Measuring Marketing

Chapter 90 Shrinkage to Net Sales

Measurement Need

Retail management needs to determine the percentage of inventory lost to shrinkage. Shrinkage is a retail term used to describe the difference between inventory purchased and officially received at the time of delivery, and the actual value of that same inventory in the stores, warehouses, or other locations in the retailer’s distribution channel. Shrinkage results from customer or employee theft, misplaced or careless inventory storage, or administrative errors.

Solutioni

$SNS=\frac{AI-BI}{S_{nt}}\times 100$

Where

SNS = shrinkage to net sales

AI = actual inventory in $ (measured at retailer’s cost)

BI = book inventory in $ (measured at retailer’s cost)

Snt = net $ sales in time period t

Retailers ...