What is Shrink in Retail?

Shrinkage is the discrepancy between the recorded inventory and the actual items in stock. When this discrepancy is high, it indicates a high shrinkage rate, which negatively impacts a retailer’s bottom line.

The shrinkage causes are multifaceted, ranging from shoplifting and employee theft to administrative errors and vendor fraud. Causes of Shrinkage in Retail Shoplifting, or ‘external theft,’ accounts for 37% of retail shrink.

The rise in self-serve checkouts and Scan & Go services has inadvertently allowed shoplifters to mis-scan items, switch barcodes, or leave the store without paying. Human error, such as selecting the wrong item at checkout, also contributes to shrinkage. Employee theft is another significant contributor to shrinkage.

This can take various forms, from outright theft of items to more subtle forms of fraud, such as intentionally mischarging an accomplice. Administrative errors, often overlooked, are mistakes in the accounting process that cause a discrepancy between expected and actual inventory…