Two quotes land on your desk for the same case of nitrile gloves. One says "list less 38 percent." The other says "landed cost plus 5 percent." They might be within a dollar of each other today. Twelve months from now, after two manufacturer price increases and a tariff change, they will not be. Understanding cost plus vs list minus is the difference between knowing what you pay and hoping the discount still means something.
The two pricing models
Cost plus sets your price by taking what the distributor paid and adding an agreed percentage. The AAEP's guide to distributor agreements describes it as "adding a percentage mark-up to the seller's cost" and calls it "an important benchmark to use when comparing pricing agreements across distributors."
List minus starts from the distributor's published list price and subtracts a percentage. The CASRAI distribution glossary defines list price as "the distributor's standard, undiscounted catalog price for an item," and contract price as "a lower, pre-negotiated price that applies only to a buyer covered by a specific purchasing agreement."
| Cost plus | List minus | |
|---|---|---|
| Anchor | Distributor's acquisition cost | Distributor's own catalog price |
| Who sets the anchor | Manufacturer invoice and freight, visible on request | The distributor, at any time |
| What a price increase looks like | Your price moves with the manufacturer's | Your discount stays the same while the anchor moves |
| How to verify it | Ask for the invoice | You cannot, unless the distributor shows cost |
| What the distributor earns | A fixed, disclosed margin | Whatever the gap between cost and list happens to be |
Distributors know which one pays better. Distribution Strategy Group's 2024 pricing report states that "Distributors that use list down instead of cost-plus pricing add 100 to 200 basis points to EBITDA," and that the model moves the sales conversation "away from what you paid for something to the value you're providing." That is the distributor's margin, and it comes out of your budget.
What "list" hides
A list price is not a market price. It is a number the distributor publishes and controls. Three things sit inside it that a discount percentage never reveals:
- The spread between cost and list. A 38 percent discount from a list set at 2.2 times cost still leaves a margin most buyers would reject if they saw it written down.
- Tier placement. CASRAI notes that "Many GPO and manufacturer contracts are structured with more than one price tier for the same item," with placement driven by committed volume, category compliance and when the facility joined or renewed. Two facilities with the same discount language can pay different prices.
- Rebate exclusions. The AAEP guide warns that "It should never be assumed that all products are rebated equally or rebated at all," and that buyers should ask which products are excluded from a rebate or rebated at a different level.
A list minus contract also does nothing when list rises. If the manufacturer raises prices 6 percent and the distributor raises list 9 percent, your discount is unchanged and your cost went up 9 percent.
What landed cost includes
Cost plus only works if "cost" is defined. The AAEP guide is blunt: "The definition of cost is complex and ultimately a moving target." Some distributors include labor, logistics and overhead. Others "strictly define cost as their own purchase price."
The honest definition is landed cost: everything it took to get the case onto the distributor's shelf. Per the importer's definition published by Racklify, that means:
- Product cost: the manufacturer's or importer's invoice price
- Inbound freight: ocean or air plus inland transport to the warehouse
- Insurance: cargo coverage in transit
- Duties and tariffs: "Customs duties based on tariff classification and country of origin," which for nitrile gloves moved sharply with the 100 percent tariff (see our nitrile glove sourcing guide)
- Import fees: customs brokerage, the Merchandise Processing Fee and the Harbor Maintenance Fee
- Handling and port charges: terminal handling, demurrage and detention where they apply
Surcharges belong on that list too: fuel, peak season and hazmat fees that carriers add after the quote. If a distributor says "cost plus" and cannot tell you which of these six are in the cost, the plus is not the whole markup.
Cost plus vs list minus: questions to ask any distributor
Ask these before you sign, and get the answers in writing:
- How is cost defined? Invoice only, or invoice plus inbound freight, duties and surcharges? Will you show the invoice on request?
- Who controls the anchor? If it is list, how often does list change and who approves it?
- Which tier am I in, and what moves me? Volume, compliance, contract date?
- Which items are excluded from the rebate? Get the exclusion list, not a reassurance.
- Is freight inside the price or on a separate line? A low unit price with a freight line can cost more than a higher unit price delivered.
- What happens on a manufacturer increase? Does my price move by the same dollar amount, the same percentage, or by whatever list does?
- Can I audit it? Annual cost review, with line-level detail, or a summary slide?
A distributor that answers all seven without hesitation is quoting you a price. One that answers three is quoting you a discount.
How KeystoneOS Cost Plus works
Keystone built its membership program on the cost plus side of this argument because it is the only model a buyer can check.
- Keystone landed cost plus 5 percent on every item. One disclosed markup across 55,000+ SKUs from 290+ manufacturers, with the Edina warehouse and same-day quotes during business hours behind it.
- Free standard shipping. Freight does not reappear on a separate line.
- A named representative who owns your account.
- An annual cost analysis that shows what you bought, what it cost and where the money went.
The membership is an annual fee sized to purchasing volume: $10,000 per year for up to $500,000 of annual purchasing, $20,000 for up to $1,000,000, and $30,000 for up to $5,000,000. The program is open to the first 100 facilities. Run the math against your current spend: on $500,000 of purchasing, the fee is 2 percent, which a list minus contract can give back in a single unannounced list change.
Approved accounts get Net 30. Read the program details or send your current price file for a line-by-line comparison. Keystone will quote it both ways so you can see the gap yourself.
Sources
- AAEP, Understanding Distributor Pricing Agreements (68th Annual Convention Proceedings): https://pubs.aaep.org/0A4370h/68thAnnCon2022/html/354.html
- Distribution Strategy Group, Best Practices in Pricing and Costing (2024): https://distributionstrategy.com/wp-content/uploads/2024/09/DSG-Report-Best-Practices-in-Pricing-and-Costing.pdf
- CASRAI, Contract Price vs List Price (Distributor Price List): https://casrai.org/dictionary/term/contract-price-vs-list-price-distributor-price-list
- Racklify, What Is Landed Cost? The Importer's Definition: https://racklify.com/encyclopedia/what-is-landed-cost-the-importers-definition/
