Work out shrinkage rate instantly with clear inputs, formula shown and shareable results.
Shrinkage is the gap between book and physical inventory, expressed as a percentage of sales. Splitting it into known wastage and unexplained loss is what makes it actionable: known loss is a process problem, unknown loss points to theft or systematic recording errors.
Total shrinkage
Shrinkage = Book inventory - Physical inventory
Shrinkage rate
Rate % = Total shrinkage / Annual sales x 100
Around 1-2% of sales across most retail, higher in apparel and pharmacy and lower in furniture and big-ticket goods.
Because it makes stores of different stock turn comparable, and because shrinkage scales with throughput rather than with the stockholding.