Retail and consumer goods
Shrink (shrinkage)
Inventory lost to theft, damage, errors or spoilage.
Last reviewedWhat does Shrink (shrinkage) mean?
Shrink is the gap between the inventory a retailer's records say it should have and what is actually there. It comes from shoplifting, staff theft, damage, spoilage of fresh food, supplier errors and admin mistakes, and it is usually shown as a percentage of sales. Example: a store sells 10 million a year and loses stock worth 150,000, so shrink is 1.5 percent of sales. In grocery, where net margins are often only a few percent, cutting shrink by half a point can raise profit a lot. The US National Retail Federation has long surveyed retailers on it.
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Related terms
- MarkdownA lasting price cut to clear stock that is not selling.
- Gross profit and gross marginRevenue minus the cost of goods sold, as an amount or a percent.
- Inventory turnoverHow many times stock is sold and replaced in a year.
- Like-for-like sales (LFL)Sales growth from stores open in both periods, leaving out new and closed stores.
- Sales per square metreStore sales divided by selling space: how productive the space is.
- Sell-through rateThe share of stock received that has been sold within a period.
- Private label (own brand)Products sold under the retailer's own brand rather than a manufacturer's.
- Trade spendThe money brands pay retailers and distributors to stock, display and discount their products.