Inventory how-to

How to calculate landed cost per unit

Landed cost per unit is the product cost plus every cost to get it into your warehouse, divided by the number of units.

Short answer: Landed cost per unit is the product cost plus every cost to get it into your warehouse, divided by the number of units. Add freight, duties, insurance, and any handling fees to the unit cost, then split that total across the units in the shipment.

What counts as landed cost

Landed cost includes the price you pay the supplier per unit, plus freight to your door, customs duties, insurance, and any broker or handling fees tied to that shipment. It does not include your own warehouse rent or staff time, those are overhead, not landed cost.

How to allocate shared costs

Freight, duties, and insurance usually come as one bill for the whole shipment, not per SKU. You need a rule to split that bill across units. The two common rules are by unit count (simple, works if units are similar in size and weight) or by value (better if the shipment has a mix of cheap and expensive items, since duties are often value-based anyway).

Build the calculation step by step

Start with the supplier unit cost. Add your share of freight per unit. Add your share of duties and insurance per unit. Add any per-unit handling or broker fee. The sum is your landed cost per unit, and that number is what you should compare against your selling price to check margin, not just the supplier cost.

Step by step

  1. List every cost on the shipment invoice: unit cost, freight, duties, insurance, broker fees
  2. Decide your allocation method: by unit count or by shipment value
  3. Total up all the shared shipping and customs costs for the shipment
  4. Divide that total by units (or allocate by value) to get a per-unit add-on
  5. Add the per-unit add-on to the supplier unit cost to get landed cost per unit
  6. Store that landed cost somewhere you can find it later, a spreadsheet next to each SKU works fine
  7. Recalculate whenever freight rates or duty rates change, old landed costs go stale fast

Worked example

Say you import 500 units of a product at $4.00 supplier cost each, so $2,000 total. Freight for the shipment is $600, duties are $300, and insurance is $100, totaling $1,000 in shared costs. Split by unit count: $1,000 divided by 500 units is $2.00 per unit. Landed cost per unit is $4.00 plus $2.00, which is $6.00. If you sell that unit for $10.00, your real margin is $4.00, not the $6.00 you would get if you only subtracted supplier cost.

How SteadyShelf helps

SteadyShelf does not calculate or track landed cost. It works from the cost figure you already have in Shopify for forecasting and reorder suggestions, so you need to work out landed cost yourself in a spreadsheet and update your product cost in Shopify if you want it to flow into other reports.

$29/month flat, unlimited products and suppliers, 30-day free trial. Run the numbers now with the free reorder point calculator.

SteadyShelf is launching on the Shopify App Store. Join early access to get the install link first.

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FAQ

Should landed cost include storage costs at my own warehouse

No. Landed cost is about getting the unit to your door, so it covers supplier cost, freight, duties, insurance, and handling tied to that shipment. Your own warehouse rent, staff time, and utilities are overhead and should be tracked separately, not folded into landed cost.

What if my shipment has products of very different values

Allocate by value rather than by unit count. Work out each product's share of the total shipment value, then apply that same percentage to the shared freight, duty, and insurance costs. This avoids overloading cheap items with the same flat per-unit charge as expensive ones.

Let SteadyShelf do this math for every SKU

Order-by dates per supplier, seasonal forecasts and draft POs for your Shopify store. $29/month after a 30-day free trial.

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