COGS

Cost of Goods Sold (COGS) represents the total cost a business incurs to acquire or manufacture the products it sells. This includes product cost, manufacturing expenses, shipping to Amazon warehouses, and sometimes handling fees.

On Amazon, COGS is a key metric used to calculate profitability. It is a component of the Contribution Margin (CM) and Gross Profit calculations.

COGS may include:

• Manufacturing costs or wholesale purchase price
• Shipping and freight expenses to Amazon FBA or 3PL
• Import duties or tariffs
• Packaging costs
• Amazon prep fees (if applicable)

What COGS does not include:

• Amazon referral fees
• Advertising costs
• Storage fees
• Other variable operational expenses

Why it matters for Amazon sellers and vendors:

• Helps calculate profitability per SKU
• Influences pricing strategy and discounting decisions
• Essential for tax reporting and financial planning
• Important for understanding Contribution Margin (CM) and Return on Investment (ROI)

💡 Example:
If your FBA product sells for $30 and your COGS is $10, then your gross margin before fees is $20.

In short:
COGS is the total direct cost to acquire or produce the goods you've sold - essential for measuring true profitability on Amazon.