Landed COGS
Landed COGS is the true cost of getting a unit into your warehouse and sellable: supplier unit cost plus freight-in plus duty. Calculated per unit and per purchase order, ecommerce operators use it as the cost base for every real margin number, from CM1 down - not the supplier invoice alone.
| Variable | What it covers |
|---|---|
| Unit cost | The supplier invoice price per unit, including supplier-side packaging. |
| Freight-in | Inbound shipping from the supplier to your warehouse, allocated per unit. |
| Duty | Import duty and tariffs charged on the customs value. |
Some operators also include inbound insurance and receiving fees - include them when material. The rule is consistency, because this is the cost base the whole step-down on The Math is built on: CM1 = revenue minus landed COGS.
Worked example
Example numbers. At an A$60.00 selling price, margin on supplier cost alone reads 70.0%; on landed cost it is 63.3% - a 6.7-point gap that every downstream number inherits.
What is a good landed COGS?
As a share of selling price it depends on category, freight mode (air is structurally dearer than sea), order quantities, the duty schedule your goods fall under and the currency you buy in - none of which fits one benchmark. The good version of landed COGS is not a number, it is a discipline: computed per SKU and per purchase order, refreshed when freight rates, duty or exchange rates move, and used as the single cost basis for every margin below it.
The free landed COGS calculator builds the per-unit number from invoice, freight and duty in minutes.
Landed COGS vs related metrics
| Metric | What it covers | How it differs from landed COGS |
|---|---|---|
| Variable costs | Every cost that moves with the order. | Landed COGS is one component - usually the largest, never the whole set. |
| Fixed costs | Costs that do not move with orders: rent, team, software. | The other side of the cost base - landed COGS scales with every unit. |
| CM1 | Revenue minus landed COGS. | The margin this number feeds - the first rung of the step-down. |
| Gross margin | Revenue minus COGS, as a percentage. | Only honest when the COGS inside it is landed, not the supplier invoice alone. |
Common mistakes
- Counting only the supplier invoice. Freight-in and duty are product cost; leaving them out overstates gross margin and every number below it.
- Allocating freight by unit count. When a container mixes light and heavy SKUs, allocate by weight or volume - unit-count allocation makes light items subsidise heavy ones.
- Freezing the number. Freight rates, duty schedules and exchange rates move between purchase orders; recompute landed cost per PO.
- Ignoring the costing method. FIFO and weighted-average assign different landed costs to this month’s orders when input costs are moving; know which one your books use.
- Leaving out inbound handling. Receiving, inspection and prep fees are part of getting a unit sellable - include them when material.
Landed COGS FAQ
Related
Blufire S2 Unit Economics carries landed COGS through every order, customer and SKU in the Profitability Cube and the CM waterfall & bridge. The Math teaches the full step-down free.
Updated July 2026