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.

SharePlatform iconPlatform iconPlatform icon

Subscribe to our newsletter


OR

Recommended Articles

What Are Net Terms?
Learn4 min read

What Are Net Terms?

Making use of net terms can enable both buyers and vendors to increase their profitability and sales dramatically. This is what net terms are.

Settle Spotlight Series: Q&A with Vividly
Learn9 min read

Settle Spotlight Series: Q&A with Vividly

We sit down to chat with Alyshah Walji from Vividly, a trade promotion management (TPM) software built by and for the consumer packaged goods industry.

What is the Cash Conversion Cycle?
Learn6 min read

What is the Cash Conversion Cycle?

A company’s cash conversion cycle can speak volumes about its operational efficiency and financial stability. It can also determine whether people get paid on time.

Accounts Receivable Factoring 101
Learn4 min read

Accounts Receivable Factoring 101

Accounts receivable factoring can help companies can improve their financial stability and cash flow. We’ll explain what it is and how it's beneficial in our guide.

How to Create an Invoice
Learn6 min read

How to Create an Invoice

Creating invoices can be tedious, especially for new businesses processing everything manually. Learn how to create invoices effectively and efficiently with this detailed guide.

Settle Spotlight Series: Q&A with SourceMedium
Learn14 min read

Settle Spotlight Series: Q&A with SourceMedium

In this month’s Settle Spotlight Series, we chatted with Will Holtz from SourceMedium about how interconnected data can be a superpower for brands in hyperscale mode.

The 2024 Settle Staff Picks Holiday Gift Guide
Learn2 min read

The 2024 Settle Staff Picks Holiday Gift Guide

Do you really need another gift guide this time of year? Our Settle team spends so much time obsessing over our customer brands, that the right answer is obviously yes. We have compiled the inaugural Settle Staff Picks Holiday Gift Guide, with the most fire small brands out there. So read on for ideas from stocking stuffers to travel accessories – for everyone on your list. And join us in shopping small this holiday. 

Settle 2023 Product Wrap
New Feature3 min read

Settle 2023 Product Wrap

A year in review of Settle's product releases that make running CPG brands easier.

Your purchasing process. Made simple.
New Feature2 min read

Your purchasing process. Made simple.

We brought simplicity to bill pay. Now we’re bringing it to the purchasing process, with end-to-end support that takes a load off your plate.

Invoice vs. Receipt: What's the Difference?
Learn6 min read

Invoice vs. Receipt: What's the Difference?

Invoices and receipts are similar in concept, but differ in the details. Here’s what differentiates invoices from receipts, and why it’s important to understand.

What is an A/P Aging Report?
Learn6 min read

What is an A/P Aging Report?

The Accounts Payable Aging Report is an essential tool for businesses with a large number of accounts payable to track. Here’s a general breakdown of A/P Aging Reports.

What Are the Consequences of Equity Dilution?
Learn5 min read

What Are the Consequences of Equity Dilution?

Equity dilution can be a very concerning process for shareholders who are unfamiliar with its consequences. This is how to avoid equity dilution and keep stocks healthy.

What is the Accounts Payable Process?
Learn4 min read

What is the Accounts Payable Process?

Accounts payable (AP) refers to all the payments that a business owes its suppliers and creditors. Neglecting your accounts payable process can lead to production and supply issues.

Black Friday CPG Prep Checklist
Learn6 min read

Black Friday CPG Prep Checklist

Black Friday sets the tone for your business’ holiday season. Start early on forecasting demand, devising marketing strategies, and preparing your site.

How to Evaluate Accounting Firms
Learn7 min read

How to Evaluate Accounting Firms

Figuring how to find the right accounting firm for your company can be difficult. Here’s how to choose the best accounting firm for any business.

A Guide To Inventory Management for CPG
Learn6 min read

A Guide To Inventory Management for CPG

Learning to navigate inventory management can be a tricky part of growing your brand. Check out our guide to inventory management to find out more about it.

Non-Dilutive Funding Guide for CPG Brands
Learn7 min read

Non-Dilutive Funding Guide for CPG Brands

A popular source of funding is financing from angel investors and VCs. Yet many companies fail to recognise non-dilutive funding — where no ownership is lost.

Navigating Distribution And Retail Margins for CPG Brands
Learn8 min read

Navigating Distribution And Retail Margins for CPG Brands

For emerging CPG brands, navigating challenges like supply chain disruptions and retail changes underscores the critical importance of understanding and managing retailer and distributor margins, as it directly impacts profitability and success in the industry.

How to Find a CPG Distribution Partner
Learn5 min read

How to Find a CPG Distribution Partner

Partnering with the right distributor is arguably one of the most essential tasks for a retail company. Find out what to look for in distribution partners and how to source them.

Accounts Payable vs. Accounts Receivable
Learn5 min read

Accounts Payable vs. Accounts Receivable

Understanding accounts payable and accounts receivable is an essential part of business workflow. So how do they differ? Learn more about them in this guide.

An Introduction to Cash Flow Forecasting
Learn6 min read

An Introduction to Cash Flow Forecasting

A company’s ability to make a cash flow forecast is essential in the world of modern business. Here is everything you need to know about cash flow forecasting.

What Is Amazon FBA and Is It Right For You?
Learn7 min read

What Is Amazon FBA and Is It Right For You?

Using Amazon FBA is a great way for companies to expand their scalability and fulfillment abilities. Here is how it works, and how businesses can benefit from it.

How Long Does a Wire Transfer Take
Learn7 min read

How Long Does a Wire Transfer Take

Wire transfers can be the quickest method of exchanging funds. Knowing how long it takes can help determine whether wire transfer is the best solution.

Guide: The ABCs of cashflow
Learn2 min read

Guide: The ABCs of cashflow

We put our heads together with the folks at IndieCPG to create a guide to the basics of cashflow for new (and maybe even not-so-new) founders.

Settle blog

Insights in your inbox

Join our newsletter and never miss an update on Settle's latest features and industry trends.