What is landed cost in fashion?
The full cost of a product once it arrives at the warehouse, including purchase price, freight, duties, insurance and handling.
In short
Landed cost is the full cost of a product once it arrives at the warehouse, including the purchase price, freight, import duties, insurance, handling and other charges. It gives a true picture of what a product costs before it is sold.
How does it work in practice?
Sourcing teams start with the factory price agreed with the supplier. They then add international freight, insurance, customs duties and taxes that are not recoverable, customs brokerage, port and handling fees, inland transport and sometimes agent commissions or testing costs. Currency effects are included when goods are bought in a different currency. The result is the landed cost per unit, which is stored in the ERP and used for margin calculations.
Why does it matter?
A product that looks profitable on the factory price can become marginal once freight and duties are added. Landed cost is therefore the correct basis for setting wholesale prices and comparing sourcing options, for example a cheaper factory further away versus a nearer one with faster delivery. It also affects inventory valuation and financial reporting, so accuracy matters well beyond the buying team.
How is AI changing it?
AI improves landed cost estimates by predicting freight rates, transit times and currency movements, and by classifying products correctly for customs. It can model different sourcing and routing scenarios early in development, so teams understand the full cost before committing to a supplier. After shipment, AI can reconcile estimated and actual costs and flag unexpected charges.
Common pitfalls
- Pricing products on factory cost alone.
- Using outdated freight or duty assumptions.
- Ignoring currency risk between order placement and payment.
- Allocating shared shipment costs inaccurately across products.
Frequently asked questions
What is included in landed cost?
Landed cost includes the purchase price plus freight, insurance, import duties, customs fees, handling, inland transport and any currency effects.
Why is landed cost important for fashion brands?
It shows the real cost of a product, which brands need to set profitable wholesale prices and to compare suppliers and sourcing regions fairly.
