How to calculate the real cost of goods sold for charity-shop resellers, wholesalers, and dropshippers in 2026.
What COGS Actually Means Cost of Goods Sold (COGS) isn't just what you paid at the till. It's every penny it cost to get an item ready to sell. The True COGS Formula COGS = Item cost + Sourcing cost + Prep cost + Storage cost (if any) Worked Example: Charity Shop Flip Charity shop dress: £4.00 Train fare to high street: £3.50 (5 items found that day) → £0.70 per item Wash + steam: £0.30 (water, electricity, detergent) Repair (button replaced): £0.10 True COGS: £5.10 (not £4.00) Worked Example: Wholesale Pallet Pallet of 200 mixed clothing: £400 Delivery: £35 Sort/grade time: 8h × £10/hr opportunity cost = £80 Disposal of unsellable items (40 pieces): £15 True COGS per sellable item: (£400 + £35 + £80 + £15) ÷ 160 = £3.31 Worked Example: Dropshipping Supplier price: £8.00 Supplier shipping: £1.50 Returns reserve (5% rate): £0.40 True COGS: £9.90 Why It Matters If you only count the sticker price, your margins look 20 40% better than reality. Sellers go bust because they 'made a profit' on paper but had no cash at the end of the month. How to Track It Spreadsheet column for every cost component Or use accounting tools like Quickbooks Self Employed (~£10/month) Re calculate monthly so seasonal sourcing trips average out 💡 Tip: Enter your true COGS in our profit calculator's 'Item cost' field, not the sticker price. Your margins will tell the truth.