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Why Keeping Track of COGS Is Painful for Shopify Stores

Feb 14, 2019 | 2 min read | Leave a comment

To succeed with a business, you definitely need to know your profitability. But first, you need to track your Cost of goods sold (COGS), which takes a large proportion of your budget.

This task seems easy at first, because the prices are there on AliExpress. No rocket science, right?

The truth is: it’s not easy at all.

The problem

COGS can change weekly due sales promotion, negotiation or rising demand. The prices you see on AliExpress today may be different from yesterday, and will probably fluctuate tomorrow. Now multiply that by 50 products. Welcome to cost management!

Many dropshippers simply ignore this fact and settle on an approximate estimation. That could work when you’ve just started, but will cost you much more in the long run. Say you has 3000 orders/month, an increase of $1.5 COGS would cost you an extra $4500 and you may not even notice!

cogs fluctuation
Price history of an AliExpress product (screenshot using Ali Hunter)

Another problem comes with shipping costs. In the dropshipping industry, it’s normal for shipping to cost more that the product itself. So an insight into shipping costs is fundamental for your business. Unfortunately, an accurate number is so hard to get, as neither AliExpress nor Oberlo/Dropified provides a report on shipping costs. Especially if you’re selling worldwide, fees vary widely across different countries.

With all this variability, knowing COGS may be harder than you thought.

The solution

Manual analysis is possible, though, as we discussed in this article.

But the ultimate problem remains. You don’t need to know COGS at the end of the month. You need to track it in real time. That’s when important decisions are made.

For example, your COGS suddenly rises by 10%. Realizing this, you can instantly adjust your pricing or cut down on the discounts threatening to eat into your profit.

True Profit app was born to help you do this effortlessly.

It automatically pulls and updates data from Shopify, AliExpress, Facebook Ads and Google AdWords to give you the real picture of not only COGS, but also your profitability. You get to see Profit, COGS, Shipping cost, Processing fees, Conversion rate and other major metrics in real time.

Try our 14-day FREE TRIAL.

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