Product Costing for Consumer Brands
Product costing should capture every cost required to put a saleable product in the customer’s hands—not only the factory price. A useful model connects landed cost, channel deductions and operating assumptions to contribution margin.
Build the landed cost
Start with the ex-factory price, then add tooling allocation, testing, inspection, packaging, freight, insurance, duties, taxes where non-creditable and inbound handling. Use realistic exchange-rate and freight assumptions.
Add channel and customer costs
Include marketplace commission, payment fees, fulfilment, shipping support, returns, warranty, discounts and marketing. These costs often determine whether the apparent gross margin survives.
Model scenarios, not one number
Create base, downside and upside cases for selling price, returns, advertising and sell-through. Identify the break-even contribution and the inventory exposure if demand is slower than planned.
Use cost engineering carefully
Reduce cost by simplifying architecture, consolidating components, improving pack efficiency and negotiating based on reliable volume. Do not remove the feature or quality cue that makes the product worth buying.
Frequently asked questions
What is included in landed cost?
Typically the product, packaging, freight, insurance, duties, testing, inspection and inbound handling required to make inventory available for sale.
What is contribution margin?
Revenue remaining after variable product, channel and fulfilment costs. It shows what each sale contributes toward fixed costs and profit.
Strong products come from clear specifications, realistic economics and disciplined supplier execution—not from chasing the lowest quotation.