The Invoice Price Trap

When importers evaluate a product's viability, many start and stop at the supplier's unit price. "It costs £3.50 per unit, I'll sell it for £14.99 — that's a 76% margin!" But the invoice price is just the beginning. Between your supplier's factory door and your customer's doorstep, a dozen additional costs accumulate.

The true measure is landed cost per unit — the total cost to get one unit of product from the factory to the point of sale, including every fee, tax, and charge along the way.

The Full Cost Stack

1. Product Cost (Ex-Works / FOB)

This is your supplier's price. It may be quoted as:

• EXW (Ex-Works): Price at the factory gate — you arrange everything
• FOB (Free On Board): Supplier delivers to the port and loads — you pay from there
• CIF (Cost, Insurance, Freight): Supplier pays shipping and insurance to your port

Make sure you know which Incoterm you're using, as it determines which costs are included.

2. International Freight

The cost to move goods from the supplier's country to the UK:

• Sea freight (FCL): £1,500-£4,000 per 20ft container
• Sea freight (LCL): £50-£200 per CBM (cubic metre)
• Air freight: £3-£8 per kg (fast but expensive)
• Rail freight (China-UK): £2,000-£3,500 per container (middle ground)

To calculate per-unit freight cost: divide total freight by the number of units in the shipment.

3. Insurance

Typically 0.3-0.5% of the CIF value. Many importers skip this — until a container is lost or damaged. For a £10,000 shipment, insurance costs £30-£50 for peace of mind.

4. Import Duty

Based on the HS code and the country of origin. UK duty rates range from 0% to over 20%. This is calculated on the CIF value (product + freight + insurance).

5. Import VAT

20% of (CIF value + duty). While reclaimable if VAT-registered, it impacts your cash flow and must be paid upfront.

6. Customs Clearance

Your customs broker charges for processing the import declaration:

• Standard entry: £50-£150 per shipment
• Complex entries: £150-£300+

7. Port and Terminal Charges

• Terminal handling: £100-£250 per container
• Demurrage (if you're slow to collect): £50-£100 per day after free period
• Examination fees (if customs inspect): £200-£500

8. UK Inland Transport

Moving goods from the port to your warehouse or Amazon FBA:

• Haulage: £200-£600 depending on distance
• Pallet delivery: £30-£80 per pallet

9. Warehousing (if applicable)

If goods don't go directly to Amazon:

• Storage: £15-£30 per pallet per week
• Pick and pack: £1-£3 per order

10. FBA Prep and Delivery

• Labelling: £0.10-£0.30 per unit
• Poly-bagging: £0.15-£0.40 per unit
• Delivery to Amazon FBA: £0.20-£0.50 per unit

Worked Example: True Landed Cost

Let's calculate the landed cost for a kitchen product:

The supplier price was £3.50, but the true landed cost is £5.56 — that's 59% higher than the invoice price.

If you'd calculated margins based on £3.50 cost and a £14.99 selling price, you'd think you had a 76.7% margin. The real margin (before Amazon fees) is 62.9%. After Amazon's ~35% cut, your actual net margin is closer to 27%.

Cost Allocation Methods

When a shipment contains multiple products, you need to allocate shared costs (freight, customs, haulage) across products. Common methods:

• By units: Equal split per unit — simple but ignores size/weight differences
• By weight: Proportional to each product's weight — good for heavy goods
• By volume: Proportional to each product's volume — good for bulky goods
• By value: Proportional to each product's invoice value — common default
• Equal: Even split regardless of quantity — simplest approach

The right method depends on your products. Heavy items should use weight-based allocation; bulky items should use volume-based.

Why Accurate Landed Cost Matters

For Product Selection

Knowing your true landed cost tells you whether a product is viable before you order. Many products that look profitable at the invoice price aren't.

For Pricing Decisions

Your selling price needs to cover landed cost + Amazon fees + advertising + returns + profit margin. Underestimating landed cost leads to underpricing.

For Supplier Negotiation

When you know exactly how much each cost component adds, you can negotiate the right things. Sometimes a supplier at a higher unit price but with better Incoterms (CIF vs EXW) is actually cheaper overall.

For Comparing Shipments

Tracking landed cost per unit across shipments reveals trends — are freight rates rising? Is one supplier's products consistently cheaper to import? This data drives better decisions.

Automate Your Calculations

Manually calculating landed cost for every product in every shipment is tedious and error-prone. A purpose-built import calculator lets you input each cost once, choose your allocation method, and instantly see per-unit landed cost across all products in a shipment.

The goal is visibility: knowing your real numbers so you can make confident sourcing and pricing decisions.