An umbrella term that is usually used by retailers for inventory lost via clerical error, damage, shoplifting., or even employee theft. Shrinkage is usually determined by comparing perpetual inventory records to the physical count of inventory. As far as shoplifting is concerned, an empirical study estimated that $13 billion worth of goods are stolen from U.S. stores annually (according to the National Association for Shoplifting Prevention, 2013). A regular shoplifter has already stolen $18,800 worth of goods. Shoplifters usually prefer items such as cosmetics, pregnancy tests, baby formula, men’s razors, jewelry, underwear, condoms, iPhone accessories, etc.

Shrinkage is also known as inventory shortage.