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Landed Cost Definition, Why You Need It, and How to Calculate It

What Is the Definition of Landed Cost?

The definition of landed cost is somewhat complex. It’s a measure of the cost of manufacturing and transporting goods from their origin point to the place of final consumption.

Businesses use it in transportation and service industries to calculate the maximum possible price a buyer or seller can charge for a product or a service.

What Does It Involve?

Landed costs can be different for each business, as they may involve many charges and extra fees. The most basic form of landed cost consists of the manufacturing and shipping cost of a product. However, that’s not the case most of the time.

Landed cost includes all the fees and taxes that you have to pay to deliver your goods to consumers. Those extra charges include the shipping cost, customs duties (in cases of international shipping), terminal charges, and storage expenses.

It may also involve insurance and compliance costs, handling costs (loading and unloading products), and payment processing fees. Learn why you should use them in our extensive article about landed costs.

How to Calculate A Single Unit In a Batched Shipment

To calculate the total landed cost of your products, add all the charges and fees that apply in each scenario. If, for example, you need to calculate the landed cost of a domestic shipment you don’t need to take into account any customs fees.

landed cost definition

If you want to determine the landed cost of a single unit in a batched shipment, then just divide the landed cost by the number of units in your order.

Be mindful of this process. Underestimating the landed cost can have a detrimental impact on profit margins while overestimating the cost can result in higher prices that drive customers to rival businesses.

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