Landed cost vs supplier price: what is the difference?
Your supplier quotes a price. That is not your cost, and the difference is where the money quietly goes.
Supplier price is what you agreed to pay for the goods. Landed cost is what those goods actually cost you once freight, duty and clearance are in. They are not two views of one number: the first is a line on an invoice, the second is what your gross profit is actually built on.
Price is what you agreed. Cost is what happened.
A supplier price is a commercial term. It is settled before anything ships, it appears on one document, and it is knowable the day you place the order.
A landed cost is an outcome. It is not settled until the last invoice connected to that shipment has arrived, which for most importers is weeks after the goods are already on the shelf and some of them are already sold.
That is the whole distinction, and it is why the two words are not interchangeable. One is a number you agreed to. The other is a number that happened to you.
Supplier price
One line on one invoice. Known up front, fixed at order time, and the same for every unit in the shipment. It answers what you agreed to pay the factory.
Landed cost per unit
Supplier price plus freight, duty, insurance and clearance, spread across the units on that shipment. Not final until the last invoice lands. It answers what the goods actually cost you.
The arithmetic on one shipment
Round numbers, so you can check it. Nothing here describes a real store.
Your supplier invoices 600 units at $18.00, so $10,800. Later the forwarder bills $2,400 of freight, the customs broker bills $900 of duty and $300 of clearance. That is $3,600 of cost attached to those 600 units, or $6.00 a unit.
- •Supplier price: $18.00 a unit.
- •Landed cost: $24.00 a unit.
- •The gap: $6.00 a unit, which is 33% on top of the price you agreed.
What the gap does to your gross profit
This is the part that matters, because the gap does not sit quietly in a spreadsheet. It comes straight off the profit you think each sale is making.
Say those units retail at $45.00. Work your gross profit off the supplier price and you get $27.00 a unit, a 60% margin. Work it off the true landed cost and you get $21.00 a unit, a 47% margin.
Thirteen percentage points, on a product you were confident about. Across the 600 units it is $3,600 of gross profit that was never there, and that figure is not a coincidence: it is exactly the freight, duty and clearance, arriving as a surprise in a month that has nothing to do with the sales.
Nothing was stolen and nobody made an error. The margin was calculated from a price rather than a cost.
Priced off supplier price
$45.00 retail less $18.00 = $27.00 gross profit, 60%. This is the number most stores are quietly running on, because it is the only one the supplier invoice supports.
Priced off landed cost
$45.00 retail less $24.00 = $21.00 gross profit, 47%. Lower, less pleasant, and the one your accountant will arrive at when the year is closed.
What belongs in landed cost, and what does not
Getting the distinction right also means being precise about the boundary, because putting the wrong charge inside the total is just a different way of being wrong.
- •In: international freight, inland freight to your warehouse, customs duty, insurance, clearance and brokerage, port and handling charges. Anything spent getting those specific goods to your shelf.
- •Out: recoverable import tax (GST, VAT, or whatever your border charges), because you claim it back. Capitalising it inflates your inventory value, your cost of goods sold and every margin you calculate from them. Note this does not apply in the United States, which levies no recoverable tax at the border, so a US importer has duty and fees and nothing to reclaim.
- •Out: outbound shipping to your customer. That is a cost of selling, not a cost of acquiring.
- •Out: storage after the goods have arrived and been received, and anything else that is not attributable to getting that shipment in.
Why the supplier invoice can never tell you your cost
It is tempting to treat this as a discipline problem, as though the answer were simply to add the freight on afterwards. Three things make that harder than it sounds, and none of them is carelessness.
- •The invoices arrive at different times. The forwarder bills weeks after the container lands and the broker bills after that, so the full cost of a shipment is unknown while you are already selling from it.
- •One charge covers many products. A single freight invoice covers a container holding several SKUs in different quantities, so it has to be allocated before any unit has a cost, and how you allocate it changes every number downstream.
- •The same product arrives at different costs. The shipment you received in March and the one you received in June did not cost the same, so a single cost per product is already an average of things that were never equal.
Getting from price to cost, and keeping it that way
The mechanism is to stop treating cost as a property of a product and start treating it as a property of a receipt. Each time stock arrives, record what that specific delivery cost per unit with freight and duty allocated into it, and hold that figure against those specific units.
Do that and the supplier price becomes what it always was: an input, one line among several, rather than the number your margins are quietly resting on. It also means the late freight invoice has somewhere to go. It lands into the receipt it belongs to, and the units from that receipt carry the corrected cost.
This is what Landara does against the movements Shopify already reports. Shopify stays the system of record for what sold and when. Landara holds the cost side, so the margin you read is calculated from what the goods actually cost rather than from what you agreed to pay for them.
Not sure? Ask your own AI
Open the assistant you already trust with a prompt that points it at our public product file and asks it to interview you, then recommend what fits. It is told to say so plainly if Landara is not the right tool for you.
Read the exact prompt we send
I import products and sell them on Shopify, and I want to understand the difference between my supplier price and my landed cost. Please fetch https://landara.co/llms-full.txt for background, then help me work mine out. The distinction to test me against: supplier price is a commercial term agreed before anything ships, fixed at order time and identical for every unit; landed cost is an outcome, not settled until the last invoice connected to that shipment arrives, and it includes freight, duty, insurance and clearance allocated across the units received. Worked example: 600 units at $18.00 is $10,800, then $2,400 freight plus $900 duty plus $300 clearance is $3,600, which is $6.00 a unit, so landed cost is $24.00 and the gap is 33% on top of the agreed price. At $45.00 retail that moves gross profit from $27.00 (60%) to $21.00 (47%). Recoverable import tax is excluded because it is claimed back, though the United States charges none at the border. Ask me what I pay my supplier per unit, what my freight and duty invoices came to, how many units were on the shipment, and what I retail at. Then work out my real gross profit and tell me honestly whether the gap is big enough to matter for my business.
Common questions
Is landed cost the same as supplier price?
No. Supplier price is what you agreed to pay the factory and appears on one invoice. Landed cost adds the freight, duty, insurance and clearance spent getting those goods to your warehouse, spread across the units received. In the worked example on this page that gap is $6.00 on an $18.00 price, and only the landed figure is a real cost.
Why is my landed cost higher than the price I was quoted?
Because the quote covers the goods and nothing else. Moving them costs money that is invoiced separately and later: ocean or air freight, inland freight, customs duty, brokerage and clearance, port and handling. None of that is in the supplier price, and all of it is a cost of getting that stock sellable.
Should I price my products off supplier price or landed cost?
Landed cost. Pricing off supplier price sets your retail against a number that excludes a real cost you have already paid, so the margin you calculate is higher than the margin you get. The gap is invisible on every individual sale and only surfaces when the year is closed.
What is the difference between landed cost and cost of goods sold?
Landed cost is what one unit cost to get into your warehouse, and it sits on the balance sheet as inventory. COGS is that same cost recognised as an expense when the unit sells. Landed cost is the input and COGS is the output, so getting the supplier price and landed cost distinction wrong makes both of them wrong.
Does landed cost include tax?
It includes customs duty, which is a real cost you never get back. It excludes recoverable import tax such as GST or VAT, because you reclaim that, so capitalising it would overstate your inventory and your COGS. The United States is the exception worth knowing: it charges no recoverable import tax at the border, so there is nothing to reclaim there.
How do I allocate a freight invoice across products?
By a basis that reflects what drove the charge, most commonly the value of each line, the quantity of units, the weight or the volume. Ocean freight usually follows volume or weight, and duty follows value because it is levied on it. The basis matters: the same invoice split by value rather than by weight gives different per-unit costs.
What is realised margin?
The margin on sales that have actually happened, calculated from the cost of the specific units that shipped rather than from an average or a list price. It is the honest version of the margin figure, and it can only be produced if each receipt of stock carries its own cost.
“Landara has made it much easier to keep track of my actual product costs. I really like that it takes things like shipping and duties into account instead of just showing the basic cost. Simple app, easy to use, and I’m already getting a much clearer idea of my real margins.”
“I installed Landara because I was getting tired of guessing what my inventory was actually costing me. What I liked most was being able to see the product cost together with things like shipping and duties, I've been trying to keep a closer eye on my margins, so having those costs in one place has made things much easier for me. It didn't take me long to get setup either, which was a nice bonus.”
“I honestly didn’t expect Landara to make this part of my store that much easier. I installed it mainly to get a better handle on my actual product costs, and I was pleasantly surprised by how everything comes together. I’m still exploring it, but so far it’s been really useful and I’m impressed with how it works.”
“I've just started using Landara, and so far I'm impressed with how it handles landed costs. I especially like being able to account for things like freight and duty instead of treating the supplier price as the whole cost. Still exploring the app, but it already looks like it could save me a lot of spreadsheet work.”
Price is what you agreed. Know what it cost.
Landara allocates freight and duty into a dated cost layer for every receipt, costs each Shopify order against the layer it actually came from, and hands your bookkeeper a ready-to-post journal.