The most common mistake is thinking your COGS is just the price from your factory. As Andrew Youderian's expert panel on The eCommerceFuel Podcast episode "Why You're Likely Calculating COGS Wrong" stressed, you need to include all the "landed costs" to get an accurate number. This means the per-unit product cost plus a proportional share of inbound freight, import duties, and even packaging. On an Honest Ecommerce episode, Sarah Delevan also pointed to including variable labor and merchant fees. You need to account for every cost that gets the product from your supplier to your warehouse, ready to sell. Thomas Gleeson calls this your "blended COGS" on Ecommerce Coffee Break, and it's the foundation of your unit economics.
The most effective way to lower your blended COGS per order isn't always about renegotiating with suppliers. As Taylor Copilot explained on The Bottom Line: Ecommerce Tactics for Profitable Growth, increasing your average order value is often easier and more impactful. When a customer buys two units instead of one, your shipping and fulfillment cost doesn't double. This spreads those variable costs across a higher cart value, instantly improving your margin on that order and lowering the blended COGS percentage for the sale.
Here’s your first step: Recalculate your COGS for your top-selling product. Dig up every single direct cost: unit cost, inbound freight, duties, packaging, fulfillment labor, and payment processing fees. This single, accurate number is your true blended Cost of Goods Sold (COGS) and the most important metric for profitability.
