How to Calculate the Full Landed Cost for Resale

Landed cost is the full cost of a product at the moment it's sitting in your warehouse ready to sell — not just the price you paid the supplier. The gap between these two numbers is the most common reason projected margin on paper doesn't match real profit after the first sale.

The basic calculation formula

Landed cost = product price + shipping + customs charges (duty and VAT) + cargo insurance + inspection costs + banking and currency costs + any additional fees (certification, brokerage). Each of these line items is calculated separately, then divided by the number of units in the batch to arrive at the final per-unit cost.

Product price — more than just the price list number

Check whether standard packaging is included in the price or whether branded packaging costs extra. If you're ordering with a custom design or product modification, add one-time development costs (molds, printing plates) divided across the first batch's volume, not spread across all future production.

Shipping and related costs

Include not just the freight itself, but cargo pickup from the factory warehouse, consolidation if goods are coming from multiple suppliers, and delivery from the port or bonded warehouse to your final address. Demurrage for a possible container delay is worth budgeting as a probability, not ignoring entirely — during peak season, that probability is noticeably higher.

Customs charges as a separate line item

Duty is calculated on the customs value, not directly on the invoice price — customs value usually includes the cost of international transport too. Import VAT is calculated on the sum of customs value and duty combined, so these charges are interdependent rather than simply added up from one base figure.

Costs that often get left out

Payment processing fees or the hidden markup in the bank's exchange rate when transferring money to the supplier. The cost of an independent pre-shipment inspection, if one is conducted. Costs from potential rework or re-sorting if defects are found, even if the factory bears them contractually — lost time itself has a cost to the business. An agent or middleman's fee, if the deal goes through one.

A worked example with real numbers

A batch of 1,000 units at $3 each — $3,000. Sea shipping including pickup and consolidation — $800. Customs charges (duty and VAT, averaging 20% of customs value) — around $760. Pre-shipment inspection — $150. Currency costs on the transfer — around $90 (3% of the product sum). Total landed cost for the batch — roughly $4,800, or $4.80 per unit instead of the initial $3 — a 60% difference that's easy to miss if you calculate based on the supplier's price alone.

How to use landed cost to calculate real margin

Compare your selling price against landed cost, not the supplier's price — that's the only way to see real margin instead of an inflated number on paper. Recalculate landed cost for every new batch rather than relying on a past order's figures — exchange rates, freight rates, and customs conditions can change even within a few months.