What the product costs you.

COGS is what a sold product costs you before overheads — the unit itself, the freight that brought it in, the duties at the border, and the box it leaves in.

What's in, what's out

COGS counts only the costs that walk out the door with the product. Everything else is overhead, however real it feels.

In: the unit cost you pay the supplier, inbound freight, import duties, and the packaging it ships in.
Out: ad spend, salaries, rent, and software — costs of running the store, not of the thing sold.

The honest version is landed cost: what one unit has cost you by the time it sits on your shelf, freight and duties included. Quoting the factory price alone flatters every margin you calculate from it.

Why the line matters

COGS is a convention as much as a number, and the value of a convention is consistency. Compute it the same way for every product and gross margin becomes comparable across the catalogue — you can finally say which product earns its shelf space and which merely looks busy. Compute it three different ways and every comparison is quietly wrong.

Watch the edges, too. An order that ships out but never delivers — an RTO — pays freight twice and usually loses the packaging, adding cost with no sale attached. Returns do the same. Neither shows up on the supplier invoice, but both raise your effective COGS, and the honest ledger lets them.