Using Shelved Cost To Price Products
The shelved cost of the product is the true cost of the product to you. And when you want calculate the price at which you should sell your product, you should use the shelved cost.
The shelved cost is the cost of the product that you pay the supplier plus any other costs that it takes to get that product on the shelf in your warehouse or shop.
To get the product on your shelf you will have to add to the price you pay the supplier all the costs involved in having that product shipped from the factory to your warehouse or shop and the costs of unloading that product and stacking it on the shelves.
Those costs will include at least the following: courier fees, port charges, agency fees, shipping fees, customs bonds, duties and taxes, trucking fees, plus the labor costs involved in taking the product from the truck at your warehouse and moving it to the shelves.
To price your product you have to total all these fees and add them to the actual cost of your product on a pro rata basis.
Importers recognize that if they order and import products by the pallet or container load, the shelved cost of the product may be anywhere from 25 to 40% higher than the cost of the product exworks factory.
If you order small amounts of products from a factory to be imported, the fees and charges mentioned in the last paragraph can be significant in relation to the cost of the product at the factory. In fact, they can be so high that it will be better for you to buy from an importer that acts as a local distributor.
There are cases, because of unique product properties, that the shelved cost of the product can be as much as 100 to 200% higher than the cost of the product exworks factory. This generally occurs where one is ordering low-cost products that come packed in large boxes. This includes such as Christmas balls and gazing globes - they occupy a lot of volume.
This also occurs where one wants to order less than pallet loads. When one orders less than a pallet of product, one still incurrs all the costs that one would incur were one to order a full pallet load. So if one is not going to order a full pallet, it is best to order from a distributor or wholesaler.
You can reduce your shelved cost by ordering more than one pallet of product from a factory at a time. That is because some of the costs involved in the importing process are fixed so that when you prorate your import costs across everything that you ordered, the amount added to each product is lower.
Another thing that you can do is have your pallet shipped as part of an aggregated load so that the shipping costs and fees are shared among everyone on a prorated basis. That means if someone is going to import a pallet load of watering balls, you can reduce your costs by adding your order for a pallet of crystal, or watering balls, or something else to the same shipment.
What this means to you is that if you're going to order small amounts of product it may be better for you to buy from a local distributor than to try and import directly from a factory in Poland. Even though the price that you pay the local distributor may seem much higher than you expect, it is likely that it will be much lower than you will actually pay if you would attempt to import the product directly from the factory.
So as a rule of thumb, if you are going to buy less than a pallet load of product, buy from a local distributor.
If you're going to buy less than a pallet load of product, buy directly from the factory and, if possible, add that pallet to another load being shipped.