“Cost of Goods Sold” or COGS as generally abbreviated, is the total of the direct costs attributable to production of the goods at a company. It includes all costs of materials bought and used in the production process and also the direct labor costs.
COGS does not include on the other hand, all other costs that are not directly linked to production such as distribution expenses or sales force commissions. In many cases, COGS is also referred to as “cost of sales”.
Following this short introduction, I am sure you will find the table (*) below interesting. It shows how direct selling companies can differ in the costs of sales they incur as a percentage of their net sales:
As you see there are significant differences among various companies’ productions costs. RBC Life Sciences, Avon and Youngevity for instance, are on the higher end. Nu Skin, USANA, Mannatech and Herbalife all are on the lower end.
Another observation is that we see a strong trend in some companies: Nu Skin’s COGS has increased in time (from 15.9% to 19.5%), and RBC’s has gone down (from 52.8% to 43.5%).
Looking only at these figures, it is obviously not possible to draw any further conclusions. A high cost of sales for example, might mean lower sales commissions and/or profits. From another angle, a low cost of goods sold might mean overpriced products. However, these are only a few of the possibilities.
So, I am leaving you here with these figures that I find really interesting.
(*) Figures extracted from companies’ reports.
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