These are some common questions about shrinkage

While shrinkage is a common issue for retailers, many are unaware of its full scope—and the various reasons it occurs. Here are some of the most common questions about shrinkage, along with answers to them.

What is shrink in retail?

Shrink in a retail context means the loss of inventory caused by other factors than sales. These factors can be either internal or external. Common reasons are product expiration, administrative errors and theft. Shrink in retail stores is one of the biggest issues for retailers worldwide, as it decreases revenue and can be hard to keep track off.

What is the biggest cause of shrink?

The biggest causes of shrink are shoplifting, employee theft, administrative errors, vendor fraud and operational loss. These can be divided into either internal or external factors.

What is internal shrink?

Internal shrink refers to inventory losses caused by internal factors, such as employee theft, operation loss or administrative errors.

What is external shrink?

External shrink refers to inventory losses caused by external factors, such as shoplifting, vendor fraud or organized crime. Also less dramatic factors, such as leaving items in the wrong spot, could be a cause for shrinkage.

Are fraudulent transactions internal or external shrink?

Fraudulent transactions is primarily an external shrink - but can also be linked to employees or other internal resources. Fraudulent transactions can be done by individuals, organized crime groups or vendors.

What percentage of shrink is internal and external?

The percentage of shrink depends on the retailer type and the market. Furthermore, the surveillance systems for each shrinkage factor heavily influence how much inventory is lost. For example, retailers using AI-based monitoring in their self-checkout area might experience a lesser degree of external shrinkage than other retailers.

How to prevent shrinkage in retail?

Retail can be prevented by having surveillance systems to handle shrinkage caused by internal and external factors. It is important for retailer to continuously keep their it-infrastructure and systems up to date, in order to stay efficient and prevent shrinkage over a great period over time.

How to reduce shrinkage in retail?

All retailers experience shrinkage, however it is important to know what the reason is, in order to reduce it effectively. Decide which type of shrinkage to focus on - and implement a suitable system (software or hardware) that will diminish that specific kind of shrink. The system can be warehouse automation management, AI-based surveillance, a self-scanning solution or something else.

How to control shrinkage in retail?

Shrinkage can be managed effectively through ongoing monitoring and the right internal systems. Because shrinkage can result from various factors—such as operational errors and shoplifting—retailers need to choose the most appropriate solutions to minimize losses and protect their bottom line.