Defining and Measuring Total Retail Loss

retail loss, inventory shrinkage definition

Professionals in the retail universe agree that loss is a problem. What they have not agreed on in the past is what actually makes up retail loss–and how it ought to be calculated. The terms “shrinkage” and “shortage” are used to describe the issue, but there is even ambiguity when it comes to these descriptors. What types of losses are included as “shrinkage”? Should spoiled foods count? Are staff errors part of shrinkage? How might we best define retail loss?

This was the challenge taken up by the Retail Industry Leaders Association and the ECR Community Shrinkage and On-shelf Availability Group in a recent research project. The project aimed to assess how retailers currently perceive the problem of loss. The project’s secondary goal was to devise a new definition and framework that would hopefully be of use to retailers as they analyze the impact of loss on their businesses.

This research is reported in depth in a feature article in the November-December issue of LP Magazine. From the article:

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“The research utilized a number of different methodologies—an extensive literature review; a questionnaire to a group of large European retailers; 100 face-to-face interviews with senior directors in ten of the largest retailers in the US, representing 27 percent of the total retail market; and a series of workshops and focus groups with loss prevention representatives from a range of European retailers and manufacturers.”

Check out “Beyond Shrinkage: Introducing Total Retail Loss” to read the full feature article and review the new definitions of costs and losses, developed with the help of senior US retail executives. You can also learn how to access a free copy of the report for yourself or your organization.

Visit the Table of Contents for the November-December 2016 issue or register for a free subscription to the magazine.

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