How to calculate landed cost for Shopify orders

What counts toward landed cost?

For a direct-shipped Shopify order, landed cost is the amount your business pays to get the goods to the agreed destination. Add the supplier’s product price, shipping and handling, any separate insurance, and the brokerage or import charges your business pays. For bulk inventory, the destination may be your warehouse. In that case, calculate the landed cost into your warehouse and keep the later customer delivery cost separately.

Start with actual invoices. A supplier may quote one delivered price that already includes freight and handling. If you use that value, add a separate charge only when it appears on a separate bill for that order. Keep payment processing fees and advertising costs in their own lines so you can see how much they take from the margin after fulfilment.

Find out who pays at the border

Confirm the shipping term for each market and service with your carrier or supplier. Under delivered duty paid (DDP), the seller handles applicable import charges. Under delivered at place (DAP), the customer generally pays the applicable import charges on arrival. If shoppers pay the carrier directly, that payment does not pass through your store. Track any refusal and return costs your business actually bears separately.

When checkout collects duties or import tax meant to be passed through, keep those amounts separate from merchandise revenue and reconcile them against the carrier invoice. Brokerage may appear as its own line. Check Shopify’s guide to carrier terms and brokerage fees and the store and carrier requirements for collecting charges at checkout.

Worked example for an order sent from the UK to Ireland

Suppose a UK business reports in GBP, bills a customer in Ireland in EUR, and absorbs the applicable import charges. For this example, a €18.00 supplier cost converts to £15.30 at an illustrative £0.85 per euro. The other costs below come from a hypothetical carrier bill. They are example amounts and should be replaced with the charges on your own orders.

The product alone looked like a £15.30 cost. Using that price to set an ad budget would miss another £13.30 of delivery and import costs on this order.

Use the landed cost to set an ad-spend ceiling

For the order above, assume £58.00 of merchandise revenue after discounts, excluding separately collected taxes, with free delivery to the customer. Subtract £28.60 landed cost, £2.10 in payment fees, and £13.00 in acquisition spend. That leaves £14.30 of contribution, about 24.7% of the £58.00 before overhead and any later refund.

At a 20% contribution target, the order needs to keep £11.60. After the landed cost and fees, you have £27.30 before advertising, so the maximum acquisition cost is £15.70. Repeat this calculation for France, Germany, or any other destination where freight rates, invoice charges, or the amount you receive differ. A single margin percentage across all EU orders can conceal an unprofitable route.

Build a repeatable check by market

• Compare one recent complete order per shipping route to the supplier, carrier, and payment statements.
• Keep the original amount and exchange rate beside the GBP or EUR amount you use in your report. The shopper’s currency, store currency, and payment payout currency can differ.
• Use actual billed amounts when available and label estimated costs. Revisit the estimate when the carrier invoice or payment statement arrives.
• For shared shipping on bulk stock, divide costs by a consistent measure such as units for similar products or weight for mixed sizes. Record the method so you can explain the unit cost later.

See Shopify’s explanation of currency conversions when a payment and a later refund use different rates. Once your order costs are in one reporting currency, use the Break-Even ROAS Calculator to test the ad spend your margin can support and the Profit Inspector sample dashboard to see where those costs sit in a report.

Common questions