How to Calculate Landed Cost for a Dropshipping Product (With a Worked Example)
A supplier quotes $6.80 for a product listed at $29.99. The difference looks attractive, but it has to cover far more than the product itself. Start with the cost of getting one unit to the buyer, then account separately for the cost of making the sale. This guide works through an illustrative quote and shows which questions to resolve before treating the remainder as a margin.
Example numbers in this article are made up to show the method. Check current quotes, fees and import rules before you sell.
What landed cost includes
Landed cost is everything you pay to get one unit to one buyer. For a dropshipping product it usually has five parts:
1. Unit price: what the supplier charges for the product itself.
2. Shipping: what it costs to send that unit to the buyer's country, usually quoted per destination.
3. Duties and import fees: taxes or fees charged when the parcel enters the country, if the shipping quote does not already include them.
4. Packaging and inserts: a branded bag, a thank-you card, extra protection. Small per unit, but not zero.
5. Payment and handling fees: the supplier's or agent's processing fee, and any fee for paying in a different currency.
Landed cost stops at the buyer's door. Platform fees, ads and returns come later, out of what is left.
A worked example, line by line
Here is a handheld fan, with made-up but realistic numbers, sold to a buyer in the United States.
Unit price: $6.80.
Shipping to the US from a supplier warehouse: $4.60.
Duties and import fees: the shipping quote says duties are included, so $0 extra. If it did not say so, you would need to find out before going further.
Packaging: a simple branded bag, $0.35.
Payment and handling: the agent charges 3% on the order value, about $0.34.
Landed cost: $6.80 + $4.60 + $0 + $0.35 + $0.34 = $12.09.
The fan sells for $29.99, so the room left before platform fees, ads and returns is $17.90. That is the amount available for the remaining costs, not evidence that the product is viable. If the same product sold for $16.99, the room would be $4.90, and a single return would wipe out the margin on several orders.
Shipping is usually the number that decides
For small, cheap products, shipping is often the largest line after the unit price, and sometimes larger. It also varies more than any other line. As an illustrative comparison, one route might quote $3 and another $9. Compare actual quotes for the same destination and service, including delivery expectations.
That is why we compare supplier quotes by landed cost to the US, not by unit price. A supplier who charges $1 more per unit but ships from a US warehouse can be the cheaper and faster option. Our Low-Cost Sourcing list shows the unit price, the shipping quote and the warehouse location side by side for this reason.
Do not guess duties
US rules on import duties for small parcels have changed more than once in recent years, and they depend on where the product comes from and what it is. We will not quote rates here, because a rate printed in a blog post goes out of date faster than the post.
What you can do is ask the right question. When a supplier or agent gives you a shipping price, ask whether duties and import fees are included, and get the answer in writing. If they are not included, find out who pays them and when. Unexpected charges on delivery can lead to complaints, refusal or additional costs. Confirm the arrangement before making a delivery promise.
What comes out after landed cost
Landed cost tells you what the product costs. It does not tell you what you keep. Once you know it, subtract the costs of selling:
Platform and payment fees: a percentage of each sale, plus sometimes a fixed fee. Check the current rate for the marketplace you use.
Ads and creator commissions: often the biggest cost of all, especially at the start.
Returns and refunds: plan for some. Even a small return rate takes a real share of the margin on a cheap product.
What is left is your margin per unit. If it is thin, a higher price, a cheaper shipping route or a bundle can fix it. If the contribution is negative under the current assumptions, increasing volume increases that loss. Recheck the price, terms and costs before expanding.
Run your own numbers
You can do all of this on paper, but it is faster to put the numbers in a calculator and change one at a time. Try the example above in our cost calculator, then replace each line with the real quotes for a product you are considering. Change the retail price, then the shipping, and watch which change matters most. That is usually where your next supplier question should go.
Frequently asked questions
What is the difference between landed cost and cost of goods?
Cost of goods is usually just what you pay for the product. Landed cost adds shipping, duties, packaging and handling, so it is what one unit really costs once it reaches the buyer.
Does landed cost include platform fees?
No. Landed cost stops at the buyer's door. Platform fees, ads and returns come out of the margin that is left afterwards.
Is it cheaper to ship from a US warehouse?
Often, for the buyer's delivery time and sometimes for cost too, even when the unit price is a little higher. Compare suppliers by landed cost to the US, not by unit price alone.
How do I know if duties are included in a shipping quote?
Ask the supplier or agent directly and get the answer in writing. If duties are not included, find out who pays them and when before you sell.