4 ways to use cost tracking in Shopify to improve profits

If you haven’t already heard the news, Shopify added cost tracking!

Actual footage of Shopify merchants

Now that you can enter cost directly into Shopify, what do you do with that information? We, the data nerds at Inventory Planner, put together a list of where to start and how to use this data to your advantage.

1. Define what cost means.

Decide how you’re defining cost for your company and how you’ll use this field in Shopify. Does cost mean the unit price you pay your supplier? Or will you use the landed cost, which also includes shipping and taxes? The landed cost can give a fuller picture of expenses associated with each product, but it can also vary based on shipping costs and how many units are on each order from your supplier. Pick one way to define cost as you’ll use it in Shopify and stick with it. Consistency makes for better data.

2. Assess profitability for each product and variant.

Are your retail prices high enough to cover your costs and still make a profit? (Profit = Revenue – Cost) If you need to raise prices, you may sell fewer units. How will lower unit sales affect the product profitability? Keep in mind that selling fewer units at a higher retail price could generate more total profit for that product than selling more units at a lower retail price.

3. Compare gross margin by product.

Which products show the largest margins and which show the smallest? Do you have a consistent pricing strategy for your products? If your pricing strategy is based on the cost of each product, then assess if your pricing strategy is consistently applied to all products. Over time, your product cost may have risen without a corresponding increase in retail price.

4. What is driving profitability across your store?

Shopify reports will show you a ranking of gross profit from highest to lowest. Take this one step farther to look at the amount of profit each SKU contributes to your total profit. Are a few SKUs driving a disproportionate amount of profit for your store? Do you have SKUs in your catalog that are not contributing to your profitability? If that is the case, why not discontinue those items?

(You can see this information automatically by connecting your Shopify store to Inventory Planner, or you can handle calculations in Excel.)


If you’re caught up in the day-to-day race of running your business, this is a good time to work on your business and not just in your business. Take a couple of hours to see what products are driving the profit for your store. What does this mean for your merchandising strategy? Are there commonalities such as category, vendor or product features that the more profitable products have in common? What can you do capitalize on that trend?

Note: The new cost field is available now for many stores and should be available to all soon. Click on your product page to see the new cost field. If you have variants, you’ll need to click ‘Edit’ on the variant level to add cost. It’s important to add this information sooner than later because Shopify reports profitability to items which had the cost price recorded at the time of the sale.