Inventory carrying cost is the total cost of holding stock over a period, usually a year, expressed as a percentage of the inventory's value. It combines the cost of the capital tied up, storage fees, the risk of the stock losing value (obsolescence, damage, shrinkage), and handling or insurance. It is the real cost of every unit that sits on a shelf.
What is a typical inventory carrying cost percentage?
For many sellers the all-in carrying cost lands somewhere in the 20 to 30 percent of inventory value per year range, though it varies widely by product and business. On Amazon FBA the storage and risk components can push it higher for slow-moving or bulky items because of storage fees and aging surcharges.
Andrew Erickson is the founder of Inventory Hero. He has spent years working with Amazon FBA sellers on demand forecasting, restock planning, and the cash flow side of running a private-label brand. Inventory Hero exists because every spreadsheet-based inventory system he tried eventually broke — usually right before Q4.
Carrying cost is the holding-cost side of the order-quantity trade-off. A high carrying cost favors smaller, more frequent orders that keep less stock on hand; a low one favors larger, less frequent orders. It is also the true cost of overstock, which is why right-sizing inventory matters more than the storage fee alone suggests.
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Inventory carrying cost is the full annual cost of holding stock, not just the storage fee: it combines the capital tied up in inventory, storage, the risk of the stock losing value, and handling. The short version: it is usually expressed as a percentage of inventory value per year, often landing in the 20 to 30 percent range, and knowing yours changes how you think about overstock and order sizing. Below are the four components, how to estimate your rate, and how to use it.
Carrying cost has four components, all of which you pay for every unit that sits in inventory:
Capital cost. The biggest piece for most sellers. Money tied up in stock is money you cannot use to buy more inventory, run ads, or anything else. Value it at your cost of capital, which for a growing FBA business funding inventory is often high.
Risk cost. The chance the inventory loses value before it sells: obsolescence, going out of season, damage, shrinkage, and the markdowns it takes to clear slow movers. See obsolete inventory.
Service cost. Insurance, handling, and the administrative cost of managing the stock.
Add those up over a year and divide by the average inventory value, and you have your carrying cost rate.
The standard expression is a percentage of inventory value per year:
Carrying cost rate = (capital + storage + risk + service costs per year) / average inventory value
For many sellers the all-in rate lands somewhere in the 20 to 30 percent range,1 but the only rate that matters is yours. To build your own, estimate each piece as a percentage of inventory value:
Capital: your cost of capital. If you fund inventory on a line of credit, use its rate (often 15 to 20 percent); if from cash, use what that cash would otherwise earn or save by going into a faster-turning SKU.
Storage: what FBA storage plus any 3PL storage costs you over a year as a share of the stock's value. Model the FBA piece in the storage fee calculator first, since it is the most concrete.
Risk: a judgment estimate of obsolescence, damage, shrinkage, and the markdowns it takes to clear slow movers. A stable evergreen SKU is low; a seasonal or trend product is much higher.
Service: insurance and handling, usually small.
On FBA the storage and risk pieces tend to run higher than in a simple warehouse, because of storage fees, aging surcharges, and obsolescence risk. For a bulky or slow-moving SKU that went through Q4 storage surcharges, those pieces alone can push the effective rate well above 30 percent, so model the storage piece first.
Say a SKU costs you 10 dollars landed, and you estimate your annual carrying cost rate at 25 percent:
Input
Value
Landed unit cost
$10
Carrying cost rate
25% per year
Carrying cost per unit per year
$2.50
Every unit of that SKU costs about 2.50 dollars a year just to hold, before you have sold anything. A unit that takes six months to sell carries roughly 1.25 dollars of cost on a 10 dollar item, which is real margin. For a quick sense across rates and unit costs (per unit, per year):
A carrying cost rate is not an accounting curiosity; it changes real choices:
It is the true cost of overstock. A pile of slow-moving inventory is not free just because it is paid for. At a 25 percent rate, holding an extra 10,000 dollars of stock for a year costs about 2,500 dollars, and that figure already includes the capital tied up, so it is the real all-in drag, not just a storage line.
It is the holding-cost input in your order quantity. The economic order quantity trade-off balances ordering cost against carrying cost. A high carrying cost pushes you toward smaller, more frequent orders.
It sets the urgency on aging stock. The higher your carrying cost, the faster a slow mover destroys margin, and the more it pays to clear it early rather than hold and hope.
This is why right-sizing inventory matters more than the storage fee alone suggests. The storage fee is visible; the capital and risk costs are not, but they are usually larger, and carrying cost is how you put a number on all of it.
Inventory carrying cost is the full annual cost of holding stock, capital plus storage plus risk plus service, expressed as a percentage of inventory value and often in the 20 to 30 percent range. It is far larger than the FBA storage fee alone, it is the real cost of overstock, and it is the holding-cost input behind your reorder decisions. Estimate yours, and use it to keep inventory lean. For the full fee picture, see Amazon FBA fees 2026; for keeping stock moving, see restock planning.
Inventory carrying cost is commonly estimated at 20 to 30 percent of inventory value per year in standard supply-chain references (for example CSCMP and APICS/ASCM inventory-management guidance). It is an industry rule-of-thumb, not an Amazon fee; estimate your own from the components above. ↩