Definition
Landed cost is the total per-unit cost of getting a finished, sellable product from the factory to Amazon’s FBA warehouse. It includes every expense in the supply chain: manufacturing, packaging, labeling, international freight, customs duties and broker fees, domestic transportation to the fulfillment center, quality inspection, and FBA prep.
Landed cost and COGS are closely related but serve different purposes. Landed cost emphasizes the logistics chain (factory to warehouse) and is most useful during product research and sourcing decisions. COGS is the accounting term used on P&L statements. For most FBA sellers, the two numbers are identical.
The term matters most when you are evaluating a new product. During research, you need to estimate the true per-unit cost before committing to a supplier and a purchase order. A product that looks profitable at the FOB (factory gate) price can fall below your margin threshold once you add freight, duties, and prep.
Landed cost formula
Landed Cost = Factory Price (FOB)
+ Packaging & Labels
+ International Freight (per unit)
+ Customs Duties (% of declared value)
+ Broker Fees
+ Domestic Freight to FBA
+ Inspection / QC
+ FBA Prep (poly bag, labeling)
// Simplified
Landed Cost = FOB Price + Logistics + Duties + Last Mile
Example: importing from Shenzhen to FBA
Order: 2,000 units of a Home & Kitchen product from Shenzhen. FOB price: $4.20 per unit. Shipped LCL (3 CBM) to Los Angeles port, then trucked to an FBA warehouse in Riverside, CA.
| Cost component | Total cost | Per unit |
|---|---|---|
| Manufacturing (FOB) | $8,400 | $4.20 |
| Packaging + inserts | $700 | $0.35 |
| FNSKU labels | $160 | $0.08 |
| Ocean freight (LCL, 3 CBM) | $1,700 | $0.85 |
| Customs duty (3.4% of $8,400) | $286 | $0.14 |
| Customs broker | $100 | $0.05 |
| Domestic trucking (LA to Riverside) | $600 | $0.30 |
| Pre-shipment inspection | $160 | $0.08 |
| FBA prep (poly bag + label) | $300 | $0.15 |
| Total landed cost | $12,406 | $6.20 |
The FOB price is $4.20, but the landed cost is $6.20. Freight and logistics add $2.00 per unit (48% on top of the factory price). If ocean freight rates spike 30% (from $1,700 to $2,210), landed cost jumps to $6.46 per unit. On 2,000 units, that is $510 more than budgeted.
Why landed cost accuracy matters before you source
During product research, most sellers estimate margin using just the factory price. A product that looks like it has 50% margin at the FOB price might only have 35% after the full landed cost. Running the landed cost calculation before placing a purchase order prevents committing capital to products that will not hit your net profit per unit targets.
Landed cost is also the number you need to make informed reorder decisions. When you compare the cost of restocking via air freight (faster but $2-$4 per unit more expensive) versus ocean freight, you need accurate landed cost figures for both scenarios. The tradeoff between stockout risk and higher landed cost on an air shipment is a math problem, and getting the inputs right—alongside your FBA fee stack—determines whether you make or lose money on the reorder.
Common mistakes
- Using FOB price as landed cost. The factory price is 60-70% of the true landed cost. Freight, duties, and prep add 30-50% on top. A $4.20 FOB product lands at $6.20. That $2.00 gap compounds across thousands of units.
- Not updating landed cost when freight rates change seasonally. Ocean freight rates can swing 30-50% between peak season (August through October) and off-peak. Your January landed cost may be $0.40 per unit lower than your September landed cost for the same product on the same trade lane.
- Forgetting customs duties and broker fees. Duties range from 0% to 25% depending on the HTS code. On a $4.20 product at 7% duty, that is $0.29 per unit. Add the broker fee and you have $0.34 per unit that many sellers leave out of their calculations entirely.