Unknown shrinkage
Stock that goes missing with no explanation: what it is, how to work it out, where it comes from and where to start to bring it down.
Recorded loss, unknown loss
Both bring stock down. Only one is a blind spot.
Recorded loss
The losses you have recorded: breakage keyed in, unsold goods thrown out and removed from stock, expired products, commercial markdowns. Unpleasant but under control — you know what left, and why.
Unknown shrinkage
What is missing with no explanation. The goods are still in the book stock, they are no longer on the shelf, and no entry says where they went. You only find it by counting: the stocktake reveals it, never the management software.
How to work it out
Two sums: the loss in value, then the rate that makes it comparable from one year to the next.
The Quantinvo report shows the variance the other way round — counted minus book, so −30 when thirty items are missing. It is the same information: shrinkage is that variance counted as a loss.
The shrinkage rate
The value of the loss, divided by net sales for the period, multiplied by a hundred. This is the rate you track year on year, and compare between stores.
An example
Take a store with €1,200,000 in net sales. The stocktake leaves €14,400 of missing goods at purchase price. The rate is 14,400 / 1,200,000 × 100, or 1.2%.
Where it comes from
Four causes, and two of them are not theft.
Shoplifting
The cause everyone thinks of first. It concentrates on specific product families: small, valuable, easy to resell.
Internal theft
Quieter, and often costlier per item. It leaves a particular trail: repeated variances in the same zones or at the same hours.
Unrecorded breakage
A product dropped, damaged, expired, thrown in the skip without a stock withdrawal. It is recorded loss that becomes shrinkage for want of an entry.
Administrative errors
A delivery signed off for a quantity never received, a supplier return not deducted, a barcode that rings up one item as another. Nothing has gone missing: the entry is wrong.
How to bring it down
Count more often
A variance found twelve months later has no identifiable cause left. Spotted within the month, it ties back to a delivery, a zone, a period.
Count twice
A second pass on sensitive aisles separates a real loss from a counting mistake. Without it, you act on causes that do not exist.
Fix the entries
Before blaming theft, go back over deliveries, returns and breakage withdrawals. It is the least visible share, and often the easiest to win back.
Target what moves
The families that come up every time deserve a dedicated, more frequent count, and action on the shop floor. The rest does not need the same effort.
The questions we get asked
What is shrinkage?
Goods still in your book stock but no longer in the store, with no entry explaining where they went. It is measured by comparing counted stock with book stock, so only during a stocktake.
How do you calculate shrinkage?
By value: book stock minus counted stock, valued at purchase price. As a rate: that value divided by net sales for the period, multiplied by a hundred.
How is it different from recorded loss?
Recorded loss is written down: breakage keyed in, expired goods removed from stock, commercial markdowns. Shrinkage has no entry — that is precisely what makes it unknown.
At purchase price or at retail price?
At purchase price to measure the real loss on stock value, and that is the reference calculation. At retail price you measure the sales you missed: the figure is bigger, and the two cannot be compared with each other.
How often should it be measured?
As often as you count. An annual stocktake gives one figure a year, with no cause you can pin down; cycle counting gives one per zone and per pass, which is what lets you act.
Does a high rate mean we are being stolen from?
Not necessarily, and this is the most common mistake. Delivery and till errors often weigh as much as theft. Go back over the entries before concluding: fixing them is quicker, and cheaper.
Measure your shrinkage with Quantinvo
Zones and tags, a double count, variances in units and in value in the report.