What is COGS?

COGS (cost of goods sold) is what a unit cost you before Amazon touched it. It is the one number in a seller's profit and loss that Amazon cannot provide, because Amazon has no visibility of your supplier. Until it is entered, every profit, margin and break-even figure in any tool is arithmetic performed on a missing term.

What belongs in it

Landed cost is the usual basis: the factory price plus freight, duty and inbound handling, divided by the units received. In practice it is usually held as two fields, a production cost and a freight cost, summed per unit. Costs that recur monthly regardless of a sale, such as storage or software, are not COGS. Advertising is not COGS either, which is the whole point of keeping contribution margin separate.

Worked example

Suppose a unit costs £5.00 to manufacture and £1.20 to land in the warehouse. COGS per unit is £6.20, and every profit line for orders in that period rests on it.

Costs are effective dated

A cost applies to orders whose date falls inside its window, and a new cost starts a new tier rather than overwriting the old one. Reporting then picks the latest tier at or before the order's date. This is what lets last quarter's margin stay correct after a price rise from the factory.

Two consequences follow. First, entering a cost restates history: profit for past months changes the moment the number lands, so profit figures are never as settled as ad spend. Second, a cost with an end date and no successor leaves later orders at zero cost and an inflated profit. A product showing £0 COGS is almost always missing data rather than free goods, and should be treated as unknown, never as zero.

Returns change the cost, not just the revenue

A refund is not automatically a recovered unit. Stock graded back as sellable returns the cost to inventory as a credit. Stock graded damaged is a write-off that stays in cost. Crediting every refunded order in full assumes a perfect recovery rate and quietly overstates profit, by more on categories that take damage.

Pitfalls worth knowing

• Several SKUs on one ASIN. Cost is held per SKU while profit is usually reported per ASIN, so two SKUs at different costs on one ASIN is genuinely ambiguous. Decide the rule rather than discovering it.
• Date formats. Supplier and marketplace exports differ on day-first and month-first ordering, and a file where every day is twelve or under parses silently either way.
• Currency. A cost sheet in one currency applied to a marketplace in another needs converting before it means anything.