By Retail Brew Staff
less than 3 min read
Definition:
If a product disappears without a corresponding sale, it’s shrink. Shrink refers to lost inventory that never reaches the point of sale. Though often—and sometimes erroneously—blamed disproportionately on organized retail crime (ORC), a term that is absolutely not synonymous, many factors account for shrink, including shoplifting, employee theft, damaged goods, human and administrative error, and vendor issues. According to the National Retail Federation, shrink cost US retailers nearly $100 billion in 2022, with external theft as the leading cause. As retailers juggle razor-thin profits, they’re employing shrink control solutions like AI surveillance, locked-up high-theft items, and smart shelf tracking.
Origins of shrink
Industry speak for “inventory loss,” shrink has been around in some form since the dawn of retail. Advances in manufacturing and transportation transformed the retail industry, but also increased the potential for error and the opportunity for theft. ORC is a more recent buzzword for an old problem: theft that’s more involved than mere shoplifting. Meanwhile, the rise of technology like self-checkout corresponded to a spike in shrink in the 2010s and 2020s. In recent years, retailers like Target, The Home Depot, and CVS have sounded the alarm.
Shrink in context
In 2024, Home Depot pointed out in its annual report, “While we have a number of initiatives underway to address shrink, minimize theft, and maintain safety in and around our stores, these efforts require operational changes that may increase costs and reduce margins.”
“Over the last several years, as the nature of retail loss has evolved, it has become clear that a broad study about retail shrink is no longer sufficient for capturing the key challenges and needs of the industry,” Danielle Inman, senior director of media relations at NRF, told Retail Brew.
