Landed Cost Made Simple: Definition, Formula and Tips

What is Landed Cost?

Let’s start with a simple definition of landed cost. Then, we will break down what it means in practice, share a clear landed cost formula, and show you how to quickly estimate it for your business using DHL’s MyGTS (My Global Trade Services) tool, which includes a built-in landed cost calculator.

Landed Cost Meaning

When pricing products, e-commerce businesses need to look beyond just the cost of materials. There are multiple additional expenses involved in getting a product from production to the customer’s doorstep, and understanding these costs is essential to maintaining healthy profit margins.

In simple terms, landed cost is the total cost of delivering a product from the factory to the end customer. This includes shipping fees, insurance, as well as any customs duties and taxes that apply when goods are shipped across borders.

What is Landed Cost in Supply Chain?

The landed cost is the sum of several different component costs: the product price, transportation costs, customs duties & taxes, other regulatory fees, and insurance costs. Here’s a bit more explanation of what each of these components means:

• Product price. Includes the total cost of sourcing the raw materials and manufacturing the product, plus the seller’s profit margin, i.e., the final price sold to consumers.
• Freight costs. Includes the cost of shipping the product to your customer’s door: freight cost, customs clearance costs, other charges of the transport provider.
• Customs duties & taxes, and other regulatory fees. Each country has customs duties and taxes associated with importing and exporting goods, and other regulatory fees (charged by Customs Authorities).
• Insurance Costs: This protects you from lost, stolen or damage goods, and the cost depends on the category and value of your shipped goods

Landed Cost Formula

Below is a simple formula showing how to calculate landed cost.

Landed Cost Calculator

You can get a free Landed Cost estimate through DHL’s MyGTS, a free, user-friendly platform that will help you navigate all aspects of international shipping.

Get Landed Cost for goods in any country: calculate your product cost, duties & taxes, and freight charges to enhance your pricing strategy and give your customers transparency over shipping fees – which builds trust with your business.  

You can log in to MyGTS with your existing DHL Express account, or register a new MyGTS account. Click below for your options.

Why is it important to know Landed Cost?

Without knowing your business’s costs, you risk running at a loss! Calculating your total landed cost will help you to:

• Price your products correctly
• See where you can make savings – by switching suppliers, for example
• Give your customers a clear breakdown of costs at checkout, which helps to build trust between them and your brand

Factors Affecting Landed Cost

Landed cost isn’t fixed, it can change depending on several factors along your supply chain. For instance, the price of raw materials may go up or down, and production costs can shift with changes in energy or fuel prices. Shipping costs also vary based on the size and weight of your goods, as well as the logistics provider you choose.

On top of that, customs duties, taxes, and regulatory fees can differ widely from one country to another. Currency exchange rates can also have a noticeable impact on your overall costs.

Landed Cost Example

Below is an example of a small business’s landed cost estimate from DHL Express.

It gives the business a clear overview of the total costs of getting the product to the customer’s door.

This in turn will help them price their products better and give the customer a transparent cost for shipping.

As international logistics specialists and e-commerce experts, we can help you optimize your supply chain and grow your business. Apply for a DHL Business Account today. Get started