If you have ever sold and shipped your products internationally, you have most likely heard the term “Landed Cost” before. What I would like to do with this post is provide several frequently asked questions about landed cost and provide the answers to help better your understanding on landed cost and how it may apply to your business.
What is Landed Cost?
Landed Cost is the total cost your international customers will pay by the end of receiving an order.
What are the fees the make up a landed cost?
Some of the items that your international customer may be paying for as part of the landed cost for their order are:
- Duty and tax
- Currency conversion
- Carrier fees
Why is landed cost important to my business?
Many international consumers that purchase from U.S. retailers are aware that most of the fees listed above exist, but are not sure how they will affect their order, or if they will be charged extra by the shipping carrier once their package arrives.
The buyer’s uncertainty of their total landed cost causes frequent cart abandonment.
Why is landed cost important to my customers?
As mentioned above, international customers are typically not aware of the landed cost when placing an order online with U.S. retailers.
Imagine if this was the purchasing experience you had with an international order through your business. While shopping online you find a widget for sale form a U.S. retailer for $100.00 USD, about half of the cost for the same item at the local retailer.
Even though the shipping was about $25.00 USD you still place the order assuming that you have just saved yourself about $75.00 USD. After anxiously waiting several days, your package finally arrives. However, upon opening the door and greeting the delivery driver you come to find out that they will not deliver your package until you pay an additional $50.00 USD. You reluctantly pay the $50.00 USD and take the package from the carrier.
Even though you still saved money, the transaction ended on a sour note. Good luck getting your customers to got through that experience again.
How can I calculate Landed Cost for my customers?
Unfortunately, due to all of the different fees that your customers may be subject to, that can vary by country and shipping carrier, it is extremely difficult to calculate landed cost.
Fortunately, there are software and service providers, like iGlobal, that can help with this and even guarantee that the customer will not pay more.
I strongly recommend to any eCommerce business out there that has, or is looking to expand internationally, to provide their customers with a landed cost. This will both improve the customers experience and increase their conversions.