Outbound shipping you pay, counted per product
If the customer does not pay the full postage, you do, and it comes out of the margin on what they bought. Estimate the part you absorb per unit and count it beside the product's cost.
Updated
Estimating it per unit
Over a month:
- carrier charges: $9,400
- shipping charged to customers: $3,150
- units shipped: 2,500
($9,400 − $3,150) ÷ 2,500 = $2.50 absorbed per unit
That is an average. Heavy and bulky products cost more than the average, so set a higher figure on them.
Free shipping thresholds
A threshold shifts cost onto the orders just above it. If orders over $75 ship free and a single $68.00 throw does not qualify, the throw carries little shipping cost; a $79.00 quilt carries all of it. Costing per product shows which items the threshold makes expensive.
Does it belong in cost per item
Usually no. Shopify’s definition of cost per item leaves shipping out, and Shopify’s net sales figures exclude shipping as well, so adding postage to the cost would compare a cost that includes shipping with a revenue that does not.
Recording it in Cogsy
Add an “Outbound shipping” cost kind, per unit, with the shop-wide average as the default and a specific amount on heavy products. Leave it out of the cost written to Shopify. It then appears in each variant’s total cost and margin in Cogsy.
Questions
- Is shipping to customers part of cost of goods sold?
- Under most accounting policies it is a selling or fulfilment expense. Some businesses include it in cost of sales. Follow your accountant's policy and apply it consistently.
- Customers pay for shipping on some orders. What do I record?
- The net amount you absorb. Take what you paid carriers in a period, subtract the shipping charged to customers, and divide by units shipped.
- What is the difference between inbound and outbound shipping?
- Inbound freight brings stock to you and is part of the product's cost. Outbound shipping takes an order to the customer and is a cost of the sale.
Related
Cost type
Pick and packHow to turn a 3PL's pick and pack fees into a per-unit cost, why the fee belongs in your margin but rarely in Shopify's cost per item, and how bundles change it.
Glossary
Contribution marginContribution margin is the price minus every cost that varies with a sale, including fulfilment and payment fees. The formula and a worked ecommerce example.
Cost type
Inbound freightHow to turn a freight invoice into a per-unit cost for Shopify products, the three ways to allocate it across a mixed shipment, and a worked example.
Feature
Costs on top of the unit costPackaging, fulfilment or duties per unit, or fees as a percentage of the price, for a variant, a product or the whole shop.