COGS (cost of goods sold) is the direct cost of producing or purchasing the products you sell: materials, manufacturing, direct labor, and often shipping or fulfillment per unit. Revenue − COGS = gross profit. Gross margin % = (Revenue − COGS) ÷ Revenue.
What to include
Include direct product costs: what you pay suppliers, manufacturing, direct labor, and (depending on your accounting) inbound shipping and fulfillment per unit. Exclude indirect costs like marketing, rent, and salaries.
Why it matters
COGS drives gross margin and product profitability. Use our Gross Margin Calculator, Gross Profit Calculator, and Product Profitability Analyzer to model margins. Back to Ecommerce Growth Stages glossary.