Glossary
Shrinkage
Also called: Shrink
Shrinkage is stock you paid for that is gone without being sold, through theft, damage or errors nobody recorded.
For a typical small retailer it runs at about one to two percent of stock, depending on what you sell.
What actually causes it
Theft is the famous one and rarely the biggest. In most stockrooms the list runs:
- Damage that went in the bin without an inventory adjustment
- Returns refunded but never put back on the shelf
- Deliveries booked in from the note instead of counted
- Transfers between locations that only got recorded at one end
- Theft, by customers and by staff
The first four are process. Only the last one is a security problem, and it is the one that gets the budget.
How to find your real number
You cannot measure shrinkage until the other causes are under control. Fix receiving, returns and damage first, and count the fast lines with cycle counting. Whatever is still missing after that is the figure worth acting on.
Where it goes wrong
Shrinkage becomes the answer for every gap. It is comfortable, because it is nobody’s fault and nobody’s process.
A store blaming theft for a four percent gap almost always has a receiving problem instead. The six causes, in the order they usually cost the most, are in why Shopify stock counts drift.
Related terms
Stocktake
Also called: Physical inventory count, Stock count
A stocktake is counting every product you hold and correcting the system to match what is really on the shelves.
Stock accuracy
Stock accuracy is how often the number on screen matches the number on the shelf, counted line by line rather than in total.
Cycle counting
Cycle counting is counting a few products often, on a rota, instead of counting everything once a year.