The Only Number That Matters: Landed Cost Per Unit
Many buyers think in terms of the lot's purchase price. That's the wrong number. The useful number is the landed cost per sellable unit: everything you'll have paid, divided by the number of units you can actually sell.
This article gives you a calculation method you can apply to any container, regardless of the merchandise.
Step 1 — Add Up Every Cost
Make a complete list, leaving nothing out:
- Purchase price of the goods
- Inland transport to the loading point
- Loading, lashing, packing
- Ocean freight
- Documentation and booking fees
- Cargo insurance, if applicable
- Port fees on arrival
- Customs duties and local taxes
- Customs clearance and brokerage
- Final delivery and handling
- Any storage costs
This total is your landed cost. Our article Container Shipping Cost Canada → Africa details these line items from the transport side.
Step 2 — Honestly Estimate the Number of Sellable Units
This is where most calculations go wrong. A container rarely contains 100% full-price sellable merchandise. Depending on the category, there will be:
- unsellable pieces (breakage, defects, waste);
- pieces sellable at a reduced price;
- pieces sellable at your target price.
Set three scenarios: optimistic, realistic, pessimistic. If the deal only works under the optimistic scenario, it isn't a deal.
Step 3 — Calculate Landed Cost Per Unit
Total landed cost ÷ number of sellable units = cost per unit.
Example (illustrative figures, replace with your own): if your total landed cost is $20,000 and you estimate 4,000 sellable units, your cost is $5 per unit. If you sell at an average of $9, your gross margin per unit is $4.
This approach is more reliable than any "margin percentage" quoted by a seller.
Step 4 — Factor in Time
A container that generates a 40% margin in three months isn't worth the same as one generating 40% in fifteen months. Tied-up capital has a cost, even when it doesn't show up in a spreadsheet.
Ask yourself two questions:
- How long until arrival? Add ocean transit time, customs clearance and delivery.
- How long to sell through the stock? Based on your past sales, not on hope.
Step 5 — Subtract Operating Costs
Gross margin is not your profit. Subtract further: rent or storage space, labour, local transport, resale packaging, losses, payment processing fees, local sales taxes.
What remains is your real net margin. That's the only number worth comparing from one container to the next.
Step 6 — Compare Transport Scenarios
Transport is one of the few line items you can still optimize after choosing your merchandise:
- A better-filled container lowers the cost per unit.
- Choosing the right container type avoids paying for empty space.
- Grouping two purchases into one container pools freight costs.
- For small volumes, consolidation avoids paying for a half-empty full container.
Warning Signs in a Profitability Calculation
- No "local fees at destination" line item: the calculation is incomplete.
- An assumed 100% sell-through rate: unrealistic in almost every category.
- A resale price based on a single exceptional sale.
- No provision for breakage and unsold stock.
- An unquantified sell-through timeline.
FAQ
What margin should I target on a container of goods? There's no universal number: it depends on the category, the market and turnover speed. What matters is that net margin covers your operating costs and risk.
How much of the total cost is freight? This varies widely with the value of the goods. On low unit-value products, freight can be a major share of the cost; on high-value products, it becomes marginal.
How can I reduce the cost per unit? By filling the container better, choosing the right format, booking early, and reducing waste at purchase.
Can VELOX help me estimate the transport side? Yes. Give us the merchandise, volume, weight and destination, and we'll outline transport options and the costs to plan for.
Conclusion
The profitability of a container isn't a guess — it's calculated, line by line, with honest sales assumptions. Run the numbers before you buy, then ask us for a freight quote to replace your transport estimate with a real figure.
Related reading
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