What counts as COGS for an apparel store

For measuring POAS, "cost of goods" means every cost that scales with each order you sell. Ad spend is not included, because it's the other side of the ratio. For an apparel store, the supplier's unit price is only the start.

What goes in

Cost	Count it?	Why
Unit cost from the factory or wholesaler	Yes	The base of landed cost
Inbound freight, duty and customs brokerage	Yes	Landed cost: duties on imported apparel can be a meaningful share of unit cost
Trims, labels, hangtags, polybags	Yes	Per-unit and easy to forget
Pick, pack and outbound shipping you pay	Yes	Scales with orders, not with time
Payment processing fees	Yes	A share of every order
Return shipping and handling	Yes, spread across all orders	Not on any supplier invoice, so easy to miss
Markdowns and discounts	No, they lower revenue	Counting them as cost double-counts them
Photography, samples, design	No	Fixed or per-season overhead
Google Ads spend	No	It's what POAS divides by

Returns deserve their own line. In its 2026 report on apparel sizing, Coresight Research describes the reverse-logistics cost of each return (shipping, restocking, repackaging and inspection) as "often exceeding the margin on the original sale". We haven't found a reliable published figure for what one apparel return costs, so measure your own:

• the return label, if you pay for it
• the time to receive, inspect, refold and restock
• the units that come back unsaleable and have to be written off or marked down

Add these up over a month, then divide by all orders in that month, not just the returned ones. That gives a per-order return cost to carry into every POAS calculation.

Building one unit's cost

The gap between those two percentages is the reason apparel POAS gets misjudged. A store that enters only the factory price into Shopify's Cost per item field will report margins it doesn't have.

Three levels of accuracy

Selvra OS works with three tiers of cost data and shows which one a figure is based on.

T1: one flat margin (labelled "estimated")

One percentage for the whole catalogue. This works for a store that sells one kind of product at one price point, like a single-line basics brand. It misleads a store that mixes tees with outerwear, because the flat figure is wrong for nearly every product.

T2: margin by category (labelled "approximate")

A margin per product type: tees, knitwear, outerwear, accessories. When a catalogue mixes basics with seasonal fashion, margins can differ widely between categories, and this is where the extra accuracy starts to change decisions.

T3: cost per product (labelled "verified" once synced)

Shopify's Cost per item field, per variant, read directly. This is the most accurate tier. Watch for sizes: a cost entered on one size doesn't apply itself to the others, and extended sizes can cost more to make.

Reading the benchmark above

The figure above comes from large US-listed apparel companies. It is a reference point, not a target. A store selling only direct to consumers sells every unit at retail price, which lowers cost as a share of revenue compared with selling the same unit wholesale. Smaller production runs can push unit costs the other way. Use the benchmark to check that your own figure is plausible, then trust your own figure.

Common COGS mistakes in apparel stores

• Using the supplier price and stopping there. Landed cost is higher, sometimes substantially for imported goods.
• Leaving returns out. The cost of processing returns is real even when the product goes back into stock.
• Treating sale price as a cost. A markdown shrinks revenue. Record it as lower revenue, and don't add it as an extra cost.