Landed cost is the total cost of getting a product from your supplier in China to your customer's doorstep. Understanding your landed cost is essential for pricing your products profitably and avoiding margin surprises.
Components of landed cost
The full landed cost formula for a cross-border e-commerce order includes several components that many sellers overlook.
Product cost is what you pay your manufacturer per unit, including any customization or branding.
Inbound shipping is the cost of getting products from your factory to your fulfillment warehouse. If your 3PL is in Shenzhen, this is usually domestic Chinese shipping, which is cheap.
Storage fees cover warehousing your inventory until it sells. Look for 3PLs that offer a free storage period — 30 days is common. After that, fees are typically $0.30–0.80 per cubic meter per day.
Order handling includes picking, packing, quality check, and labeling. Typically $0.60–1.50 per order for the first item, plus a smaller fee for additional items.
Shipping is usually the biggest variable cost. It depends on destination country, package weight, dimensions, and speed tier (economy, standard, express).
Duties and taxes depend on the product type, declared value, and destination country's import regulations. For EU orders under €150 with IOSS, VAT is collected at checkout.
Example: Landed cost for a phone case
| Component | Cost |
|---|---|
| Product cost (from factory) | $1.50 |
| Inbound to warehouse (domestic CN) | $0.10 |
| Storage (within free period) | $0.00 |
| Order handling (1 item) | $0.80 |
| Shipping to Germany (economy, 150g) | $3.20 |
| VAT (collected via IOSS at checkout) | Customer pays |
| Total landed cost | $5.60 |
If you sell this phone case for $15.99 and collect $3.04 in VAT for Germany (19%), your gross margin is $10.39 per unit — a healthy 65%.
How to reduce landed cost
Strategies to minimize landed cost include choosing a fulfillment partner with self-operated shipping lines (fewer markups), optimizing product packaging to reduce volumetric weight, using economy shipping for non-urgent orders, consolidating products to reduce per-unit inbound shipping costs, and taking advantage of free storage periods to avoid warehousing fees.
The biggest lever for reducing landed cost is shipping. Using a 3PL with its own shipping lines instead of a reseller can save 30–50% on the shipping component alone.