How do I work out my margin on stock I import from China once freight and customs are added?
Add up the whole freight, customs and clearance bill, divide it by the number of units in the shipment, and add that to the supplier's unit price. That landed cost per unit is what goes in the cost field, not the price on the factory invoice.
Why the supplier price flatters you
When you negotiate with a factory, all your attention goes on the unit price. But the goods do not reach your warehouse for free. There is sea or air freight, customs duty, a clearing agent's fee, local delivery and often a bank transfer charge. These are paid once for the whole shipment, so they feel separate from the product. They are not: every unit you sell carries a share of them.
Measure your margin against the factory price alone and you get a lovely number on paper, then wonder why that profit never shows up in your account.
Build the landed cost per unit
- Total everything you paid to get the shipment to you: international freight, duty, clearance, the local leg to your storage and any transfer fees. Use the figures from your own invoices.
- Divide the total by the number of sellable units that arrived.
- Add the result to the supplier's price for one unit.
- Type that figure as the cost in the Profit margin calculator, with your selling price before tax.
The supplier charges 38 per unit, and the shipment is 100 units.
Freight, duty and clearance come to 2400 in total, which is 24 per unit.
Landed cost is 38 + 24 = 62, and your shop price is 99.
What changes in the result
Enter only the supplier price, 38 against a price of 99, and the calculator shows a profit of 61, a margin of 61.62% and a markup of 160.53%. Numbers that tempt you to order a bigger shipment.
With the landed cost of 62, profit is only 37, the margin is 37.37% and the markup 59.68%. Freight and customs took roughly a quarter of the selling price. That is the figure your decisions should rest on: how much you can spend on ads, and whether you can afford a sale discount.
Common mistakes when spreading import costs
- Dividing by the units ordered instead of the units received. If 95 good units arrived out of 100, divide by 95.
- Splitting freight evenly across products of very different sizes. A bulky item takes more space in the container than a small one. Estimate each product's share of volumetric weight with the Volumetric shipping-weight calculator and allocate by that.
- Ignoring the exchange rate. If you paid the supplier in dollars, convert at the rate your bank actually charged.
- Reusing an old duty estimate. Every shipment has its own invoice, so update the cost with each new batch.
And if the margin is lower than you want?
You have two levers: bring the landed cost down, for example by ordering more so each unit's share of freight shrinks, or raise the price. To find the price that hits a specific margin once marketplace fees are included, put the same landed cost into the Selling-price calculator.
Common questions
Should import VAT go into the cost?
If you reclaim it under the tax system you are registered in, it is not a cost to you; if you cannot, it is. Check your own position with your accountant, since the calculator only works with the numbers you type.
Does the tool work out landed cost for me?
No. It has two fields, cost and selling price. You do the split with a simple division and enter the result.