What is Cost Per Unit Landed and How to Calculate It
For eCommerce businesses, understanding your cost per unit landed is essential for pricing your products correctly and ensuring profitability. It’s a comprehensive metric that factors in all expenses related to getting a product from the supplier to the customer’s hands.
What is Cost Per Unit Landed?
Cost per unit landed (CPL) is the total cost involved in acquiring and delivering a product to its final destination. This includes manufacturing costs, shipping, duties, taxes, and any other fees incurred along the way. Accurately calculating CPL ensures you know the true cost of each unit sold, enabling better pricing strategies.
Components of Cost Per Unit Landed
Here are the key elements that make up the CPL:
- Manufacturing Costs This includes the cost of production or purchasing the item from a supplier. It covers raw materials, labor, and any factory overhead.
- Shipping and Freight Costs The costs of shipping goods from the manufacturer to your warehouse or fulfillment center. This includes air, sea, or land freight charges.
- Customs Duties and Taxes If you’re importing goods from overseas, customs duties and taxes can be a significant part of your CPL. These vary by country and the type of product.
- Insurance Costs Insuring your products during transit can add to your total cost. This covers you in case of damage or loss while the goods are being transported.
- Warehousing and Handling Storage fees and handling costs once your goods arrive in your country. This can also include fees for 3PL services if you outsource your warehousing and fulfillment.
- Other Miscellaneous Costs Additional costs such as packaging materials, labeling, and any compliance costs related to regulatory standards.
How to Calculate Cost Per Unit Landed
To calculate your CPL, you need to sum up all the costs mentioned above and divide by the number of units:
CPL=
Total Manufacturing Costs+Shipping+Customs and Taxes+Insurance+Warehousing and Handling +Miscellaneous Costs / Total Number of Units
Example Calculation:
Let’s break it down with an example:
- Manufacturing Cost: $10,000 for 500 units ($20 per unit)
- Shipping Costs: $1,000
- Customs and Taxes: $500
- Insurance: $200
- Warehousing and Handling: $300
Total Cost: $12,000
To find the CPL:
So, your cost per unit landed is $24.
Why is CPL Important?
Knowing your CPL is essential for pricing your products effectively. It allows you to:
- Set competitive pricing
- Ensure healthy profit margins
- Understand the full cost structure of your product
- Avoid underpricing and ensure long-term profitability
Conclusion
Understanding and calculating your cost per unit landed is crucial for any eCommerce business. By factoring in all the costs associated with getting a product from supplier to customer, you can better manage your pricing strategies and maintain profitability. ShipCarte’s 3PL services can help streamline the shipping and warehousing components of your CPL, optimizing your logistics costs.