--- title: "Tied-up capital in retail: why every euro in stock is missing from the bank | Spreat" description: "Understand and calculate tied-up capital in retail: formula, days in stock, cost of capital, and the three levers small stores have to reduce it - without shrinking the assortment." url: "https://spreat.com/en/stories/industry/tied-up-capital-retail" language: "en" --- [Back](https://spreat.com/en/stories?tag=industry) - Retail & insights # Tied-up capital in retail: why every euro in stock is missing from the bank Bought stock is paid-for money that has not earned anything yet. How to work out your tied-up capital, what it costs you over a year, and which levers exist. 8 April 2025 Translated from German [Read the original version](https://spreat.com/stories/industry/kapitalbindung-einzelhandel) ![A euro moving between the bank account and the goods](https://spreat.com/media/images/stories/kapitalbindung-einzelhandel/cover-en-800.webp) Tied-up capital is the money sitting inside bought goods for as long as they remain unsold. You have paid for it, it stands on the floor instead of in the bank, and it earns nothing until somebody goes to the till. The longer the goods stand, the more expensive they get - even though the price tag never changes. ## How to work it out The simplest route runs through days in stock. Divide your average stock at cost by the annual cost of goods sold and multiply by 365. The result is how many days a euro is stuck in goods on average. An example: €40,000 average stock, €120,000 cost of goods for the year. That is 40,000 ÷ 120,000 × 365 = roughly **122 days**. Four months between paying and being paid. What it costs you depends on what the money would otherwise do: at 8% cost of capital, €40,000 comes to about €3,200 a year purely for standing there - markdowns, storage and insurance not yet counted. 122 days days in stock in the example €40,000 stock, €120,000 cost of goods for the year €3,200 cost of tied-up capital per year at an assumed 8% rate on the stock 3.0 stock turn 365 divided by the days in stock ## Why it hits small stores harder A chain treats tied-up capital as a metric. A small shop experiences it as a month. Put €4,000 into a new category and those €4,000 are no longer there for rent, staff or the invoice arriving next week - and whether the category works is something you learn in eight weeks at the earliest. That is why assortments in small shops stay narrow when they ought to be wide. It is not a question of nerve, it is a question of liquidity. What a metre of space has to earn is set out in [what a square metre of retail space has to earn](https://spreat.com/en/stories/industry/what-a-square-metre-must-earn). ## The three levers 1. **Turn faster** Fewer variants per item, smaller order quantities, reorder more often. It acts immediately on days in stock, but costs more ordering effort and often worse terms. 2. **Pay later** Longer payment terms shift the tie-up to the supplier. It does not disappear, it just sits somewhere else - and in the negotiation you pay for it elsewhere. 3. **Do not buy at all** If the goods stay the brand's property until they sell, no capital is tied up. That is not better buying, it is a different relationship - and the reason an additional product then costs nothing up front. What the third lever looks like in practice is set out in [consignment stock in retail](https://spreat.com/en/stories/industry/consignment-stock-retail) and in the [comparison of the four models](https://spreat.com/en/stories/industry/consignment-commission-shop-in-shop-marketplace). The [Viertelladen in Düsseldorf](https://spreat.com/en/stories/success/viertelladen) has lived it: ten producers became thirty-three, in the same space, with no buying budget. The figures above are an example, not industry benchmarks. The rate of interest is an assumption - use the one at which you actually borrow or invest, or you will talk yourself into a comfortable answer. Money that sits inside goods and is therefore unavailable for anything else. It starts the moment you pay an invoice and ends when the goods pass the till. Average stock at cost divided by the annual cost of goods sold, times 365. The result is days. The inverse is stock turn - both numbers say the same thing from opposite ends. At least the interest the money would otherwise earn, or that you pay on a loan. Add storage, insurance, shrinkage and - the most expensive item - markdowns on goods that no longer move at full price. Three ways: turn faster, pay later, or carry goods that are not yours until they sell. Only the third lets the assortment grow while the tie-up falls. Run it with your own numbers. What a space brings in when no capital sits in it - commission per product, per month and per year. [To the store calculator](https://spreat.com/en/stores/pricing) Written by [Mattis Klöpperon LinkedIn](https://www.linkedin.com/in/mattis-kloepper/) Co-founder and managing director Share this article ## More stories - [![Weeks instead of months into physical retail, and what a brand's risk really costs](https://spreat.com/media/images/stories/schnellster-weg-in-den-einzelhandel/cover-en-800.webp) - Retail & insights - Product ## The fastest route into physical retail - and what it really costs a brand With Spreat, the brand carries the stock risk. That is true. But how big it is can be put in euros - and set against the routes where the retailer takes on the risk and gets paid for it. Read the story](https://spreat.com/en/stories/industry/fastest-route-into-retail) - [![Four steps instead of buying stock: how much work the brands' goods take in a store](https://spreat.com/media/images/stories/aufwand-fremde-ware-im-store/cover-en-800.webp) - Retail & insights - Product ## How much work the brands' goods take in a store Space, staff time, return shipping: the brands' goods do not come for free. Here is what a store really does for them - and which work falls away in return. Read the story](https://spreat.com/en/stories/industry/work-brand-goods-in-store) - [![Eight questions from Reddit and forums on consignment, commission and stock without buying it](https://spreat.com/media/images/stories/reddit-fragen-kommission-marktplatz-store/cover-en-800.webp) - Retail & insights ## The marketplace in the store: what retailers and brands ask on Reddit and in forums Eight questions about consignment, commission and stock without buying it, as they appear on Reddit, in German seller forums and on gutefrage - with the community's answers and what Spreat made of them. Read the story](https://spreat.com/en/stories/industry/reddit-questions-consignment-in-store-marketplace) ## And how about you? Store or brand - the way in is a different one. Tell us which side you are coming from. [I have a store](https://spreat.com/en/stores) [I have a brand](https://spreat.com/en/brands)