what is inventory shrinkage

what is inventory shrinkage is a foundational question for anyone managing stock in retail, warehousing, or e-commerce operations. Inventory shrinkage refers to the loss of products that should be in stock but are not due to theft, damage, miscounts, or clerical errors. When users search for this phrase, they are usually trying to understand why discrepancies occur between recorded inventory and physical counts. Shrinkage directly affects profitability and operational accuracy, often indicating deeper issues in internal processes, security, or employee training. Reducing inventory shrinkage requires implementing robust inventory management systems, frequent cycle counts, surveillance, and staff accountability measures. It’s also vital to identify whether shrinkage results from internal or external theft or process inefficiencies. Understanding what inventory shrinkage is—and how to prevent it—can save businesses thousands in lost product and labor costs. For growing e-commerce stores, controlling shrinkage early ensures scalability, boosts margin retention, and supports healthier inventory turnover rates.