What is "shrinkage" in the context of retail?

Shrinkage in the context of retail refers specifically to the loss of inventory that occurs due to various factors, primarily theft, administrative errors, and damage. This loss directly affects a retailer's profitability and can result from shoplifting, employee theft, or mistakes during inventory management or processing. Retailers actively seek to minimize shrinkage through various strategies, including improving security measures, conducting regular inventory audits, and training employees on proper inventory handling procedures. Understanding shrinkage is crucial for retailers to maintain their profitability and ensure effective inventory management.