Ex-works pricing (EXW)

Ex-works pricing, abbreviated EXW, is an international trade term (an Incoterm) describing a price that covers only the product itself as it leaves the supplier's dock. The buyer, in this case the retailer or its freight forwarder, takes on responsibility and cost for loading, transport, insurance, customs, and delivery from that point forward.

How ex-works pricing works

When a retailer receives an ex-works quote, that number is the lowest possible landed-cost starting point, not the true cost of getting the product onto shelves. The retailer must add freight, insurance, customs duties, brokerage fees, and any inland transport to arrive at the real cost of goods used for margin calculations. Retailers sourcing internationally often compare EXW quotes from several suppliers, but a lower EXW price doesn't always mean a lower landed cost if shipping distance or duty rates differ.

Because EXW shifts logistics risk and cost to the buyer, it's common with overseas manufacturers who don't want to manage export logistics themselves. Other Incoterms shift more responsibility to the seller, for example FOB (free on board), where the supplier covers loading and export clearance, or DDP (delivered duty paid), where the supplier handles freight and duty as well. Retailers comparing quotes across suppliers need to know which Incoterm each quote uses, since an EXW quote and a DDP quote for the same product are not directly comparable numbers.

Example

A furniture retailer gets an EXW quote of $140 per unit from a factory in Vietnam. After adding $22 in ocean freight, $9 in insurance, and $18 in import duty, the landed cost is $189 per unit, about 35 percent higher than the EXW price. Pricing the retail shelf price off the $140 figure instead of the $189 landed cost would badly overstate margin. If the retailer targets a 45 percent margin, pricing from the EXW figure alone would suggest a shelf price around $255, well below the roughly $344 actually needed once true landed cost is used.

Why it matters for retailers

Using ex-works price instead of full landed cost as the basis for markup is a common and expensive mistake, since it hides freight, duty, and handling costs that can add 20 to 40 percent to the true cost of goods. Getting this right protects margin targets set at the buying stage from eroding once the product actually arrives in the warehouse.

This matters most for retailers sourcing a growing share of their assortment overseas, where freight rates and duty schedules change independently of the supplier's factory price. A category that looked healthy on paper at the buying stage can quietly fall short of its margin target by the time goods reach the distribution center, if landed cost isn't tracked as carefully as the initial quote.

How Retailgrid helps

Retailgrid lets category managers track full landed cost, not just supplier quotes, inside the AI workspace, so cost-plus rules and markup targets set through price optimization are calculated off the real cost of goods rather than an ex-works number that understates it.