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Landed cost: why your $1.10 unit arrives costing $1.68

The quote is not the cost. Here is everything between a factory door and your shelf, what each part tends to run, and how to price a batch before you commit to it.

Updated September 21, 2026·4 min read

Landed cost is what one finished unit costs you sitting in your own warehouse, ready to sell. It is the only cost worth building a price on, and it is reliably higher than the quote — on a small overseas run, commonly 40% to 60% higher.

Founders who price off the quote discover this after the first batch, at which point the retail price is printed on the carton.

Everything between the factory door and your shelf

A worked example

3,000 units quoted at $1.10 ex-works, shipped by sea from Asia to the United States.

Note what does the damage. It is not the duty, which everyone worries about, at five cents. It is freight and the three flat fees, at twenty-three cents combined — flat charges divided by a small number of units. Ship 12,000 units instead of 3,000 and those same flat fees fall to about six cents a unit.

This is the same arithmetic as tooling and setup, arriving from a different direction, and it has the same conclusion: small runs are expensive per unit for structural reasons, not because you negotiated badly.

The part-container trap

Under a full container you ship LCL — less than container load — and pay per cubic metre with a minimum. It is the right choice for a first batch and it has an ugly property: cost is driven by volume, not weight, so bulky packaging is punished disproportionately. A carton that is 20% larger than it needs to be costs 20% more to ship, forever, on every shipment.

Which makes the carton dimensions worth ten minutes with your supplier before artwork is finalised. Ask how many units fit on a standard pallet in the current carton, and whether a small dimensional change would fit more. It is the least glamorous cost saving available and one of the most durable.

Air freight is not always the expensive option

Air costs several times sea per kilo and skips six weeks of transit. For a first run of a light product, air can be the correct commercial decision: it cuts the time your cash is committed by more than half, it gets you to real sales data sooner, and the per-unit difference on something small and light is often less than a dollar. Price both before assuming.

That cash-out consideration is frequently what should decide where you make the product at all — China, the US, Taiwan or Mexico.

Build it before you commit

Write every line above into your costing with its own basis — per unit or per batch — and mark each as quoted or estimated. Then look at the total honestly: a landed cost built from four quotes and six guesses is not a landed cost, it is a hypothesis, and the gap between those two is where first batches go wrong.

Then set the finished number against your intended retail price. If the margin does not work, you have found out at the cheapest possible moment — before a deposit, while the specification is still free to change. The seven lines and a worked example, and what the quote itself left out.