Pricing imported products: building your margin on landed cost, not factory price

The most expensive pricing mistake in importing is quiet. Nothing breaks, sales look healthy, the product flies off the shelf — and at the end of the year the profit isn’t there. Very often the cause is simple: the price was built on the supplier’s unit price, not on what each unit really cost to land. This guide sets out a method that avoids that trap.

Why is factory price the wrong starting point?

The factory price is the cost of the goods at the supplier’s door or port. Between there and your shelf sit freight, insurance, duty, broker fees, port and terminal charges, cartage and unpacking. Depending on the product’s value, weight and volume, those can add anything from a few per cent to a large share of the factory price. Bulky, low-value goods suffer most, because freight is charged on space, not value.

business.gov.au lists GST, duty, import processing charges, transport, insurance and storage, brokerage, biosecurity and clearance fees, and dumping and countervailing duties among importers’ costs. Every one that isn’t recoverable belongs in your cost base.

Step 1: What’s the landed cost per unit?

Start with a properly built landed cost:

Component	Per-unit share
Supplier price (at the exchange rate you actually paid)	✓
International freight and insurance (if yours to pay)	✓
Customs duty	✓
Broker fees and import processing charge	✓
Port, terminal, cartage and unpacking	✓
Estimated cost of finance for the stock	✓
Import GST	✗ — usually claimed back as a credit

The landed cost calculator does this per unit. For mixed containers, allocate shared costs by volume, weight or value — whichever reflects what drives the cost — and apply the same method every time.

Step 2: Margin or markup?

This is where good intentions go wrong.

• Markup = profit ÷ cost
• Margin = profit ÷ selling price

Landed cost	Selling price (ex GST)	Profit	Markup	Margin
$20.00	$30.00	$10.00	50%	33%
$20.00	$40.00	$20.00	100%	50%
$20.00	$33.33	$13.33	67%	40%

If you want a 40% margin and apply a 40% markup, you’ll end up with about 29%. Decide which one you’re managing to — most businesses find margin easier because it relates directly to sales.

Selling price (ex GST) = landed cost ÷ (1 − target margin)

For a landed cost of $20 and a 40% target margin: $20 ÷ 0.6 = $33.33.

Step 3: What does it cost to sell each unit?

Gross margin has to pay for the costs of making each sale. For many importers, these vary by channel:

• Marketplace and platform fees — commission on each sale, sometimes plus fulfilment fees.
• Payment processing fees — a percentage on card and wallet payments.
• Outbound shipping — if you offer free or subsidised delivery.
• Returns and damages — especially for online sales.
• Trade discounts and rebates — for retail and wholesale accounts.

A product with a healthy 45% gross margin in your own store might be marginal on a platform once fees and shipping come off. Work out a contribution per unit for each channel, not just a gross margin.

Step 4: How much buffer do you need?

Your landed cost is only true for the order you just landed. The next order may cost more because of:

• Exchange-rate movement between quote, deposit and balance — see exchange-rate timing.
• Freight rate changes, which can swing with demand and disruptions.
• Duty changes — a lost free trade agreement preference, a new measure, or a reclassification.
• Delays — storage and container charges if goods sit at the port.

A practical approach: cost your next order at an exchange rate a few per cent worse than today’s and at a conservative freight estimate. If the price still works, you have a buffer. If it only works at today’s best rates, it’s too tight.

If you’re funding stock to hold prices steady while costs move, ask us about a facility that gives you room — no credit check to ask.

Step 5: Does the price work in the market?

Maths gives you a floor; the market gives you a ceiling. Test your calculated price against:

• Competitors’ prices for comparable products and quality.
• Perceived value — branding, packaging, warranty and service.
• Price points your customers are used to seeing in your category.
• Volume effects — a slightly lower price that sells much faster can shorten your cash cycle and reduce funding costs.

If the market price is well below your calculated price, the problem is in the cost base — factory price, freight efficiency, duty or order size — not in the arithmetic.

How does pricing affect cash flow?

Price doesn’t just decide profit; it decides how fast stock turns into cash. A price that’s too high slows sell-through and stretches your cash cycle, which means more working capital and more funding cost. A price that’s too low sells fast but may not cover the next order’s higher landed cost. The sweet spot covers the next order’s likely landed cost with a sensible margin and sells at a pace that fits your funding.

A worked example

Illustrative only. An importer of yoga mats lands 3,000 units. The supplier price is $9.00 a unit; freight, insurance, duty, broker and local charges add $3.20; finance for the order adds an estimated $0.30. Landed cost is $12.50 a unit.

Channel	Price (ex GST)	Channel costs per unit	Contribution	Contribution %
Own website	$24.95	$3.40 (payment fees, shipping subsidy, returns)	$9.05	36%
Marketplace	$24.95	$5.60 (commission, fulfilment, payment)	$6.85	27%
Wholesale to studios	$17.50	$0.40 (freight to customer)	$4.60	26%

At a 40% target margin, the formula gives $12.50 ÷ 0.6 = about $20.83 — but the own-website price of $24.95 leaves room for channel costs. Wholesale works only because studios order in volume and pay within 14 days, which shortens the cash cycle. The owner costs the next order at a slightly weaker exchange rate and finds landed cost rises to about $13.10; the website price still works, but the wholesale price is reviewed.

What should you review with every order?

• actual landed cost per unit versus what you priced on
• exchange rate achieved on deposit and balance
• channel mix and fees
• sell-through speed by line
• whether any line should be repriced, reordered in a different quantity or dropped

How do you handle price increases with existing customers?

Sooner or later, landed cost rises enough that prices must follow. A few principles make it smoother:

• Give notice. Trade customers value a clear date — often at least a month — so they can adjust their own pricing.
• Explain briefly. A short note that freight, exchange rates or duty have moved is enough; customers in import-reliant categories usually understand.
• Move in steps. Several small, planned increases tend to land better than one large, sudden one.
• Protect key lines. If a hero product drives traffic, you might hold its price and adjust accessories or add-ons instead.
• Time it with new stock. Where possible, move prices when the higher-cost order lands rather than while cheaper stock is still selling.

Keep a record of each change and the landed cost that justified it, so your next review starts from facts rather than memory.

Price well, then fund the stock

Pricing from landed cost protects your margin; funding protects your cash while the stock sells. If the gap between paying for stock and selling it is stretching the business, see if you qualify with Trade Loan. There’s no credit check to enquire, and we don’t pass your enquiry around a group of lenders — a real person reads it and calls you. Please give accurate information about your order sizes and turnover so we can match you properly on the first call.