Parallel Imports Undercutting an Appointed Distributor in Its Own Territory
Parallel imports undercut appointed distributors when wholesale pricing gaps across territories exceed landed transport and tariff costs.
Landed Net Margin
Meaning
The final profitability percentage of a product after subtracting all costs associated with manufacturing, transport, tariffs, and distribution is a primary metric of trade health. Measuring this landed net margin allows a company to evaluate the true profitability of international sales compared to domestic transactions. It incorporates every expense required to deliver the product to the customer’s warehouse.
Cost Breakdown
Traditional margins often fail to account for hidden logistics and compliance expenses. Calculations for landed net margin must include ocean freight, customs clearance, local cartage, and any regional warehousing fees. If these logistics costs rise unexpectedly, they can turn a seemingly profitable sale into a net loss.
This risk requires international distribution agreements to specify which party bears each element of transport cost.
Channel Comparison
Comparing these margins across different regions reveals which distribution models are most efficient. A direct-to-market approach might show a high gross margin, but the localized operating costs can result in a lower net return than using a regional distributor. This analysis helps the supplier select the best route to market.
Pricing Strategy
Companies adjust their export prices based on this net return to ensure that each territory meets corporate profit targets. If a specific country’s import duties rise, the wholesale price must be adjusted to protect the margin. This continuous adjustment prevents the dilution of overall corporate profits.