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COGS (Cost of Goods Sold)

COGS is the direct cost of purchasing or producing goods sold during a period. For e-commerce, COGS typically includes product cost, manufacturing cost, packaging, and inbound shipping to the fulfillment center.

Why It Matters

•Forms the basis for calculating gross profit and gross margin.
•Directly affects pricing decisions, profitability analysis, and SKU evaluation.
•Errors or inconsistencies in COGS distort ROI, margin, and capital efficiency metrics.

Connection to Capital

COGS determines the amount of capital required to purchase inventory, influencing investment size and the potential return on working capital.

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