Meaning
Contractual shield defining the minimum acceptable spread between the total cost of an imported product and its wholesale selling price. The landed margin protection ensures that a distributor is not penalized by sudden increases in ocean freight, customs duties or terminal handling fees. It shifts the risk of logistical inflation back to the manufacturer or the original brand owner.
Calculations Variable
Calculations include the unit price, insurance, freight, duties and any local delivery charges required to reach the warehouse. This landed margin protection becomes active when the sum of these variables exceeds a predetermined percentage of the suggested retail price. Audits of these costs are conducted quarterly to ensure the accuracy of the protection level.
Constant monitoring of exchange rates is required for international contracts.
Mechanisms Adjustment
Mechanisms within the contract allow for an automatic increase in the wholesale price or a decrease in the acquisition cost to maintain the margin. The landed margin protection prevents the distributor from selling at a loss during periods of high transportation costs.
Brands Risk
Brands use this protection to secure distribution in volatile markets where shipping costs are unpredictable. The landed margin protection provides the financial certainty necessary for a partner to commit to high inventory volumes.
