The factory quote says 4 dollars a unit. By the time the product is sitting in your warehouse, ready to ship to a retailer, it has cost you closer to 6. That second number is your landed cost, and it is the only cost that should ever appear in a wholesale price calculation. Brands that price from the factory quote build their whole wholesale program on a number that is a third too low, then wonder why the margin on the spreadsheet never shows up in the bank.
This guide lists everything that belongs in landed cost, walks through a worked example with round numbers, and shows how to keep the number current as freight and duties move.
What landed cost includes
Landed cost is the total cost to get one unit from the supplier to your door, sellable. The typical components:
- Product cost. The supplier's unit price, including any tooling, sampling or setup fees amortized across the run.
- Packaging. Retail packaging, inserts, labels, inner cartons and master cartons if they are billed separately.
- Inbound freight. Ocean or air, plus origin charges, destination charges and drayage from the port to your warehouse.
- Duties and tariffs. Customs duties on the declared value, plus any additional tariffs that apply to the product or its country of origin.
- Customs brokerage and fees. The broker's fee, bond, entry fees and any inspection charges.
- Insurance. Cargo insurance for the shipment.
- Currency effects. If you pay the supplier in another currency, the exchange rate and bank fees on the payment.
- Inbound handling. Receiving, inspection, labeling and putaway at your warehouse or third-party logistics provider.
What is not landed cost: outbound shipping to customers or retailers, marketplace fees, advertising, storage after receipt, and returns. Those are selling and holding costs and belong in a different line. The dividing line matters because landed cost is the foundation of cost of goods sold, and COGS for product brands shows how the two fit together.
A worked example
You order 5,000 units from a supplier at 4 dollars each.
- Product: 5,000 multiplied by 4 = 20,000 dollars
- Tooling and samples, amortized across this run: 1,000 dollars
- Retail packaging billed separately: 0.40 per unit = 2,000 dollars
- Ocean freight for one container share, including origin and destination charges: 3,500 dollars
- Duties and tariffs on the declared value: 2,400 dollars
- Customs broker, bond and entry fees: 350 dollars
- Cargo insurance: 150 dollars
- Drayage from the port to your warehouse: 600 dollars
- Receiving and labeling at the warehouse: 0.10 per unit = 500 dollars
Total: 30,500 dollars. Divided by 5,000 units, landed cost is 6.10 dollars per unit.
That is more than 50 percent above the factory quote. Now look at what happens to pricing. If you targeted a 50 percent wholesale margin from the 4 dollar quote, you would set wholesale at 8 dollars, and your true margin at a 6.10 cost is under 24 percent. Price from 6.10 instead and the wholesale price that delivers a real 50 percent margin is 12.20 dollars. Two different businesses, and the only difference is which cost went into the formula. How to price wholesale products builds the rest of the chain from this number.
Why the number keeps moving
Landed cost is not a one-time calculation. Several inputs change on their own schedule:
- Freight rates swing with season, fuel and capacity. The same container can cost very different amounts in different quarters.
- Duties and tariffs change with trade policy, and a change can add or remove a meaningful share of your unit cost overnight.
- Order size spreads fixed shipment costs across more or fewer units. A half-container costs almost as much to move as a full one, so small runs land at a higher per-unit cost.
- Currency moves your product cost if you pay in the supplier's currency.
- Shipping mode matters most of all. Air freight on a rush reorder can multiply the freight component several times over.
Recalculate landed cost on every inbound shipment, and keep a rolling weighted average across the inventory you actually hold. If you ship a mix of ocean and air batches, your true cost is the average of what is on the shelf, not the cost of the cheapest batch.
Landed cost and the shipping terms you agree to
Where the supplier's responsibility ends and yours begins is set by the shipping terms on the purchase order. A quote that includes delivery to your door will look higher than one that ends at the factory gate, but the "cheaper" quote just moves freight, insurance and duties onto your side of the ledger. Compare supplier quotes on a landed basis, never on the headline unit price. Incoterms explained covers the common terms and what each one leaves you paying for.
The same logic applies in reverse when you sell wholesale abroad or to a distributor who wants delivered pricing: your outbound freight becomes part of their landed cost, and a buyer who understands their own numbers will ask for it.
How to keep a landed cost you can trust
A simple system that works for a one-person brand:
- One sheet per shipment. List every invoice tied to that inbound batch: supplier, freight forwarder, broker, insurer, warehouse. Sum them, divide by units received, not units ordered.
- Allocate shared costs sensibly. If one shipment carries three SKUs, split freight by volume or weight and duties by declared value, not equally by SKU.
- Maintain a weighted average per SKU. When a new batch lands, blend its cost with the units still on hand.
- Set a review trigger. Any time freight or duties move by more than a small amount, reprice or at least recheck margin. A wholesale price list is a promise you make for months, so the cost behind it needs to be current when you make it.
Once the number exists, use it everywhere: your line sheet, your marketplace profitability, your minimum order math and any deal you evaluate. The free wholesale margin calculator takes landed cost as its starting input for exactly this reason.
Mistakes that inflate margin on paper
- Using the factory quote as cost. The most common and most expensive error. It overstates margin on every unit you sell.
- Forgetting tooling and samples. They are real cash, and on a small first run they can add a meaningful amount per unit.
- Dividing by units ordered. If 5,000 were ordered and 4,900 arrived sellable, the divisor is 4,900.
- Ignoring the air freight batch. One rushed reorder at several times the freight cost quietly raises your average for the whole quarter.
- Not revisiting after a tariff change. Prices set before a duty increase can lose most of their margin without anyone noticing until the next inbound invoice.
Landed cost in a wholesale negotiation
Buyers will push on price, and your landed cost is the line you defend. Knowing it to the cent lets you say "I can do 11.50 on 500 units but not on 100" with confidence, because you know precisely what each price leaves you. It also lets you respond intelligently when a buyer asks for delivered pricing, a marketing allowance or free freight: each of those is a known number against a known cost. Brands that negotiate from the factory quote give away margin they never knew they had.
For the full margin calculation once landed cost is set, how to calculate wholesale margin walks through it with another worked example.
The short version
Landed cost is the real cost of a unit on your shelf: product, packaging, freight, duties, brokerage, insurance, currency and inbound handling. It is typically well above the factory quote, it moves with every shipment, and it is the only cost that belongs in a wholesale price. Track it per shipment, keep a weighted average per SKU, and reprice when the inputs move.
Once your landed cost and price are solid, the remaining work is finding buyers who will pay it. WholesalePilot finds the distributors, wholesalers and retail buyers that fit your product, verifies their emails, sends outreach in your name and books the calls, so the number you worked out actually meets a purchase order.
The factory quote is what the supplier charges. Landed cost is what the product costs.
Paste your product link and see which buyers are a fit, free, and start the conversation.