Most Amazon FBA sellers know their product cost — the price they pay their supplier per unit. Very few know their landed cost — the actual total cost to get one unit into Amazon's warehouse, sold, and delivered to a customer. The gap between these two numbers determines whether your business is actually profitable or just looks profitable.
The landed cost formula
True landed cost per unit for an Amazon FBA product includes every cost incurred from supplier to customer:
Let's break down each component.
Component 1: Product cost
This is your supplier's price per unit. Straightforward — but make sure you're using the most recent order price, not a blended average from 12 months ago. If prices fluctuate with raw materials or exchange rates, use the actual cost per shipment.
Component 2: Inbound freight
This includes everything from factory to Amazon's receiving dock:
- Factory to port: Inland trucking in the origin country
- Ocean/air freight: The main shipping leg. Ocean is typically $2–5 per kg; air is $5–12 per kg
- Port to Amazon (last mile): Trucking or LTL from the destination port to Amazon's fulfilment centre
To get a per-unit freight cost, divide the total shipment freight by the number of units in that shipment. Don't use an annual average — calculate per shipment.
Component 3: Customs duties & brokerage
If you're importing products (most FBA sellers are), you'll pay customs duties based on your product's HTS code and the country of origin. Duty rates vary widely — anywhere from 0% to 25%+ depending on the product and any applicable tariffs.
Don't forget customs brokerage fees — your broker charges $150–$400 per shipment to handle the paperwork. Divide by units in the shipment to get a per-unit cost.
Tariff alert: If your products are sourced from China, check the current Section 301 tariff status. Additional tariffs of 7.5% to 25% may apply on top of the standard duty rate. These change frequently — your customs broker should be tracking this for you.
Component 4: Packaging & labelling
This includes product packaging (boxes, inserts, poly bags), FNSKU labels, suffocation warning stickers, and any prep work required by Amazon. If you use a prep centre, include their per-unit fee here.
Component 5: Quality inspection
If you're running pre-shipment inspections (you should be), allocate the inspection cost per unit. A typical inspection runs $300–$500 per batch.
Component 6: Amazon FBA fees
This is usually the largest single cost component after product cost. FBA fees include:
- Referral fee: 8–15% of sale price depending on category
- Fulfilment fee: $3–$8+ per unit depending on size and weight tier
- Monthly storage fee: $0.87–$2.40 per cubic foot (higher Oct–Dec)
- Long-term storage surcharge: If units sit beyond 365 days
Pull these from Amazon's Fee Preview report or Transaction View in Seller Central. Use actual fees per ASIN, not category averages.
Component 7: Returns allowance
Returns are an unavoidable cost in e-commerce. The average return rate on Amazon is 5–15% depending on category (apparel is much higher). When a unit is returned:
- Amazon charges a return processing fee
- The unit may be unsellable (damaged, opened)
- You refund the customer but don't recover your FBA fees
Build a returns allowance into your landed cost — typically 3–8% of the selling price, depending on your category's return rate and the percentage of returns that can't be resold.
Example: putting it all together
Here's a real-world example for a health supplement product selling for $29.99 on Amazon:
| Cost Component | Per Unit | % of Sale Price |
|---|---|---|
| Product cost (supplier) | $4.20 | 14.0% |
| Ocean freight + last mile | $1.35 | 4.5% |
| Customs duty (6.5% + broker fee) | $0.45 | 1.5% |
| Packaging + FNSKU labels | $0.30 | 1.0% |
| Inspection (allocated) | $0.08 | 0.3% |
| Amazon referral fee (15%) | $4.50 | 15.0% |
| FBA fulfilment fee | $3.86 | 12.9% |
| Monthly storage (avg 2 months) | $0.22 | 0.7% |
| Returns allowance (5%) | $1.50 | 5.0% |
| Total Landed Cost | $16.46 | 54.9% |
| True Profit per Unit | $13.53 | 45.1% |
If this seller had only been tracking product cost ($4.20), they'd think they had a 86% margin. The real number — after all costs — is 45.1%. Still healthy for this particular product, but a completely different picture for pricing and inventory decisions.
Key insight: Amazon fees alone (referral + fulfilment + storage) account for roughly 28–30% of the selling price for most products. If you're not including these in your COGS or landed cost calculation, your margin is dramatically overstated.
How to track this ongoing
Per shipment: Every time you receive a new shipment, calculate the landed cost per unit for that batch. Use the actual freight, actual duty, and actual inspection costs for that specific shipment.
Monthly: Update your FBA fees using Amazon's actual fee reports (not estimates). Storage fees change quarterly and spike in Q4.
Quarterly: Review your returns rate and adjust the allowance if needed. Also check for long-term storage charges.
In your books: All of these costs should flow into COGS in your accounting system — not into operating expenses. Read our COGS classification guide for how to structure this in QuickBooks or Xero.