The Cost Of Retail Growth

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When people think of the word shrink they often refer to what happens when you first leave a new shirt in the dryer and it comes out two times smaller than when you first purchased it. People in retail, however, refer to shrink as “the portion of inventory that gets lost, damaged or stolen” (Kokemuller). Now that you know the basic definition of shrink, what causes it and how significant are the losses involved in shrink. Retail shrinkage is calculated by a percentage based on the value of lost inventory, divided by the sales in the same period. For example, assume that the value of loss goods in a period equals $30,000 and in that same period sales were at $600,000. To calculate the shrink you would take the total losses (30,000), divided by the total amount of sales (600,000), the total losses for that period would be .05 or 5 percent (Kokemuller.) The company’s shrink would be five dollars per one-hundred dollars of total sales. So what exactly are the causes of shrink and what are the estimated losses nationally? The main causes of retail shrink are employee theft and shoplifting, followed by accidental damages. 43.7 percent of all shrinkage in 2010, was credited to employee theft, one-third or 32.6 percent of shrinkage was caused by customer shoplifting (Kokemuller). Retail theft in the United States totaled an astounding forty-two billion or 1.48 percent of total sales. Mobile phones, apparel, power tools, makeup products rank among the most-stolen merchandise in
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