Factory Price vs Landed Cost: What You Actually Pay

The number on the quotation is the smallest part of the money you spend. Between the factory gate and your shelf sit four or five more lines, and they are priced by different people on different bases. This page sets out what those lines are, how to total them, and how much room the retail band actually leaves for them.

The gap, measured

We hold two sets of public prices for the same three product classes: 90 usable factory listings from Made-in-China retrieved 2026-10-30 (92 collected, two excluded because they quote per kilogram or per set rather than per unit), and 122 US retail listings from Walmart, Target and PetSmart retrieved 2026-11-01 (172 collected; accessories, replacement parts and wild-bird feeders excluded). Put the medians side by side and the room available for the landed cost stack becomes visible.

Factory medians: listing midpoints at each listing’s own MOQ, retrieved 2026-10-30 · Retail medians: retrieved 2026-11-01 · Share of retail = difference ÷ retail median.

That difference is not profit. It is the envelope that has to contain freight, insurance, duty, import tax, customs clearance, marketplace fees and returns, and only then leaves a margin. On the fountain, 60.6% of the retail price has to cover everything that happens after the factory gate. On the feeder, 40.0%, which is why the same percentage of leakage hurts a feeder seller far more than a fountain seller.

Five lines between the factory and your shelf

1. Freight is priced by volume, not by unit

Carriers charge the greater of actual weight and volumetric weight, and volumetric weight comes from the carton dimensions divided by a carrier-specific divisor. Two products at the same factory price can land at different per-unit freight because one ships 12 units to a carton and the other ships 4. This is why carton dimensions and gross weight belong in the quotation, and why a cheaper unit is not automatically a cheaper landed unit. Ask for the carton spec before you judge a factory price; without it you cannot compute the freight line at all.

2. The rate is set by the code, not by the product name

Duty is levied on a customs classification — the HS code — and the rate follows from that code plus the importing country’s schedule. The same product described two ways can fall under two codes. Ask the supplier which code they use on export documents, then verify it against the importing customs tariff before you model the cost. We do not publish duty percentages here: they change, and a rate copied from a blog post is worse than no rate at all.

3. Import tax is not duty, and it may not be a cost

Import tax — VAT or GST depending on the country — is charged on the customs value plus duty plus freight, so it compounds the two lines above. Whether it is a cost depends on whether you are registered to recover it. A margin model that treats recoverable import tax as a cost understates the margin; a cash-flow plan that ignores it overstates the cash you have. Both mistakes are common and they point in opposite directions.

4. Customs clearance is a fee, and it can be a delay

Brokerage, terminal handling, documentation and last-mile delivery are small lines individually and add up across a shipment. They are also the lines where an incorrect HS code turns into an inspection, and an inspection turns a 30-day plan into a 60-day one. The cost of the delay is not in any quotation; it is in your working capital.

5. The incoterm decides which lines are yours

An FOB quotation ends on board at the Chinese port, so every line after it is yours. A CIF quotation includes main-carriage freight to the destination port, which makes it look cheaper and moves the freight risk to the seller while leaving the goods’ risk with you. Under DDP terms the seller quotes a delivered price and the charge is inside the number, which is convenient and opaque: you cannot audit a total import cost you cannot see the parts of. For an audit, DDP is the worst possible incoterm to work from, because the price is a single figure with no breakdown behind it.

How much room is there, really

Take the retail median as a ceiling rather than a target, and set a gross margin you would accept. At a 40% gross margin, the maximum landed cost per unit is 60% of the retail price. Compare that with the factory median and the whole freight-and-fee stack has to fit inside the difference.

Max landed cost = retail median × 0.60. Retail medians retrieved 2026-11-01; factory medians retrieved 2026-10-30. The 40% margin is an assumption for illustration, not a market figure.

A cent short of nothing is what the feeder column comes to: at the median shelf price, a 40% gross margin leaves $40.49 for landed cost, and the factory median is $40.50. This is the arithmetic that explains why so many first import orders are profitable on the spreadsheet and flat in the bank: at the public retail band, a 1.7× multiple between factory and retail is not enough room for a full landed cost stack plus marketplace fees. A product needs either a retail price above the band median, a smaller carton, or a factory price below it — and the first two are much harder to arrange after the order is placed.

The four places this leaks

1. Comparing an EXW quote with an FOB budget. The inland trucking and export clearance are missing from one side of the comparison and present in the other.
2. Freight modelled per unit instead of per carton. Volumetric weight is set by the carton, and the carton is set by the design.
3. The rate modelled from a search result. It follows the HS code, and the code follows the classification, not the product name in the title.
4. Retail modelled from the wrong band. A premium listing at the top of a retail range is a competitor with a brand, not a price you can charge on day one. The median is the defensible reference; the top of the range is a hope.

What to ask for, in one email

Three documents close most of the gap: the carton specification (dimensions, units per carton, gross weight), the HS code as it appears on the supplier’s export documents, and a proforma invoice that names the incoterm and the port. None of them is confidential, all three are produced routinely, and a supplier that cannot supply them is telling you something about how the order will be documented later.

What to do with a quote you already have

Three figures turn a quotation into a landed cost model: the factory unit price with its incoterm and port, the carton dimensions and gross weight, and the HS code. With those, the freight cost and the customs charge can be priced by someone who ships regularly, and the result is a landed unit cost you can compare with a retail band. Without them, a total import cost figure is an assumption stacked on an assumption.

This is a price audit; we do not book freight, classify goods for customs or inspect quality. Those three sit outside the analysis on purpose — the point here is to establish what the goods should cost, so that the freight and duty quotes you receive can be checked against something.

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