How to calculate the profitability of sourcing from China: the landed-cost formula

“It’s cheaper in China” is only true if you count the final price, not the factory price. The profitability of sourcing is determined by what the goods cost “to your door” compared with the local price. Let us break down how to calculate this correctly — with a worked example.

What is included in the landed cost of goods from China?

Landed cost is the final cost of the goods including all expenses to your door. That, not the factory price, is what you compare with the local price. Comparing the “factory price” with the local one is the main mistake.

How do you calculate the profitability of sourcing from China?

Landed cost = factory price + logistics + customs charges + sourcing fee + related costs

1. Factory price — on agreed Incoterms.
2. Logistics — sea/road/air, by weight or volume (how shipping is calculated).
3. Customs charges — duty and VAT, depend on the country and HS code.
4. Sourcing fee — a fixed 10% at Dream View.
5. Related — samples, inspection, insurance, bank fees.

A worked numeric example

Take a notional item with a local price of 100 units per piece:

The exact figures depend on category, volume and route, but the logic is always the same: you compare 55 (to the door), not 35 (factory), with 100 (local).

Break-even and volume

Sourcing pays off more the larger the volume: logistics, clearance and handling depend little on batch size, so per unit they spread out the more, the larger the order.

• A small one-off order — savings may be “eaten” by logistics; calculate landed cost carefully and account for MOQ.
• A large order or project outfitting — fixed costs spread across the volume, savings are maximal.

The rule is simple: the larger the volume, the lower the share of logistics and clearance in the unit price — and the more profitable the sourcing.

Savings by category (a guide)

Furniture up to 80%, tile and stone up to 70%, plumbing up to 60%, kitchens and fronts up to 50%, almost any item from 20%. On premium items the difference versus local retail can be several-fold. To decide DIY versus an agent, see the comparison in sourcing agent or DIY.

When sourcing from China is not worth it

Direct sourcing is not a universal solution. It loses when:

• Small volume and a cheap item. Logistics and clearance “eat” the saving: a single nightstand from China ends up dearer than a local one.
• Speed matters more than price. If you need the item “yesterday,” production and sea timelines don’t fit.
• No custom requirements. Standard small items available locally at a close price aren’t worth shipping.

Sourcing from China shines on volume, custom and premium items, where the price gap is several-fold. So before ordering, you calculate the landed cost for your specific item and volume — sometimes the honest answer is “local is cheaper,” and that’s fine.

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Want an exact calculation for your item or project? We will calculate the landed cost to your door and compare it with the local price — you will see the real saving upfront. For free.