Territory Exclusivity Agreements without Minimum Target Purchase Obligations
Unconditional territory exclusivity creates a one-way option where distributors lock markets without committing capital or inventory velocity.
Landed Cost Margin
Meaning
Profitability metrics in import distribution rely on total accumulated expenditure rather than simple factory purchase prices to determine commercial viability. Calculating a landed cost margin requires evaluating gross profit against all direct costs incurred to move merchandise from origin factories through customs clearance into domestic fulfillment centers. Freight tariffs, port duties, customs broker fees, marine insurance and inland haulage charges combine with invoice product prices to form the true cost baseline.
Revenue evaluations stop at net wholesale or retail selling prices, excluding general administrative overhead from the direct unit margin formula.
Accumulation Accounting
Freight charges and border levies reduce nominal gross margins. A distributor buying products at factory prices must account for ocean freight spikes and customs import tariffs before setting resale prices. Evaluating profitability through the landed cost margin prevents margin erosion caused by unaccounted transit expenses and unexpected import duties.
Importers structure resale price floors directly above this fully loaded cost foundation to preserve required operating returns.
Expense Baseline
Total import costs form the actual unit baseline.
Price Calculation
Resale prices calculated without full expense capture create severe operating losses. Contracting parties incorporate landed cost formulas into distribution agreements to establish floor prices that automatically absorb unexpected freight or tariff increases.