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Definition of 'Shrinkage'

Shrinkage is a term used in the retail industry to describe the loss of inventory due to theft, damage, or errors. It is a significant cost for retailers, and can be caused by a variety of factors.

* **Theft** is the most common cause of shrinkage. This can include shoplifting, employee theft, and vendor fraud.
* **Damage** can occur during the transportation, storage, or display of merchandise. This can include items being broken, crushed, or otherwise damaged.
* **Errors** can occur during the ordering, receiving, or stocking of merchandise. This can include items being ordered incorrectly, received in the wrong quantity, or stocked in the wrong location.

Shrinkage can have a significant impact on a retailer's bottom line. In addition to the cost of replacing lost or damaged merchandise, shrinkage can also lead to lost sales and profits. Retailers can take a number of steps to reduce shrinkage, including:

* **Enforcement of security measures**, such as security tags, cameras, and employee theft prevention programs.
* **Proper training of employees** on how to handle merchandise and prevent theft.
* **Careful inventory management** to ensure that merchandise is properly ordered, received, and stocked.

By taking steps to reduce shrinkage, retailers can improve their bottom line and increase their profitability.

In addition to the financial impact, shrinkage can also have a negative impact on a retailer's brand image. Customers may be less likely to shop at a store that they perceive to be unsafe or that has a high rate of theft. Retailers can take steps to improve their brand image by working to reduce shrinkage and by taking steps to make their stores more secure and inviting.

Shrinkage is a complex issue, and there is no single solution that will work for all retailers. However, by taking a proactive approach to shrinkage prevention, retailers can reduce their losses and improve their bottom line.

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