Not Knowing the True Landed Cost: A Fatal Mistake of International Business
For companies involved in international trade, the cost to get the product to the customer’s doorstep can be significant.
Whether you control the final sales price of your product or not, you must be aware of how that price is determined. Positioning your product against the competition in a specific market depends on this. There are some basic differences in the landed cost analysis between domestic and international markets. Some of them are obvious, like customs duties. Others are not so obvious, like all the fees that may be levied to process customs declarations or to exchange currency. Failing to be aware of all the cost items could be a very expensive mistake.
How can a company avoid this mistake?
Whether you sell through an importer and your involvement ends when the container is loaded on the ship, or you are actively involved in the sale to the end-user; you need to be aware of how the price to the customer is calculated. This is not just a question of assessing the profitability of selling to a specific market; you need to be aware of how your product is positioned against competitors. Whatever the arrangements behind the logistic of delivering your product to the ultimate client, the final price will be a major component of its success. Your P&L analysis may only include the costs incurred until the contractual delivery takes place, but the success of your product in that market depends on the final landed cost to the ultimate client. A realistic projection of sales depends on the awareness of all the costs.