Inventory Carrying Cost Calculator

Most e-commerce businesses land between 20% and 30% of average inventory value per year, and merchants who have never computed it usually guess low. Capital typically contributes 6–10%, storage 6–12% (more for bulky goods or Q4 FBA rates), service 2–4%, and risk 3–6%. Fashion, electronics, and anything perishable push the risk component — and the total — higher.

They name the same annual cost of owning inventory; the difference is how you arrive at it. This calculator builds the rate bottom-up from its four components, which shows you which lever is inflating it, while the holding cost calculator applies a single flat rate when you already know your number. Use this one first to find your true rate, then reuse that rate everywhere.

If you borrow to buy inventory — a line of credit, Shopify Capital, a card — use that interest rate, which for merchant financing often exceeds 10%. If you buy from cash, use the return the money would earn elsewhere: the profit a new product launch or extra ad spend would generate. For a growing store that opportunity cost is rarely below 8%.

Attack the biggest component. Capital and risk both shrink when you hold less: order closer to your EOQ, cut safety stock on C-items, and clear aged batches before they rot into dead stock. Storage falls by negotiating 3PL rates, avoiding peak-season surcharges, and slimming packaging. A store that drops its rate from 25% to 20% on $60,000 of stock frees $3,000 a year — pure margin.