Most of what you lose, you did not lose to thieves

The number, and where it comes from

The best-documented measurement of retail shrink is the National Retail Federation's annual survey. Its 2023 edition reported average shrink of 1.6% of sales in FY 2022, up from 1.4% the year before, amounting to $112.1 billion.

Read the definition

The NRF defines shrink as merchandise that cannot be sold because it is misplaced, spoiled, or stolen.

Hold those three words next to each other, because the framing follows from them. Two of the three are not crimes. Misplaced stock is a location problem. Spoiled stock is an expiry and rotation problem. Both are failures of the record, and neither is addressed by a camera.

Why misplaced stock counts as lost

A unit in the wrong place is economically identical to a missing unit, for as long as nobody can find it. You cannot sell it, you cannot promise it, and eventually you buy another one — so you have paid twice and hold two, one of which is invisible.

This gets worse with every location you add. Stock sitting in a transfer that was never received, stock counted at the warehouse and also at the branch, stock behind other stock in a stockroom nobody has walked in a month. A business with one shop loses things. A business with three shops and a warehouse loses things and cannot tell which of four places it lost them in.

What we are not going to claim

You will see a confident breakdown of shrink by cause — employee theft around 42%, shoplifting 37%, administrative error 12%, vendor error 9% — reproduced widely. It is not on the NRF's own page. The cause breakdown sits in the downloadable report, and NRF has since changed the report's scope.

So either download the survey and cite the page the figures are on, or leave the split out. It is tempting to reach for it, because "12% is administrative error" is a neat number for an argument about record-keeping. Our argument does not need it: the definition already contains two non-theft causes, and that is enough to make the point without borrowing a figure we cannot stand behind.

What makes shrink findable

• A reason code on every adjustment. Damaged, expired, lost, miscounted, returned to supplier. A single "adjustment" category tells you the total and nothing else.
• A name and a time on every movement. Not to catch people — to be able to reconstruct the sequence when a figure is wrong.
• Transfers with an in-transit state, so stock that has left one place and not arrived at another is visible as such rather than simply absent.
• Expiry surfaced before it happens, which converts spoilage from a discovery into a decision.
• Counts posted line by line, because shrink concentrates in particular lines and a total hides which.

The honest summary: some of your losses are theft, and no system fixes that on its own. But the share you can actually do something about is the share that comes from not knowing where things are — and that share responds to records, not to suspicion.