Overview
COGS, or cost of goods sold, is the direct cost of producing or buying the products you sell: materials, manufacturing, and inbound shipping. It is the first cost you subtract from revenue to find gross margin.
On TikTok Shop, COGS is the foundation of every margin calculation that follows, including contribution margin and net profit.
How it works
COGS includes what you pay to get a sellable unit in hand. It does not include platform fees, commission, or ad spend, those come later in the margin stack. Revenue minus COGS is gross profit.
Why it matters
COGS sets the headroom for everything else. The lower your COGS relative to price, the more you can offer in commission and spend on ads while still profiting, which directly affects how competitive your creator program can be.
How brands use it
Brands negotiate COGS down and price up to widen the gap, creating margin to fund higher commissions and aggressive creator recruiting.
