What Is Retail Shrinkage?

Shrinkage, sometimes referred to as “shrink,” is the loss of inventory between when it arrives at your facility and when it’s sold or used. This issue can be easily overlooked because it tends to occur in small increments over time. However, shrinkage does add up — to the tune of $95.4 billion in losses in 2021 for the retail industry alone, according to the National Retail Federation’s “2022 National Retail Security Survey.” Smaller businesses will feel the resulting losses in profitability to a higher degree than their larger counterparts.

The largest impact of shrinkage is a loss of profits. This is especially negative in retail environments, where businesses operate on low margins and high volumes, meaning that retailers have to sell a large amount of product to make a profit. The more shrink you experience, the greater the chance that your business may experience a prolonged period of non-profitability. This,…