FAQs

How is shrink or shrinkage measured?

How you put a value on shrinkage also generates a significant amount of variance within the retail community, although most shrinkage surveys are explicit in requesting that data be provided at retail prices, calculated as a percentage of sales turnover. Some authors suggest that the majority of retailers calculate their shrinkage at retail prices, with between 20% and 40% using cost price or a combination of cost and retail prices. Using retail value typically generates a much bigger shrinkage number, which can be useful for drawing attention to the problem (internally and externally), and factors in the potential impact of loss on retail margin, as well as compensating for some of the consequential costs of shrinkage (additional transportation, staff time etc.). However, it can generate a misleading number – changes to the retail price can mask known shrinkage problems (such as the impact of price increases on the value of current and previous stock holdings), or the difficulty of calculating the retail price of a product in a sector that is highly driven by sales and discounting.


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