Getting a product from your supplier to Amazon requires investment--this investment is your Cost of Goods Sold or COGS.
What are COGS?
COGS refers to the direct costs of producing the goods sold by a company. This amount includes the cost of the materials and labor directly used to create the good. Within Flywheel, we also encourage you to include your distribution (shipping) costs.
COGS excludes indirect costs such as overhead, ad spend & marketing.
What should you factor in when entering COGS?
Things you should consider when entering COGS for a particular SKU:
- Supplier costs
- Cost of getting the item to your local warehouse. This would include inbound FBA shipping costs: Cost of sending your products to Amazon (if applicable)
- In case of Seller-fulfilled Prime and FBM: Consider the cost of shipping the product to a shopper
Pro tip: Have dedicated SKUs for both FBA and FBM listings so you don't need to constantly update your COGS in Flywheel. For easy management include 'fba' at the end of the SKU.
What should you leave out of your COGS calculation?
Things we report on for you:
- FBA fees (where applicable). This includes pick-n-pack, order handling, shipping and Amazon customer support
- Amazon selling fees. The commission Amazon takes on each sale. Commonly 15%, but can vary based on category
- Advertising spend
Why do we need COGS for Flywheel?
COGS data helps us give you more holistic picture of how your Amazon business is performing. Uploading this information on the Product Settings page within My Products will unlock many new features and insights in Flywheel, such as:
- Estimated Gross Profit: View trends for business on the Home Page and product level metrics on the Product Metrics Page
- Estimated Gross Margin: Product level metric viewable on Product Metrics Page
- Pre-Ad Gross Margin: Understand your Margins before factoring in ad spend. Use this metric on the Campaigns page to help you set MACS
- MACS Calculator: COGS are required to use this functionality.
- Campaign Creator: COGS will help the Campaign Creator provide more accurate MACS suggestions.
How do you enter COGS?
Review this article for a quick guide on how to enter COGS and start getting more (and better) metrics.