COGS

COGS Components in Fashion

Fashion COGS includes all costs directly tied to production: fabric and raw materials (typically 40-60% of COGS), trims and hardware (buttons, zippers, labels — 5-10%), direct manufacturing labor (10-25%), factory overhead allocated to production (5-15%), quality control and inspection, and inbound logistics from factory to warehouse. Understanding COGS composition helps brands identify the most impactful areas for cost optimization.

COGS and Profitability Analysis

COGS is the primary input for calculating gross profit and gross margin — the first and most important profitability line in fashion financial statements. Revenue minus COGS equals gross profit; trends in COGS as a percentage of revenue reveal whether a brand is improving or declining in production efficiency, pricing power, and sourcing effectiveness.

Managing COGS in Fashion

Fashion brands manage COGS through strategic sourcing (selecting manufacturing partners that balance quality and cost), material optimization (fabric yield improvement, trim standardization), production efficiency (reducing waste and rework), volume leverage (negotiating better rates with scale), and design-for-cost (creating products that achieve design intent within cost targets). The most disciplined brands set cost targets before design begins, ensuring every product is commercially viable.

OSF Perspective

OSF emphasizes that COGS management is not about cutting corners — it's about allocating resources intelligently. The best fashion brands invest their COGS budget where customers perceive the most value (fabric quality, fit, finishing) while optimizing areas that don't impact the consumer experience.

Related Terms

Gross Margin  |  Markup  |  Landed Cost  |  Bill of Materials

Notable Brands

Everlane (transparent COGS), Honest By (full cost disclosure)