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Cost of Goods Sold (COGS) — The direct cost of producing or acquiring the products a store actually sold in a given period.
What Is Cost of Goods Sold?
In dropshipping, COGS is mostly the supplier’s per-unit price, sometimes including their shipping fee. It’s the direct input behind every markup, margin, and profit calculation a store runs.
How to Calculate COGS
For a dropshipping store: COGS = Supplier Cost per Unit × Units Sold. Traditional retail uses a fuller formula — Beginning Inventory + Purchases − Ending Inventory — but that mostly collapses to the simpler version when no inventory is held.
Why COGS Matters for Dropshippers
An inaccurate COGS throws off profit margin, markup, and break-even calculations all at once, since every one of them uses COGS as a starting input.
FAQ
Is COGS the same for every dropshipper?
No — it depends entirely on what a specific supplier charges per unit, plus whether shipping cost is bundled in, so COGS varies store to store even for the same product.
Does COGS include shipping from the supplier?
It can, depending on how a store tracks costs — many dropshippers include the supplier’s shipping fee as part of COGS since it’s a direct cost of getting the product to the customer.
Why does COGS matter if I don't hold inventory?
Even without inventory, COGS is still the direct product cost feeding every margin and markup calculation, so getting it right matters just as much as in traditional retail.