How a DTC Brand Found Its Real Landed Cost After Two Years of Guessing
Sam's List Editorial | 2026-08-01
How a DTC Brand Found Its Real Landed Cost After Two Years of Guessing This is an illustrative scenario, representative of the kind of eCommerce accounting work described below. Details are anonymized and the figures are for illustration only. Results vary by brand. The dashboard said 62 percent gross margin. The bank account said something else entirely. That gap is the most common unexplained problem in a growing DTC brand, and landed cost is usually where it hides. This representative case study follows a brand doing mid-seven figures that had been running on a COGS number nobody had ever rebuilt from source documents. The Problem The brand imported from two overseas manufacturers and sold through its own site plus one marketplace. COGS in the accounting file was the unit price on the manufacturer's invoice. That is it. Everything else that gets a product from a factory to a warehouse was somewhere further down the income statement, coded as operating expense: ocean and air freight, duties and tariffs, customs brokerage fees, drayage, inbound handling at the 3PL, and the occasional inspection or rework charge. The result was a gross margin line that was structurally too high and an operating expense line that absorbed costs that varied directly with units sold. Every downstream number inherited the error. Contribution margin by SKU was wrong. Ad spend targets built on that contribution margin were wrong. The decision to promote one product over another was being made on numbers that did not describe reality. The founder's instinct had been that the marketplace channel was the problem, because that is where fees are visible. It was not the main problem. The Approach The work, representative of a specialist eCommerce engagement, was a rebuild rather than an adjustment. It started with source documents: twelve months of manufacturer invoices, freight forwarder invoices, customs entry summaries, brokerage bills, and 3PL inbound charges. Nothing was estimated at this stage. The point was to see the actual total cost of goods arriving. Then allocation rules, which is where the judgment lives. A single container carries several SKUs of different sizes and weights, so shared freight and duty have to be assigned somehow. The brand adopted a documented method, allocating ocean freight by cubic volume and duty by declared value per SKU, because duty rates differ by classification. Written rules matter more than the specific choice, because consistency is what makes period comparisons meaningful. Next, a per-SKU landed cost build-up: unit cost, plus allocated...
