Concept

Shrinkage (accounting)

Summary
In accounting, inventory shrinkage (sometimes shortened to shrinkage or shrink) occurs when a retailer has fewer items in stock than in the inventory list due to clerical error, goods being damaged, lost, or stolen between the point of manufacture (or purchase from a supplier) and the point of sale. This affects profit: if shrinkage is large, profits decrease. This leads retailers to increase prices to make up for losses, passing the cost of shrinkage onto customers. In 2008, the retail industry in the United States experienced shrinkage rates of around 1.52% of sales. During the same year, retailers in Europe and Asia Pacific reported average shrinkage of about 1.27% and 1.20% of sales, respectively. Causes According to the 2008 National Retail Security Survey conducted at the University of Florida, a shrinkage rate of 1.51% translates to 36.3billioninannualloss(36.3 billion in annual loss (15.5 billion to employee theft and $12.9 billion to shoplifters). Theft, both internal and external to
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