COGS

COGS (Cost of Goods Sold) is the direct amount it costs to produce or acquire the products actually sold during a given period — it excludes marketing spend, management salaries, or general overhead. Typical components include the purchase price paid to suppliers, landed cost (customs duties, international freight, import VAT), and raw materials or packaging. COGS feeds directly into one of the most important business metrics: gross margin = (Revenue - COGS) ÷ Revenue. For example, a store with 100,000 ILS in revenue and 40,000 ILS in COGS has a 60% gross margin — a level generally considered healthy for eCommerce, leaving enough room to cover marketing, operations, and net profit. The most common mistake is calculating COGS using only the supplier purchase price without including landed cost, which artificially inflates reported profitability and leads to bad pricing decisions.

Getting COGS right requires deciding, up front, exactly which costs belong inside it and which belong in operating expenses further down the income statement — a decision that directly determines whether gross margin looks realistic. Landed cost (the item price plus shipping, customs, and import fees to get it into inventory) belongs inside COGS, since it's a direct cost of the specific goods sold; warehouse rent and the salaries of staff who pack and ship orders are usually operating expenses, not COGS, even though they're clearly connected to getting the product to the customer.

StoreChart's profitability module is built specifically to get this allocation right automatically: landed cost from the imports/procurement module (unit price plus freight and customs) flows directly into per-SKU COGS, so a store's reported margin reflects the true cost of the specific goods sold rather than a simplified unit price that ignores everything that happened to get that inventory onto the shelf.

A quick audit worth running periodically is checking whether every fee that touches a specific unit of inventory before it reaches the shelf — customs, inbound freight, even payment processing fees on the supplier purchase itself — is actually flowing into that unit's recorded cost, rather than getting absorbed into a general operating-expense line where it silently inflates reported margin.

For a business with multiple suppliers offering slightly different prices for the same product, average costing versus specific-batch costing is another decision that shapes reported COGS — average costing smooths out supplier price differences across a period, while specific-batch tracking preserves the exact cost of each individual unit sold.