Have you ever wondered how Amazon sellers can offer such affordable prices on their products? The answer lies in the company’s focus on the Cost of Goods Sold, often abbreviated as COGS. Determining your COGS can be difficult as your products move through various channels and distributors. Let’s take a look at some products that need more attention to keep costs under control, and how you can keep track of them.
As a retailer, your COGS is one of the most important factors in determining profitability. Whether you’re an Amazon seller with a few products or a major e-commerce merchant with thousands of items on sale, shipping costs can end up being one of the greatest expenses. Amazon sellers need to know what they’re paying in shipping costs and COGS so that they can make informed decisions about buying from a certain supplier, and deciding if it is worth the cost.
Amazon Freight Shipping Costs
The freight shipping cost is determined by the mode of transportation and time it takes to deliver. Freight includes fuel prices, mileage costs, and any additional services such as capacity requirements or other services.
- Sea Freight Shipping– Sea freight shipping is one of the most effective methods available in getting products from country to country. This is the most affordable way to transport containers, much cheaper than air freight shipping.
- Air Freight Shipping– The major advantage of air freight is speed. Goods can be delivered within 24 hours, which means that it’s great for very time-sensitive products. The downside of this is the high cost.
If you really want to stay on top of added costs, it’s also necessary to find a trustworthy supplier, and one that helps you keep costs down. With an Amazon supplier management tool like SellerMobile, you can view your top suppliers to see where your profits come from and who has the highest fees.
What is Cost of Goods Sold?
Cost of Goods Sold is the accounting term used to describe how much it costs a company for materials, labor, and other expenses incurred to produce their products. COGS has two parts: direct and indirect costs.
Direct costs refer to the expenses incurred when you purchase or produce the product. This includes the cost of raw materials to manufacture your products, value of supplies, cost of packaging, etc. On the other hand, indirect costs refer to the expenses incurred to physically get products to their final destination, whether that be the customer or a fulfillment center, and these include taxes and tariffs, labor costs, storage costs, etc.
Calculating COGS will help you deduct the proper costs, whether you are a retailer or a manufacturer, which is important because it provides transparency about what to expect from for-profit margins when looking at product sales. While you keep track of your product cost, it is also important to keep track of your profit. Having software that includes an FBA profit calculator, like SellerMobile, helps to better estimate your overall profit by checking on Amazon storage fees, other costs, and revenue.
Cost of Goods on SellerMobile
SellerMobile’s web app allows users to add the cost of goods and processing costs for products that they have listed on Amazon. The software provides sellers with accurate profit calculations and margins. You even have the ability to update COGS based on a specific date range to help you get the most accurate data, especially considering price fluctuations throughout the year. You can manipulate this data for COGS up to a year back in time for past purchase orders. With the newest COGS update, you will get a more accurate profit calculation so you know how your Amazon business is performing.
Understanding the freight shipping cost and your Cost of Goods Sold is crucial for running a successful business. If you’re an Amazon seller trying to make a mark amongst all the rest, then it is important that your pricing be competitive yet appropriate. Shipping charges vary depending on where you are sending your items, how much they weigh, and what type of packaging is required to arrive securely. The COGS update in the SellerMobile app lets you change your cost of goods by date, providing you with the most accurate data so you can make better informed decisions as you grow your Amazon business.