Landed cost is the true, all-in cost of getting a product onto your shelf — the invoice price plus freight, duties and taxes not recovered, insurance, handling, and wastage or shrinkage in transit and storage. Pricing off the invoice cost alone quietly eats a supplier’s margin, because the real cost is always higher. Build the selling price on landed cost, not invoice cost, and the margin you think you are making is the margin you actually keep.
What landed cost really includes
A supplier's invoice cost is only the start of what a product actually costs to have ready to sell. Landed cost is the full picture — everything spent to get the goods onto your shelf and out the door:
- The purchase price from your own supplier.
- Freight and transport to your warehouse.
- Duties and any non-recoverable taxes.
- Insurance and handling.
- Wastage, shrinkage and breakage in transit and storage — real for perishables and fragile goods.
Sum those and you have the true cost per unit, which is almost always meaningfully higher than the invoice figure.
The invoice-cost trap
The most common margin leak in distribution is pricing off invoice cost. You buy at ₹80, mark up to ₹100, and believe you are making 20%. But if freight, handling and shrinkage add ₹10 of real cost, your landed cost is ₹90 and your actual margin is half what you thought. Do that across a catalogue and the business runs on a margin illusion — busy, turning stock, and quietly making far less than the paperwork suggests. The fix is simple to state and easy to skip: price on landed cost, not invoice cost.
Building a selling price that holds
Once landed cost is right, margin becomes honest. Decide whether you are working to a markup (a percentage on top of cost) or a margin (a percentage of the selling price) — they are not the same, and confusing them is another quiet leak. A 25% markup on a ₹90 landed cost gives ₹112.50; a 25% margin requires a ₹120 price. Pick the basis, apply it to the real landed cost, and the number you quote protects the return you intend.
Do not forget shrinkage and terms
Two things quietly widen the gap between invoice and landed cost, especially in HORECA supply. Shrinkage — spoilage, breakage, short-shelf-life write-offs — must be spread across the units that do sell, or the good stock silently subsidises the lost stock. And payment terms matter: extending long credit to buyers has a financing cost that, over volume, eats margin just like freight does. Fold both into how you price, and the landed-cost discipline that protects the plate cost in a kitchen protects the catalogue in a distribution business.
Landed Cost & Margin Calculator (Suppliers)
What a supplier actually makes per SKU after freight, packing, wastage, credit-days financing and returns, the number the rate card hides.
Step by step
Calculate landed cost and a protected price.
- Start with the purchase price. The invoice cost from your own supplier, per unit.
- Add every cost to shelf. Freight, duties and non-recoverable taxes, insurance, handling, and expected wastage or shrinkage.
- Get the true landed cost per unit. Sum the above and divide across saleable units to get the real cost each unit carries.
- Apply margin to landed cost. Choose markup or margin deliberately and apply it to landed cost — not invoice cost — to set a price that holds.
Frequently asked questions
What is landed cost?
Landed cost is the true all-in cost of getting a product onto your shelf — the invoice purchase price plus freight, duties and non-recoverable taxes, insurance, handling, and wastage or shrinkage in transit and storage. It is almost always higher than the invoice cost alone.
Why is pricing off invoice cost a mistake?
Because the invoice cost ignores freight, handling and shrinkage, so the real cost is higher than it shows. Marking up from invoice cost overstates your margin — a ₹80 buy marked to ₹100 looks like 20%, but with ₹10 of added real cost the true margin is half that.
What is the difference between markup and margin?
Markup is a percentage added on top of cost; margin is a percentage of the selling price. A 25% markup on a ₹90 landed cost gives ₹112.50, while a 25% margin requires a ₹120 price. Confusing the two quietly erodes returns, so pick the basis deliberately and apply it to landed cost.
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