Landed Cost vs COGS: The Difference for FBA Sellers | Inventory Hero
·5 min readFBA Fees
Landed Cost vs COGS: The Difference for FBA Sellers
Landed cost vs COGS: landed cost is the full cost to get a unit to the warehouse; COGS is the cost of what you sold. Why FBA sellers must not confuse them.
What is the difference between landed cost and COGS?
Landed cost is a per-unit figure: the total cost to get one unit to your warehouse, including product, freight, duty, insurance, and handling. COGS, cost of goods sold, is an accounting total for a period: the cost of the units you actually sold during that period. Landed cost is the building block; COGS is the period figure built from it.
What is included in landed cost?
Landed cost includes the product (the factory or supplier price), inbound freight, customs duties and tariffs, insurance, and any prep or handling to get the unit ready. It is the full cost of a unit arriving ready to sell, which is almost always meaningfully higher than the factory unit price alone.
Andrew Erickson is the founder of Inventory Hero. He has spent years working with Amazon FBA sellers on demand forecasting, restock planning, and the cash flow side of running a private-label brand. Inventory Hero exists because every spreadsheet-based inventory system he tried eventually broke — usually right before Q4.
Price and judge margin off landed cost, because it is the true per-unit cost of the product. COGS is for your income statement and taxes, calculated as the landed cost of the units that sold in a period. Using the factory unit price instead of full landed cost is the most common way FBA sellers overstate their margins.
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Landed cost is the full per-unit cost to get a product to your warehouse or FBA (product, freight, duty, insurance, and handling), while COGS (cost of goods sold) is the accounting cost of the units you actually sold in a period. The short version: landed cost is the per-unit building block you use for pricing and margin, and COGS is the period total built from it for your income statement. Below is what each includes, how they relate, and why confusing them quietly overstates your margins.
Landed cost is everything it takes to get one unit from your supplier to a warehouse, ready to sell. It includes:
Product cost. The factory or supplier price per unit.
Inbound freight. Ocean or air freight, allocated per unit.
Duties and tariffs. Customs charges, which for many imported goods are a large and growing line (tariffs have been volatile lately, see tariff refunds). See the Incoterm you agreed, since it determines which of these you pay.
Insurance. Cargo insurance on the shipment.
Prep and handling. Labeling, polybagging, or prep-center fees to get the unit ready for FBA.
Add those per unit and you have landed cost:
Component
Per unit
Supplier price
$8.00
Ocean freight (allocated per unit)
$1.10
Duty (25%)
$2.00
Insurance
$0.08
Prep and labeling
$0.45
Landed cost
$11.63
That 8 dollar product actually costs 11.63 dollars landed, about 45 percent more than the factory quote, which is exactly why pricing off the factory price overstates margin. One clarification: the FBA fulfillment fee and the referral fee are not part of landed cost. They are selling costs that come off the sale price, not costs of getting the unit to the warehouse, so do not fold them into landed cost. When you do want the all-in per-sale profit, that is contribution margin: selling price minus referral fee minus fulfillment fee minus landed cost. Compute your own number in the landed-cost calculator.
COGS, cost of goods sold, is an accounting figure for a period (a month, a quarter, a year): the cost of the inventory you actually sold during that period. It is built from landed cost. If you sold 1,000 units that each had a landed cost of 6 dollars, your COGS for those units is 6,000 dollars.
The key differences:
Landed cost is per unit; COGS is a period total.
Landed cost applies to every unit you buy; COGS only counts the units that sold (unsold units sit in inventory on the balance sheet until they sell).
Landed cost is for pricing and margin decisions; COGS is for the income statement and taxes.
Confusing the two, or using the factory price for either, costs real money in two ways.
First, margin. If you price a product believing your cost is the 5 dollar factory price when your landed cost is 6.50 dollars after freight and duty, every unit is 1.50 dollars less profitable than you think. Across thousands of units that is the difference between a healthy SKU and a money-loser, and it stacks with the Amazon fees that come off the sale price.
Second, accounting accuracy. Your COGS drives your gross profit and your taxes. Building it from a too-low product cost overstates profit on paper, which can mean a tax surprise and decisions made on numbers that are not real.
The fix is to track full landed cost per SKU and use it everywhere: as the cost in your pricing, as the holding base for carrying cost, and as the input to COGS. See restock planning for where landed cost feeds the buy decision.
Landed cost is the full per-unit cost to get a product to your warehouse, product plus freight plus duty plus insurance plus handling, and COGS is the accounting cost of the units you sold in a period, built from landed cost. Price and judge margin off landed cost, never the factory quote, and calculate COGS from it for the income statement. Getting this right is the difference between knowing your real margin and guessing at it. For the full fee picture, see Amazon FBA fees 2026.