Inventory holding cost calculator: what does waiting cost?

What holding cost is

Every unit on the shelf was paid for. Until it sells, that money is not in your bank, and keeping the unit costs more on top. Holding cost, also called carrying cost, puts the parts together as one yearly share of the stock's cost:

• The money tied up. The interest on a loan or card that paid for the stock, or what the cash would earn or save you elsewhere. For reference, the US bank prime rate was 7.00% on 8 October 2026; small businesses usually borrow above it.¹
• Space and handling. Rent, a warehouse or a 3PL's storage fees, the share of shelf space, counting and moving it.
• Insurance on the stock's value.
• Shrinkage and damage. Theft, breakage and loss. US retailers reported average shrink of 1.6% of sales in their 2022 financial year.²
• Obsolescence. Fashion moves on, models are replaced, seasons end and shelf lives run out. For slow stock this is often the biggest part.

Choosing a carrying rate

No official body publishes one carrying rate for retail. Planning texts usually work with 20% to 30% a year, and 25% is the default in Mufatech Clearance, but a small online shop that stores stock at home with no loan can be well under it, and a fashion business paying a 3PL with borrowed money well over it.

To build your own, add the parts as shares of the stock's cost a year. An example, not a benchmark:

Average stock at cost: the stock at cost at the start and the end of the year, added and halved. In Shopify, the Month-end inventory value report gives the stock at cost for products with a cost per item.

Work it out by hand

You need the stock's value at cost: units on hand × unit cost, for the products you are asking about. In Shopify the unit cost is the Cost per item field on each variant, and a product export lists it for every variant at once.³ The dead stock guide shows which reports find the slow stock.

A worked example. A shop has $12,000 of winter stock at cost that last sold 180 days ago, and uses a carrying rate of 25%.

• A year: $12,000 × 0.25 = $3,000.
• A day: $3,000 ÷ 365 = $8.22.
• A month of 30 days: $8.219 × 30 = $246.58.
• Since it last sold: $8.219 × 180 = $1,479.45, already spent and not coming back.

Waiting or a markdown

A markdown costs its share of the full price, once. Holding costs a little every day. The day waiting has cost as much as the markdown is where the two lines cross:

Same shop: the stock has a 50% gross margin, so it is worth $24,000 at full price. A 20% markdown gives up $4,800 if it all sells. At $8.22 a day, holding takes $4,800 ÷ $8.219 = 584 days to cost as much.

So on paper, waiting wins for over a year and a half. That is the trap in this comparison. It assumes the stock will sell at full price in the end. Stock that has not sold for 180 days usually will not: it keeps costing $246.58 a month, none of it comes back, and the slide out of fashion makes it worth less each season. The 20% markdown turns $12,000 at cost into up to $19,200 of sales, now.

Read the break-even day as a ceiling, not a plan. It tells you how long waiting could be justified for stock you are sure will sell at full price. For stock that has stopped selling, the useful questions are how deep a markdown can go before it loses money, which the markdown calculator answers with fees and returns included, and how to run the sale safely.

If the stock still sells slowly, the holding cost falls as units go. Clearance counts that: at a steady pace the stock on hand falls evenly, so until it sells out it holds half of it on average.

Holding cost calculator

Enter the stock at cost and a carrying rate, the days since it last sold, and a markdown you are weighing up with the product's margin. It runs the same formula as Clearance's "Waiting costs you" estimate.

The markdown figures assume all the stock sells at the marked-down price, the most a markdown can give up. Card fees, shipping and returns are left out here; the markdown calculator counts them.

For every product at once

The calculator takes one total. To know which stock is stuck, and how much money is in it, you need units, unit cost and the date each variant last sold, product by product.

Store Diagnosis is our free, read-only Shopify app, live on the Shopify App Store. It finds the stock that has stopped selling, values it at cost, ranks it by the cash tied up and suggests a markdown for each product. It never changes a price.

Mufatech Clearance runs this clock on every stuck variant: its home screen shows what waiting costs you a day, a month and a year at the carrying rate you set, what holding has cost since each variant last sold, and for each one whether its first markdown step beats waiting. It is coming to the Shopify App Store and cannot be installed yet. When it is listed it will have a Free plan, and Pro at $3.99 a month.

Frequently asked questions