Shopify Cost of Goods Sold: Definition, Formula & How to Track
- Helps you set the right price: Knowing your actual costs ensures that your pricing strategy covers expenses and maximizes profit.
- Allows you to accurately calculate your profit margins: Your gross profit is calculated as revenue minus COGS. By dividing this by total revenue, you get the gross profit margin, a key metric for evaluating business performance.
- Supports data-driven decisions: Understanding your most profitable products allows you to focus on scaling the right items and discontinuing those that don’t contribute to your bottom line.
- Beginning inventory is the value of inventory at the start of the period.
- Purchases during period is the cost of new stock or materials bought.
- Ending inventory is the value of unsold inventory at the end of the period.
- Go to Shopify Admin → Click on Analytics → Select Reports.
- Under Finances, you’ll find the Profitability Report (if enabled).
- If COGS isn’t visible, manually input your costs in the Cost Per Item field under each product in the Shopify dashboard.
- Supplier price changes
- Promotional discounts
- Bulk order negotiations
- Rising demand impacting costs
- Record Beginning Inventory – Note the total value of your inventory at the start of the period.
- Track Purchases – Log every product purchase, including supplier costs, in a spreadsheet.
- Monitor Sales Data – Keep track of each sale and match it with the corresponding product cost.
- Calculate Ending Inventory – At the end of the period, count your remaining stock and determine its value.
- Apply the COGS Formula as follows COGS = Beginning Inventory + Purchases During Period − Ending Inventory and do your calculation.
- Update Regularly – Adjust records for cost fluctuations, bulk discounts, and supplier changes.
- Real-time COGS updates: COGS are automatically pulled from Shopify and other dropshipping platforms.
- Flexible COGS management: Set COGS by delivery zone, adjust costs at the product or variant level, and factor in supplier pricing changes effortlessly.
- Comprehensive cost tracking: Monitor not just COGS, but also shipping fees, transaction costs, ad spend, and any other fees to get a complete picture of your business spending.
- Accurate net profit tracking: TrueProfit gathers all your store’s profit and loss data to give you a clear, real-time view of your true bottom line—net profit.
- Detect sudden COGS increases and adjust pricing in real time.
- Monitor profitability across multiple products, marketing channels, and ad campaigns.
- Gain a complete financial overview of your store, including revenue, expenses, and profit margins.
- Make data-driven decisions based on precise, real-time numbers instead of estimates.
Content Manager at TrueProfit & eCommerce Marketing Specialist
Irene Le is the Content Manager at TrueProfit, specializing in crafting insightful, data-driven content to help eCommerce merchants scale profitably. With over 5 years of experience in content creation and growth strategy for the eCommerce industry, she is dedicated to producing high-value, actionable content that empowers merchants to make informed financial decisions.
Irene Le is the Content Manager at TrueProfit, specializing in crafting insightful, data-driven content to help eCommerce merchants scale profitably. With over 5 years of experience in content creation and growth strategy for the eCommerce industry, she is dedicated to producing high-value, actionable content that empowers merchants to make informed financial decisions.
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