Research & Methodology
The data, research, and methodology behind our ROI calculations. Transparent, credible, and backed by industry-leading sources.
20-30%
Annual Carrying Costs
of inventory value
$1.77T
Lost to Inventory Distortions
in 2023 (7.2% of retail sales)
8x+
Top Performer Turnover
vs. 4-6x industry average
Inventory Carrying Costs: The Hidden Bleed
20-30% of your total inventory value bleeds annually as carrying costs. This isn't a one-time expense—it's a continuous drain on your capital that compounds over time.
What Makes Up Carrying Costs
Capital Costs (6-12%)
The opportunity cost of money tied up in inventory. This is the #1 component, representing 25% of total carrying costs. Money sitting in stock could be invested elsewhere.
Storage & Warehousing (6-10%)
Rent, utilities, maintenance, and handling. Warehousing costs increased approximately 15% year-over-year in 2023, making this an escalating expense.
Insurance & Taxes (2-4%)
Property insurance, inventory insurance, and applicable taxes on stored goods.
Obsolescence & Shrinkage (2-5%)
Products that become outdated, damaged, or lost. In 2025, 46% of SMBs reported 5%+ dead stock, with 17% carrying more than 10%.
Real-World Impact
$50K Inventory Store
$12,500/year in carrying costs (25% rate). Optimized to 20% = $10,000/year. Savings: $2,500 annually
$250K Inventory Store
$62,500/year in carrying costs (25% rate). Top-performer efficiency (20%) = $50,000/year. Reclaim $12,500+ annually
$500K Inventory Store
$125,000/year in pure carrying costs. This is money that could be reinvested in growth, marketing, or new product development.
💡 Key Insight from Shopify Research
Shopify's analysis shows that top-performing e-commerce stores reduce carrying costs by 25-30% through better forecasting and autonomous replenishment systems. The difference between a 25% carrying cost rate and a 20% rate is pure profit.
Inventory Turnover: The Capital Multiplier
Top performers turn inventory 8+ times per year vs. the industry average of 4-6 times. This isn't just a metric—it's a capital efficiency multiplier.
The 2x Capital Gap
A store turning inventory 4x per year holds 2× as much capital as one turning 8x for identical revenue. If both stores generate $500K in revenue:
4x Turnover Store
$125K
capital tied up
8x Turnover Store
$62.5K
capital tied up
The 8x store has $62,500 more capital available for growth, marketing, or new opportunities.
Industry Benchmarks
Industry Average
4-6x per year
Most e-commerce stores fall in this range. It's acceptable but leaves significant capital efficiency gains on the table.
Top Performers
8x+ per year
Leading e-commerce companies achieve this through advanced forecasting, automated replenishment, and data-driven inventory decisions.
Q4 2024 Industry Average
10.19x
Recent data shows the industry average improving, reflecting better inventory management practices and technology adoption.
Category-Specific Benchmarks
Fashion/Apparel
4-6 turns/year, 20-25% carrying costs
Electronics
6-8 turns/year, 15-20% carrying costs
Home Goods
3-5 turns/year, 22-28% carrying costs
Beauty/Cosmetics
5-7 turns/year, 18-23% carrying costs
Stockouts & Overstock: The $1.77 Trillion Problem
Inventory distortions (overstock + stockouts) cost retail $1.77 trillion in 2023 alone—representing 7.2% of all retail sales. This is the cost of poor inventory management.
The Stockout Crisis
$1.2 Trillion Lost Globally
In 2024, global retailers are projected to lose approximately $1.2 trillion due to stockouts, accounting for 40% of all lost sales opportunities.
$144.9 Billion in North America
North American retailers alone face $144.9 billion in annual losses from stockouts.
Customer Impact
69% Abandon Purchase
When items are out of stock, 69% of online shoppers will abandon their purchase entirely and shop with competitors.
21% Never Return
21% of consumers state they will never shop at a store again after frequently encountering out-of-stock items.
The Overstock Problem
55% of SMBs Hold 20%+ Excess Stock
In 2025, 55% of small and medium businesses reported holding at least 20% excess stock, up from 48% in 2024.
46% Have 5%+ Dead Stock
46% of SMBs indicated that 5% or more of their inventory is dead stock, with 17% carrying more than 10% (up from 12% in 2024).
Amazon FBA Escalating Fees
Amazon FBA adds escalating storage fees after 180+ days, making slow-moving inventory increasingly expensive to hold.
💡 The Solution
Predictive inventory analytics can reduce stockouts by up to 25%, while better forecasting prevents overstock situations. The key is proactive, data-driven inventory management.
Our ROI Calculation Methodology
Our ROI calculator uses industry-standard formulas and benchmarks to estimate your potential savings. Here's how we calculate each component:
1. Carrying Cost Savings
Formula: (Current Carrying Cost % - Optimized Carrying Cost %) × Inventory Value
We assume a reduction from industry average (25%) to top-performer level (20%), representing a 5% reduction in carrying costs. This is based on Shopify's research showing top performers achieve 20-25% lower carrying costs through better inventory management.
2. Stockout Prevention Savings
Formula: Annual Revenue × Stockout Frequency % × Revenue Loss % × Prevention Rate
Industry data shows 15% revenue loss per stockout event. We assume we can prevent 80% of stockouts through proactive inventory management, based on research showing predictive analytics reduce stockouts by up to 25%.
3. Time Savings
Formula: Hours Saved per Week × 52 weeks × Hourly Rate
We estimate 10 hours saved per week through automation (capped at actual hours spent). Valued at $50/hour (industry average for inventory management tasks), this represents the opportunity cost of time that could be spent on growth activities.
4. Capital Efficiency Improvements
Formula: Improved Turnover Rate → Less Capital Tied Up
We assume a 1.5x improvement factor for stores with turnover below 6x, and 1.2x for stores above 6x. This represents moving from average to top-performer efficiency, freeing up capital for growth.
⚠️ Important Note
These calculations use industry averages when specific data isn't provided. For the most accurate ROI, connect your Shopify store to use your actual inventory data, sales velocity, and historical patterns.
Research Sources & Citations
All data and statistics cited on this page come from reputable industry sources, research reports, and platform analytics. Here are our primary sources:
Platform & Industry Sources
- Shopify: Inventory carrying costs research, e-commerce benchmarks, and inventory management best practices
- NetSuite: Inventory carrying costs analysis and enterprise inventory management statistics
- OpenSend: E-commerce inventory statistics, turnover ratios, and warehouse efficiency data (2024-2025)
- Emplicit: Inventory distortion costs, overstock and stockout analysis (2023-2024)
- Alexander Jarvis: E-commerce inventory carrying cost research and benchmarks
Industry Reports & Studies
- NetStock Supply Chain Planning Report (2025): SMB inventory excess and dead stock statistics
- Retail Industry Analysis (2023-2024): Inventory distortion costs and stockout impact studies
- E-commerce Return Statistics (2024): Return rates and their impact on inventory carrying costs
Data Collection Period
All statistics and benchmarks referenced are from 2023-2025 research, ensuring our calculations reflect current industry conditions and recent market trends.
Last Updated: January 2026
We regularly update our research and methodology as new industry data becomes available. For questions about our calculations or sources, please contact us.
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