COGS and landed cost are related, but they are not interchangeable in every accounting or operating model. The key for profitability planning is consistency: decide which costs are included in your product-cost input and make sure the same expense does not appear again elsewhere.
What COGS means
Cost of goods sold is an accounting concept representing costs attributable to goods that were sold during a period. Exact treatment depends on your accounting policy and jurisdiction. For a SKU planning model, sellers often begin with the unit purchase or manufacturing cost and then decide which inventory-related costs are included.
What landed cost means
Landed cost is an operational measure of what it costs to get inventory to the point where it is ready for sale. Depending on the supply chain, it may include product cost, international freight, insurance, duties, customs/brokerage and inbound handling.
Worked example
Assume 500 units cost $10 each. International freight is $1,000, duties are $500 and inbound handling is $250. Total landed inventory cost is $6,750, or $13.50 per unit. If your calculator already uses $13.50 as the product/landed cost, do not add the same $3.50 of freight, duty and handling again.
Costs that usually remain outside landed cost
Outbound customer shipping, marketplace fees, payment processing, advertising, creator commissions and expected returns are normally modeled separately because they occur at or after the sale rather than when inventory is landed. Your accounting treatment may differ, so keep planning definitions separate from formal financial reporting.
Why the distinction changes pricing
If a seller prices from a $10 supplier invoice while the real landed cost is $13.50, the apparent margin is overstated before a single marketplace fee or advertising dollar is considered. Landed cost is therefore especially important for imported products.
Common mistakes
- Using supplier invoice cost while ignoring inbound freight and duties.
- Double-counting freight because it is embedded in landed cost and entered again separately.
- Allocating a shipment's freight equally when products differ substantially in weight or volume.
- Mixing accounting COGS with an operational landed-cost estimate without documenting the definition.
Practical rule
Write down exactly what your “product cost” field contains. If you can explain the definition in one sentence and trace it to supplier/logistics records, your model is easier to audit and update.
Open Landed Cost Calculator Compare Marketplaces
Document the date and source of any fee assumption you enter. When a marketplace changes pricing or your supplier and logistics costs move, update the model and rerun the scenario. A repeatable process is more valuable than a one-time calculation because ecommerce economics change over time.
Use the framework with a real SKU rather than a hypothetical average product. Pull selling price, discounts, product cost, shipping and fulfillment from your own records. Enter marketplace or payment fees using the current terms that apply to your account. Then compare a normal case with a conservative case that assumes either higher returns or higher acquisition cost. The purpose is to understand which assumptions have the greatest effect on contribution, not to produce a false sense of precision.
How to use this guide in practice
Editorial note
Fee schedules and seller programs can change. Verify current official marketplace terms for your country, category and account before making a commercial decision. Ecomly Profit provides planning estimates and educational guidance, not accounting, tax, legal or investment advice.