Cost of Goods Sold (CoGS)
Amazon has famously “razor-thin” margins on their ecommerce business. As business operators ourselves however, we know we can do a lot better! This week we started rolling out Cost of Goods Sold (CoGS) to our analytics. In the Executive summary, you’ll find two new metrics Gross profit and Gross margin:
- 💸 Gross profit = Net revenue (Sales - Discounts - Refunds) - CoGS
- ⚖️ Gross margin = Gross profit / Net revenue * 100 (%)
Gross profit and margin gives us a better idea of how much money we actually keep, and how healthy our business actually is. If you already have the “Cost per item” values set for your products, then Segments should already be incorporating them. If you don’t have them set yet, then Gross profit will equal Net revenue with Gross margin showing 100%.
Action 👉 Verify your “Cost per item” values are correct in your Shopify “Products” page
Action 👉 Compare your Gross margins for your overall customer base, along with your new, activated, and repeat customers, as well as against their year-over-year changes. Are their trends you can identify? What strategies have you considered for shifting purchases to more profitable products?