Running an ecommerce business in retail or D2C means dealing with multiple vendors, changing costs, and high order volume. Profitability becomes hard to see when costs are scattered.
The only way to know your real margins is accurate ecommerce COGS calculation.
At I&S Accounting SVCS, LLC, we help ecommerce businesses turn raw data into clear financial insight. Here is a practical example.
The Challenge: Identifying True Ecommerce COGS
You sell custom T-shirts through Shopify.
Production relies on three vendors.
Vendor A supplies blank T-shirts
Vendor B handles printing
Vendor C provides packaging
Each cost contributes directly to your Cost of Goods Sold.
Missing one breaks your margin.
Step 1: Calculating COGS per Unit
To calculate ecommerce COGS per unit, you combine all direct costs.
Blank T-shirt cost: $5
Printing cost: $3
Packaging cost: $1
Total COGS per T-shirt equals $9.
This number is your baseline.
Every decision starts here.
Step 2: Matching Shopify Orders With Fulfillment Costs
Shopify gives you sales data.
Sales price per T-shirt: $25
Discount applied: $5
Net sales per unit: $20
But revenue alone is not profit.
You must include fulfillment costs.
Shipping cost per order: $4
Pack out fee per order: $2
These costs must be linked to each Shopify order for accurate ecommerce profitability tracking.
Step 3: Measuring Profit Per Order
Example order with two T-shirts.
Total sales: $50
Discounts: $10
Net sales: $40
COGS for two units: $18
Fulfillment costs: $6
Gross profit equals $16.
This is real profit.
Not estimated.
Not assumed.
Step 4: Using COGS Data to Improve Profitability
When you track ecommerce COGS at the order level, patterns appear.
You can
Spot high fulfillment cost periods
Adjust pricing and discounts
Negotiate better supplier rates
Promote higher margin order sizes
If orders with three or more units reduce fulfillment cost per unit, bulk pricing increases profit without increasing ad spend.
Additional Profitability Factors Ecommerce Sellers Miss
Accurate ecommerce bookkeeping includes more than inventory.
You should also track
Inventory turnover and aging stock
Payment processing fees from Shopify, Stripe, and PayPal
Refund and return rates
Advertising costs from Google, Meta, and TikTok
Customer lifetime value for repeat buyers
Ignoring these hides risk.
Tracking them creates control.
Why Accurate Ecommerce COGS Matters
Revenue does not equal profit.
Accurate ecommerce COGS calculation leads to
Clean financial statements
Better pricing decisions
Lower tax exposure
Stronger cash flow forecasting
This is how profitable ecommerce businesses scale.
At I&S Accounting SVCS, LLC, we help ecommerce brands build accurate books and real profitability tracking.
If you want clarity instead of guesses, reach out.
[email protected]
https://iandsaccountingsvcs.com/contact-us/
