Helping You Understand and Manage Your Landed Costs

As an entrepreneur, you’re well aware that pricing is one of the most important decisions you need to make. It ultimately influences both your bottom line and how your business is perceived in the market. But to price your products accurately, you need to identify all contributing factors.

The mistake too many ecommerce businesses make is assuming that the cost of goods sold (COGS) and shipping costs are the only expenses they need to consider when pricing their products. In reality, there are a bunch of other expenses associated with the product’s journey from factory floor to the customer’s doorstep.

Without factoring in these costs, it’s hard to know if your business is actually profitable. This brings us to one of the most important terms in global ecommerce: landed costs.

What is landed cost?

Landed cost is the total amount you spend to transport your goods from your overseas supplier to your store or directly to your customer. It gives you a much more accurate estimate than COGS when setting your list price.

When you calculate the landed costs, you account for every expense that occurs before you get your hands on your products.

These expenses usually include:

• Product cost
• Transportation fees
• Insurance costs
• Customs duties
• Taxes
• Any other charges you incur along the way

Why should you care about landed cost?

When you’re planning on importing products and selling them in the local market, you want to find the most cost-effective way to deliver these products to your customers to ensure you make a decent profit and stay competitive.

Landed cost essentially helps you uncover both the obvious and hidden expenses across your supply chain so that you can make informed import decisions.

It also:

• Lets you set prices that maximise profit and determine the best discounts you can offer
• Generate precise financial reports, providing you with an accurate view of your assets and monthly profits
• Gives your customers a clear breakdown of all costs during checkout, which builds trust between them and your brand

Of course, it’s easier said than done

When it comes to calculating the landed cost, it’s not just a matter of adding up all the expenses. Unfortunately, some of these costs can be hard to pin down and calculate.

Freight and courier charges, for instance, might involve multiple transactions in different currencies. It’s also often hard to predict when a shipment will arrive, and fluctuations in exchange rates can lead to significant differences between the expected and actual costs listed on the invoice.

Here’s the basic equation for calculating landed cost:

Product + Shipping + Customs + Risk + Overhead = Landed Cost

Most business owners don’t have the time, resources, or data available to calculate the total landed cost manually, which is why they usually simply skip it and estimate instead. But, as mentioned earlier, this is pretty risky since you won’t know if you’re actually profitable.

Airpool’s one-of-a-kind landed cost function

If you’re in the business of importing goods from China and selling them locally, you’re in luck. Airpool has a comprehensive tool to help you crunch those landed cost numbers.

To make use of our landed cost function, here’s what you need to do:

1. Register with Airpool and request a quote on our website.  
2. Once you’ve entered in your parcel details such as your package dimensions and content description, select the button that says “inspect landed cost”. 
3. A window will pop up that shows you where every last cent of your landed cost is going.

We not only give you the total landed cost, but we also break it down for each product (which is something none of our competitors can say). We give you all the detailed info that most people have no clue about when their products arrive in the country.

No more guesswork. Ship with Airpool, so you can take a load off.