Shrinkage
Also called: stock shrinkage, inventory shrinkage
What is Shrinkage?
Shrinkage is the gap between the stock the records say you should have and the stock actually counted. It comes from theft, damage, spoilage, receiving errors and mis-scanned sales.
Why Shrinkage matters
Shrinkage is pure loss — the goods were paid for and produced no revenue. Small percentages matter enormously in thin-margin retail, where a 2% shrink can equal a large share of net profit.
Shrinkage formula
Shrinkage % = (Book stock value − Counted stock value) ÷ Sales × 100
Track it per category, since causes differ across the range.
How Shrinkage works in practice
Measure it per category so the cause is identifiable, and separate known causes such as recorded damage from unexplained loss. Unexplained shrink concentrated in one category or shift is worth investigating specifically.
Frequently asked questions
Grocery and convenience formats commonly see a low single-digit percentage; the trend matters more than the absolute.