FAQs

So, is shrink or shrinkage really just measuring unknown stock loss?

Probably yes, but it is often very unclear from the existing definitions and descriptions of shrinkage the extent to which both known losses, where the cause of the loss is apparent, and unknown losses, where no clear identifiable cause can be identified, are included. It would seem that virtually all published definitions and calculations rely heavily upon the difference between expected and actual stock levels/values, which, depending upon when the stock audit took place, will rarely if ever provide any meaningful understanding as to the root causes of the loss. In some circumstances, the loss could have occurred almost a year ago – did the missing item ever arrive, was it thrown away but not recorded as such, did a member of staff steal it, was it taken by a customer, did a member of staff not scan the item at the checkout? The possible reasons for the loss are many and varied but what is usually very clear is that the cause of loss is unknown and remains so despite the best intentions of those who may be tasked to speculate about possible reasons.

But, as can be seen above, agreeing if and what potentially known losses could be included in a shrinkage definition is not clear cut and some of the words and phrases used (administrative errors, process failures etc.) are at best vague catch all terms which could incorporate (or not) a varied list of possible losses which, depending upon the type of retailer, could significantly impact upon the size of the overall shrinkage number. However, for the most part, and for most retailers, the term shrink or shrinkage is largely used to describe those losses where there is no apparent evidence as to WHY the loss occurred – the reason is not clear and therefore they should be correctly described as losses where the cause is unknown.


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