What Is Retail Shrink?

Typically described as a percentage, shrink is the loss of product between the point of manufacture and point of sale. Just because a store orders a bulk shipment of wholesale products doesn’t necessarily mean it will sell them all. It’s not uncommon for products to become lost, damaged or stolen before they are sold. When this occurs, the store must count them as shrink and move on. To learn more about retail shrink and its impact on businesses, keep reading.

According to a 2008 National Retail Security Survey conducted by the University of Florida, the average shrink for U.S. retail businesses was 1.52%. It’s important to note, however, that shrinkage varies depending on the type of store. Grocery stores and supermarkets, for instance, tend to have a higher shrink rate, simply because they manage and sell more perishable items. If a food/beverage product isn’t sold before its sell-by date, it must be counted as shrink.

A high shrink can have a devastating impact on retail businesses. When a store is unable to sell a product, it must increase prices on its existing products to make up for this difference. In some cases, consumers will pay the higher price. But other times, they will take their money elsewhere, hoping to find the same product for a lower price. This creates a chain effect in which the retail store suffers even greater loses, as it loses customers in the process.

You might be surprised to learn that the number one cause of shrink in the retail industry theft. Each year, retail businesses lose billions of dollars worth of product due to theft. If you own or otherwise operate a retail store, you should take measures to reduce the risk of theft. See below for a list of anti-theft measures for retail stores:

• Install a video surveillance system.
• Place security tags on garments, handbags and similar products.
• Conduct background screening on all job applicants and existing employees.
• Keep your storage room locked.
• Perform regular inventory checks to identify which products are being targeted by thieves.

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