How to Calculate COGS on Shopify in 2026 (Without Getting Lost in Reports)

COGS- cost of goods sold is one of the most significant costs to know in 2026, should you be operating a Shopify store.

It is not a glitzy metric; however, COGS is what lies between the statement that my store is making sales, and that actually, my store is profitable.

Shopify provides the means to monitor the costs of products and drag COGS to the profit statements using the standard accounting formula.

Within this guide, we will take a stroll through:

• What COGS is in reality to a Shopify store.
• The process of establishing the cost per item.
• Interpreting Shopify reports on COGS.
• The relationship between COGS and your margins and prices.

You will also learn how to calculate the COGS on a Shopify website in a manner that facilitates real pricing and profit calls and not year-end accounting.

What COGS means for a Shopify store

On a high level, COGS (Cost of Goods Sold) would be the total direct cost of the products sold during a particular period. To the majority of the Shopify merchants, this entails:

• What you paid your supplier or manufacturer of the items that you sold.
• Direct costs related to converting those items into salable form, including the packaging, shipping, and handling fees.

COGS is an important concept that you need to know, as it has a direct effect on your gross profit. When COGS is large, then your gross profit margin would be low, and you will have fewer opportunities to cover the costs of operations and those to advertise the product, and decrease your net profit.

In accounting terms, the standard inventory formula is normally used to compute the COGS during a given time period (month, quarter, year):

COGS = Beginning Inventory + Purchases – Ending Inventory

But in daily life, Shopify does not ask you to go into calculations and find that formula manually. It depends, instead, on the cost per item in the item field of each variant or product. As soon as you add your cost per item and inventory tracking, Shopify will then computationally roll up your COGS into its built-in profit and margin statements.

With proper monitoring of COGS, you will have a better picture of how profitable you are, and you will be able to make better choices on pricing, product selection, and scaling. Unless your COGS is tracked or updated, then the profit margins are not going to be accurate, and you may end up making poor financial decisions, which may negatively affect your business in the long run.

Why Is Keeping Track of Shopify COGS Painful?

Computing the COGS is not difficult on paper. In real life, it can be a headache:

• Your supplier increases the prices by half a year.
• The freight and transport costs soar.
• You sell packages or collections, and all of a sudden cost per unit is not that simple.
• You do discounts or Buy One Get One promotions that frustrate the figures.
• You have several applications and ad networks on the extent to which every order will cost.

Most merchants end up with:

• A half-updated spreadsheet
• Shopify reports only tell part of the story.
• And an unspecific sense of shrinking margins, without realizing why.

It is normally at that stage that you cease to ask questions like, What is my revenue, and instead begin asking questions such as, What does each order you take leave me after COGS and everything else?

It is also the place where the tools developed with the primary consideration of profit, not only of revenue or traffic, begin to come into play.

Steps by steps to accurately calculate your COGS on Shopify:

Step 1: Decide what “cost per item” means in your business

When you want to type anything into Shopify, you should know what you actually want to do with the cost per item of your product.

Shopify considers cost per item as the price it charges you on that product or item, such as what you paid the manufacturer, should you resell the good, or a price that reflects the materials and labour used to produce that item, in case you make it yourself.

You are supposed to be able to maintain this definition throughout your catalog. To the majority of stores, an easy way to do it is: Take the cost per item = the base product cost you pay to your supplier, or whatever you think it would cost to make.

You may charge extras (shipping, duties, packaging upgrades) on your own, just so long as you are consistent as to the place of residence.

To be uncertain as to whether or not a cost should be included in the cost per item or as a distinct expense, ask:

Would this be directly related to making this product sale-ready?

Yeah, if so is likely to be included in your COGS picture; otherwise, it can be better regarded as an operating expense.

Step 2: Add cost per item to your products and variants

After you have determined the meaning of cost per item, it is high time to fill it with the meaning in Shopify.

The basic flow:

• Select Products on the Shopify Internet.
• Click on a product that you wish to edit.
• On the Pricing part, seek the Cost per item.
• Key in the price that you have assigned to that product or variation.
• Save your changes.

In case a product comes in variants, then you will need to establish the price per item per variant.

A little bit of handwork when you are dealing with a large catalog, but this is the one step that cannot be compromised. Profit reports issued by Shopify only make sense when the products in question have the cost that was registered at the point of sale. Otherwise, your reports will be incomplete or misleading.

Step 3: Track inventory correctly so COGS makes sense

COGS is essentially concerned with the flow of inventory in and out. Failure to track inventory properly will result in wrong COGS, even with the correct cost per item.

Good habits:

• Facilitate stock tracking of products that are profit-driven.
• Record store (purchases, transfers) in such a way that the beginning and ending inventory can be realistic.
• Re-adjust inventory regarding returns, damaged, or write-offs.
• Look at the inventory on a regular basis to identify blatant discrepancies.

Being perfect on the first day is not required; the more your inventory data resembles reality, the better your COGS number will be - particularly when you begin to produce reports for lenders, investors, or tax.

Step 4: View COGS and profit in Shopify reports

After filling out the cost per item and tracking inventory, Shopify will generate some COGS and margin data.

You can:

• Go to your analytics in your admin in reports.
• Search in profit or margin-related reports (e.g., profit by product, profit by order)
• Filter by date, Sales channels/product groups.

Shopify is utilizing:

• Units sold x cost per item = COGS of that product.
• Revenue – COGS = gross profit

At that point, you can see rudimentary numbers on margin, by product, order, or time period at Shopify.

When there are incomplete data on profits of certain products, likely, the cost per item was not determined at the time the orders were placed. Correcting the cost per item currently enhances the future reporting, despite past gaps.

Step 5: Use COGS to understand gross profit and margin

As soon as Shopify is monitoring your COGS, then you will be able to make decisions with it, not just compliance.

At the simplest level:

• Gross Profit = Revenue – COGS
• Gross Profit Margin (%) = Gross Profit 8/ Revenue x 100.

The margin will inform you of the amount of money you have left over to pay all the other bills, platform fees, payment processing, apps, shipping, ad spend, tools, etc, and still have some money left over as a profit.

When your gross margins still look weak despite the revision to COGS, it is not likely that it is simply your cost of goods sold. It is the totality of costs and the charges of Shopify per order. A deeper breakdown of Shopify cost of goods sold and how it interacts with your other costs can help you see whether the issue is pricing, suppliers, or everything layered on top.

COGS examples for a Shopify store

Suppose that you are selling a product at a price of 40 dollars.

You’ve set:

• The cost of a unit (what you are paying the supplier) of fourteen dollars.
• Over the month, you sold 200 units

In that month, with respect to that product:

• Revenue = 40 × 200 = $8,000
• COGS = 16 × 200 = $3,200
• Gross Profit = 8,000 – 3,200 = $4,800
• Gross Profit Margin = 4,800 ÷ 8,000 = 60%

With a gross profit of 60 per cent, you can afford to make payments to Shopify plans, card fees, shipping, apps, and ad spend, and still have a profit in your pocket, assuming you are in control of all the other costs.

Suppose your real costs of product were creeping softly to 22 due to supplier increases:

• COGS = 22 × 200 = $4,400
• Gross Profit = 8,000 – 4,400 = $3,600
• Gross Profit Margin = 3,600 ÷ 8,000 = 45%

Status quo price, same amount, totally new profit image. That is what will occur when the COGS is not regularly updated or checked.

Common COGS mistakes Shopify merchants make

Your COGS is not the only one that seems to be a mess. Some trends are repeated several times:

1. Never updating the cost per item

The suppliers change the prices, the minimum order quantity varies, and the packages are improved; however, the price per item remains the same as at the very beginning.

2. Mixing up base product cost and “everything else.”

Some merchants will stuff as many possible costs in the cost per item; others will simply key in the bare supplier price. Either of the two methods is viable; however, when you are inconsistent, your reports will be difficult to trust.

3. Ignoring returns and damaged goods

When you have a material rate of returns or damaged products, they have an impact on your efficient COGS and gross profit. When they can be tracked to nowhere, your balance sheets will always appear to be in better shape than your bank account.

4. Treating COGS as an accounting chore

COGS is frequently updated on demand by an accountant, rather than being actively used as a real-time pricing, sourcing, and product-related input.

Where TrueProfit fits in (once COGS is set up)

When you are just starting, it generally doesn’t take more than the built-in reports and a spreadsheet to have a sense of your simple COGS and margins with Shopify.

However, when your store becomes bigger, you no longer have to balance only COGS and price. You’re also dealing with:

• Rising ad costs
• Multiple apps and tools
• Shipment and delivery modifications.
• Custom charges, refunds, and discounts.

It is there that a specialized profit platform such as TrueProfit begins to pay off.

TrueProfit is a Net Profit analytics tool that was created with Shopify and ecommerce sellers in mind. In contrast to the older systems that involve the use of manual tracking or compilation of spreadsheets, TrueProfit provides you with real-time insight into all details about the costs of your store, including the COGS, the cost of products, the cost of shipping, taxes, and transaction fees etc.

TrueProfit assists you in going beyond asking, What is our revenue? to know what our net profit actually is? Tracking CoGS as one of the major blocks:

• Avoid miscalculating your costs: Regardless of the frequency of cost changes, TrueProfit will help keep track of your product costs. Regardless of whether your costs are modified by the supplier price increases, shipping costs, or any other variables, TrueProfit will keep you updated by automatically syncing the COGS with Shopify, CJ Dropshipping, or by direct CSV import. You can also make adjustments at the product/ variant level in terms of COGS.
• Monitor your expenditures in real time: TrueProfit keeps a record of all costs in real time, showing all costs as they occur: COGS, shipping, transaction and tax, and ad spend, so you can always be informed of any change. Such detailed tracking assists you in identifying and getting rid of the cost leakages as they arise.
• Integration with other platforms: TrueProfit is connected to the popular platforms such as Shopify, CJ Dropshipping, etc., to provide you with the real and updated COGS data regarding all your product lines.

Core features include:

• Real-time profit dashboard – Instantly see net profit, including the effect of COGS, shipping, fees, and ads.
• Precise cost tracking- This will entail COGS, transaction fees, shipping, taxes, and customs costs, among others.
• Support ad expenditures on leading platforms, such as Meta, Google, and TikTok, thus being able to measure your marketing investment with your actual profit.
• P&L reporting - Break down profit and loss within any period of time, with details on cost breakdown.
• Gain Customer insights, Customer value - Know customer profitability over time to optimize spending and scaling strategies.
• Mobile monitoring and all store views - Manage a number of Shopify stores using a single dashboard.

TrueProfit also promises you that you can see all those hidden charges, such as PayPal transaction fees, shipping fees, and platform charges, without the guesswork. It is the best one to use as an e-commerce merchant to ensure that you remain ahead of COGS and other expenses and eventually have a profitable scale with an informed picture of things.

Alt: The COGS dashboard of TrueProfit.

Shopify now has a set of built-in reports, which is an adequate starting point in case of new or tiny stores. However, when you are already in that medium to upper-medium range, you have consistent revenue, are actively spending on ads, and have a more complicated cost base, something like TrueProfit can show you what your COGS and fees are actually costing to your bottom line.

And the one thing you should remember as you read this article is this:

COGS is not just a figure in the accounting books. It is the foundation of all pricing and profit decisions on Shopify.

Get the cost per item correct, make it up to date, and insert it into a clear picture of your charges and margins. That is the way you can take the concept of I hope this is profitable to I know just how much money each of the products means to my business.