Importing from China is popular due to lower manufacturing costs, but accurate costing is critical to maintain profitability. Many sellers fail to calculate true landed cost, leading to underestimated expenses and lower margins.
1. Components of E-Commerce Costing
a. Product Cost (Unit Cost)
- This is the price you pay your supplier in China for each item.
- Example: A phone case costs $2/unit.
b. Shipping Cost
- Includes international shipping (air, sea, or courier).
- Must consider per-unit shipping cost if shipping in bulk.
- Example: $500 shipping for 1,000 units = $0.50/unit.
c. Customs Duties & Tariffs
- U.S. tariffs vary by product category: electronics (~20%), apparel (~25%), toys (~25%), etc.
- Duty is calculated on CIF value (Cost + Insurance + Freight).
- Example: $2/unit product, $0.50 shipping, duty 25% → $0.625/unit tariff.
d. Insurance
- Optional, but recommended for high-value shipments.
- Often 0.5–1% of shipment value.
- Example: $500 shipment, 1% → $5 → $0.005/unit for 1,000 units.
e. Warehousing & Fulfillment
- Cost of storing and handling products in the destination country (e.g., US).
- Includes FBA (Fulfillment by Amazon) or Shopify fulfillment fees.
- Example: $2/unit for storage + shipping to customer.
f. Payment Processing & Platform Fees
- Shopify: 2.9% + $0.30 per transaction.
- Amazon FBA: referral fees 8–15%, FBA fulfillment fees.
- Include all platform fees per unit in costing.
g. Returns & Refunds Provision
- Estimate a % of sales for returns, refunds, and damaged items.
- Example: 5% expected returns → $0.10/unit if product cost $2.
h. Marketing & Advertising
- Ads on Facebook, TikTok, or Google Shopping.
- Include per-unit marketing spend in profitability calculation.
- Example: $1 per sale ad spend.
2. Calculating Landed Cost Per Unit
Landed Cost = Product Cost + Shipping + Customs Duties + Insurance + Platform Fees + Fulfillment + Returns + Marketing
Example Calculation:
| Cost Component | Amount (USD/unit) |
|---|---|
| Product Cost | $2.00 |
| Shipping | $0.50 |
| Customs Duty | $0.625 |
| Insurance | $0.005 |
| Fulfillment/Warehousing | $2.00 |
| Platform Fees | $0.50 |
| Marketing | $1.00 |
| Returns Provision | $0.10 |
| Total Landed Cost | $6.78/unit |
- If you sell for $12/unit, profit = $12 – $6.78 = $5.22/unit (≈43% margin).
3. Tips for Accurate Costing
- Use per-unit calculations for precise pricing.
- Include all hidden costs, such as bank fees, currency conversion, and small handling charges.
- Update costs regularly, as shipping and tariffs fluctuate.
- Segment by product type, because electronics, apparel, and toys have very different tariffs and fulfillment costs.
- Track return rates over time to refine future estimates.
4. Common Mistakes in E-Commerce Costing
- Ignoring customs duties and tariffs.
- Not including platform and payment fees.
- Overlooking shipping or fulfillment cost per unit.
- Forgetting marketing spend per unit.
- Not factoring returns or damaged goods.
✅ Conclusion
For profitable e-commerce selling of Chinese products, it is essential to calculate the true landed cost per unit, including all fees, tariffs, and overheads. Accurate costing helps set competitive pricing, maintain healthy margins, and avoid unexpected losses.