What counts as COGS for a toy and baby 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. Toys and baby products carry costs that many categories don't: safety testing and certification, licensing royalties, and retail packaging that is large for what's inside.

What goes in

Cost	Count it?	Why
Unit cost from the factory or supplier	Yes	The base of unit cost
Inbound freight and duty	Yes	Part of landed cost
Third-party safety testing and certification, spread per unit	Yes	Required for children's products, and repeated for new products and periodically
Licensing royalties on character or brand licences	Yes	Paid per unit sold
Retail packaging: window boxes, inserts, blister packs	Yes	Per unit, and can be bulky
Pick, pack and outbound shipping you pay	Yes	Priced on dimensional weight, so box size matters
Payment processing fees	Yes	A share of every order
Gift returns after the holidays	Yes, spread across the season's orders	Arrive weeks after the sale
Product design and prototypes	No	Paid once per product
Trade shows and retail sell-in	No	Overhead and wholesale costs
Google Ads spend	No	It's what POAS divides by

Two of these are specific to the category. In the US, children's products must be tested by a third-party lab for the safety rules that apply to them and certified before sale. Mattel's annual report notes its US products are subject to the Consumer Product Safety Act as amended by the Consumer Product Safety Improvement Act of 2008. Testing is charged per product, so it costs much more per unit on a small production run than a large one. Licensing royalties are the other: Mattel reports royalty expense within its cost of sales, and a licensed toy's royalty is as much a cost of each unit as the plastic.

Building one unit's cost

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 range. This only works for a store with a narrow range, such as a single wooden-toy line. It misleads once licensed and unlicensed products, or toys and baby consumables, sit together.

T2: margin by category (labelled "approximate")

A margin per product type: licensed toys, own-brand toys, baby consumables, baby gear. Licensed and own-brand products deserve separate categories, because the royalty changes the margin.

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

Shopify's Cost per item field, per variant, read directly. Include the royalty and testing allowance in each product's cost, since neither appears on the factory invoice.

Reading the benchmark above

The figure above is one listed company: Mattel's cost of sales was 51.3% of net sales in 2025. Mattel makes toys at a scale few Shopify stores can match, so it is a reference point, not a target. It covers toys only; no comparable figure for baby products is included.

Common COGS mistakes in toys and baby

• Leaving out testing. It's a real per-unit cost, largest on small runs.
• Forgetting the royalty. On licensed products it's charged on every unit sold.
• Ignoring box size. Dimensional-weight pricing makes packaging a shipping cost too.