Landed cost calculation is not at all easy if you are running a multi-product store. Precise data on landed cost can make you far-sighted, and therefore you take decisions not solely on the purchasing price of a specific product but other factors as well.This way savings can be done where possible. When the supply chain of the product and expenses at all the stages is broken-down to calculate landed costs, it is easier to figure out the steps at which you can cut yourself some slack.When total landed cost is accurately known, the profit margin per article is optimum. Ensure estimated profit on the product by marking the price such that you can sell it with attractive discounts.The landed cost analysis is important for the following reasons: The aim is to make sufficient profits to cover up the extra expenses in importing the product and at the same time not seem very costly to the customers.
Landed cost unravel the hidden costs and thus help the retailer to sell it at an appropriate price. This example shows how landed cost can affect your selling price decision and how different products can have different costs involved in transportation. The total amount spent by you to get that vase in your store shelf i.e., Landed cost = $50+$15= $65 Let us say you bought a flower vase for $50 Īnd its importing cost $15 due to its fragile nature (more than the average transporting cost for the same weight). Without any idea of landed cost, the store owner will have no choice but to believe the data in the spreadsheets.īut knowledge of the different charges accumulated will help him decide the selling price more efficiently. Thus, it is extremely necessary to precisely disintegrate the cost price as it will help the seller to take better decisions. It gives you the insight on the actual amount paid to get your hands on the product. + Overhead: Purchasing staff, due diligence cost, travel, exchange ratesĪnalysis of the landed cost of a product helps in figuring out the obvious as well as hidden costs price for the retailer. + Risk: Insurance, compliance, quality, safety stock cost + Customs: Duties, taxes, tariffs, VAT, brokers fees, harbor fees + Shipping: Costs associated with crating, packing, handling, and freight Landed cost is the total expenditure involved in buying a product and shipping charges for importing it to your warehouse.Īpart from the cost price of the product, landed cost is made up of different charges like customs duties, currency conversion, insurance and other costs up to the destination store.ĭepending on the type of industry where you conduct business, the factors to calculate total landed cost can vary.
Sometimes in the bigger picture, smaller constraints like these can be easily overlooked but they surely affect the net profit. This is the where the concept of the landed cost comes into play. One of the main subparts of the of the retailing business is the transportation of the purchased goods from your supplier to your stores. In small and medium businesses there are many small factors that influence healthy profits.
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