Understanding Landed Costs for CPG and DTC Companies

LearnAugust 12, 20243 min read
Caroline Lu, Product Marketing Manager

Landed costs are crucial for CPG and DTC brands to manage their supply chains efficiently and ensure profitability. These costs encompass all expenses involved in getting a product from the supplier to the end consumer, beyond just the purchase price.

What are Landed Costs?

Landed Costs refer to the total cost of a product once it has arrived at the buyer’s doorstep. This comprehensive cost includes several components, such as:

  1. Purchase Price: The initial cost of the product from the supplier.
  2. Shipping Costs: Fees for transporting goods from the supplier to the destination, covering air, sea, and land transportation.
  3. Customs Duties and Taxes: Government-imposed fees for importing goods.
  4. Insurance: Protection against potential loss or damage during transit.
  5. Handling Fees: Charges for loading, unloading, and moving goods.
  6. Currency Conversion: Costs associated with exchanging currencies, if applicable.
  7. Storage Fees: Costs for storing goods in warehouses before delivery.
  8. Miscellaneous Fees: Other incidental costs that may arise during the transportation process.

Example Calculation for a CPG brand

Imagine a DTC company importing a widget from China to the United States. Here’s how you might calculate the landed costs:

  • Purchase Price: $10,000
  • Shipping Costs: $1,500
  • Customs Duties and Taxes: $1,200
  • Insurance: $200
  • Handling Fees: $300
  • Currency Conversion: $100
  • Storage Fees: $150
  • Miscellaneous Fees: $50

Total Landed Cost = $10,000 + $1,500 + $1,200 + $200 + $300 + $100 + $150 + $50 = $13,500

Benefits for CPG and DTC Companies

  • Accurate Pricing: Knowing the true cost of goods helps in setting appropriate selling prices, ensuring competitiveness in the market.
  • Better Budgeting: Helps in forecasting and managing cash flow more effectively, crucial for both CPG and DTC business models.
  • Improved Profit Margins: Ensures all costs are accounted for, protecting profit margins.
  • Supply Chain Assessment: Allows for more informed decisions in sourcing, so you can look for better priced vendors.
  • Fundraising: Having landed costs at your fingertips allows for a better understanding of your margins, which is important during conversations with investors.

Get real-time, accurate landed costs with Settle

For CPG and DTC brands, understanding and accurately calculating landed costs is vital. It ensures that all expenses are accounted for, helping businesses make better financial decisions, maintain healthy profit margins, and stay competitive in the market. With Settle, brands can automatically calculate and track these costs over time, streamlining their operations and enhancing their financial planning. Brands looking to understand their landed costs can create an account at Settle.com.

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