When a business or startup decides to develop a new hardware product, there are dozens of critical decisions to make. In the early stages of development, use-case definition, feature sets, cost targets, and price targets will define the product development path. A good product development firm will guide the company through these development cycles. And doing them well is ante for a successful product.
But ultimately, the company is developing a product to generate revenue—and more importantly, profits. At SGW Designworks, we recognize that every business that hires us is doing so as an investment in future cash flow. In the hardware world, a pillar of the profit equation is landed cost.
What Is Landed Cost?
Landed cost refers to the fully burdened cost per unit that a company will pay to have finished product “on the shelf” (or in stock at Amazon, in many cases). It’s not just the cost of building the product—it includes all expenses associated with getting that product into inventory, ready to sell.
Here are the typical contributors to landed cost:
- Component cost of the product itself
This includes enclosures, sourced parts, PCBAs, and mechanical components. - Packaging costs
Especially important for large or premium consumer products, packaging can add significantly to unit cost. - Labor cost to assemble and handle the product
This is directly influenced by the country of manufacture. Assembly in low-labor-cost regions can reduce this number, but those savings may be offset by longer lead times or higher shipping and oversight costs. - Inbound shipping or freight, including insurance
Freight costs can vary based on volume, geography, and mode of transportation. International ocean freight may be cheaper per unit but slower than air freight or domestic sourcing. - Customs and tariffs
Trade policies play a major role. Misjudging tariffs can quickly erode margins. This Forbes article by our CEO explores how tariffs should factor into product and sourcing decisions: An Alternative To Tariff Panic: Six Tips For Product Developers - Warehousing and broker fees
Often overlooked, storage and fulfillment costs—especially when using Amazon FBA or third-party logistics providers—can impact profitability more than expected.
How Country of Manufacture Impacts Landed Cost
One of the strategic decisions a business will make during hardware development is choosing where to manufacture the product. The country of manufacture affects nearly every component of landed cost—from labor and packaging to shipping and tariffs.
A product engineering company with global manufacturing experience will help clients evaluate total landed cost—not just per-unit quotes. For example, while manufacturing in Southeast Asia may offer attractive labor rates, high tariffs or extended freight timelines may reduce the overall financial benefit. Conversely, U.S.-based or nearshore manufacturing may yield higher labor costs but reduce shipping, lead time, and oversight burdens.
We routinely help clients weigh these tradeoffs as part of our development process, building cost models that forecast realistic landed cost scenarios across multiple sourcing strategies. This ensures clients don’t simply choose the lowest initial quote—they choose the most sustainable cost structure for scale.
Why Landed Cost Should Be a Design Constraint
A strong product with poor cost discipline can still fail. We’ve seen promising ideas collapse under the weight of underestimated landed cost. On the other hand, teams that treat landed cost as a core design constraint—from the first prototype to final production—are better positioned to achieve their revenue and margin goals.
Conclusion
Every hardware product development project is more than a technical challenge—it’s a business case. That means every design decision should be informed by how it affects landed cost. Choosing the right manufacturing strategy is just as critical as choosing the right chipset or enclosure material.
Whether you're a startup or an established business, partnering with a product development firm that brings both engineering expertise and business acumen can make the difference between a product that simply works—and one that works and wins.
