, Retail
You counted 412 bottles of shampoo in January. The system said 447. Nobody in the shop can account for 35 bottles, and by the time you have finished asking, three people feel accused of something.
That gap has a name and almost no useful meaning on its own. Shrinkage is simply the difference between the stock your records claim and the stock you can physically find. It is a symptom. Treating it as a single problem, usually a theft problem, is how retailers end up spending real money to fix the smallest part of it.
Four causes wearing one name
Stock loss comes from four places, and they behave completely differently.
- External theft. Customers walking out with goods, plus refund fraud and card fraud that ends with you posting goods you never get paid for.
- Internal theft. Staff, and usually not by the armful. It looks like voids, discounts applied to friends, and refunds processed against no original sale.
- Process and admin error. Goods received but never booked in, transfers between sites recorded at one end only, wastage thrown out without being scanned, price file errors, the same barcode on two products.
- Supplier shortfall. What the delivery note says against what came off the lorry.
The order matters because the fixes are unrelated. A guard on the door does nothing about a delivery that was 11 cases short, and a tighter goods-in process does nothing about a man with a holdall.
Counting is the only evidence you have
One annual stocktake tells you that you lost something over twelve months. It does not tell you what, where or when, which means you cannot act on it. Rolling cycle counts do. Pick your highest value and highest risk lines, count them weekly or monthly, and look at the variance by line rather than in total.
Once you count often enough, patterns appear quickly. Loss that clusters in one category and one product size is usually theft. Loss spread thinly across everything from a single supplier is usually a booking-in problem. Loss that spikes in one week and never again is usually a transfer or a delivery that went unrecorded.
Goods-in is where most of the recoverable money is. Check deliveries against the note before you sign, note shortages on the note itself, and raise the claim inside whatever window the supplier's terms allow, which is often only 48 or 72 hours. A driver waiting impatiently is not a reason to sign for something you have not counted. Under the Sale of Goods provisions now consolidated for business-to-business supply in the Sale of Goods Act 1979, you are entitled to what you ordered, but you have to be able to show what arrived.
The till is the other evidence source. Voids, no-sales, manual price overrides and refunds without a matching original transaction should all be reportable by operator. You are not looking for a thief. You are looking for a number that is different from everyone else's.
The security spend that costs more than it saves
Here is the arithmetic that gets skipped. A stolen item costs you its cost price, not its shelf price, unless you can show you would otherwise have sold it. If a store loses £9,000 a year at retail on a 40% margin, the cash cost is roughly £5,400. A guard on the door for the trading week costs considerably more than that in most towns. Electronic article surveillance gates, tags and tagging labour cost less and work only on the lines you tag.
None of which means do nothing. It means decide the budget from the measured loss on the measured categories, not from how the last incident felt.
Surveillance also carries legal weight. CCTV is personal data processing under the UK GDPR and the Data Protection Act 2018. The Information Commissioner's Office expects signage, a retention period you can justify, and a data protection impact assessment where monitoring is systematic or covers a large scale. Covert monitoring of staff is a high bar, not a management preference. Facial recognition in shops has had direct attention from the ICO, and if you are considering it, read the current guidance rather than the vendor's summary of it.
The law is less help than you would like
Theft from a shop is theft under the Theft Act 1968. What changed the practical picture was section 176 of the Anti-social Behaviour, Crime and Policing Act 2014, which made theft of goods worth £200 or less from a shop a summary offence that can be dealt with without a court appearance. Whether that provision survives has been a live political question, with legislation on retail crime going through Parliament, so check the current position before you decide it is not worth reporting.
Reporting still matters for a duller reason. Police forces allocate on recorded crime. A shop that reports nothing appears to have no problem.
In Scotland, the Protection of Workers (Retail and Age-restricted Goods and Services) (Scotland) Act 2021 created a specific offence of assaulting, threatening or abusing a retail worker, with an aggravation where the worker was enforcing an age restriction. That is worth telling your staff, because the most common flashpoint in any convenience shop is a refused sale.
Your own staff have protections too. Health and safety duties under the Health and Safety at Work etc. Act 1974 extend to violence at work, and the Health and Safety Executive treats it as a risk to be assessed like any other. A policy that tells staff never to physically intervene is both safer and cheaper than one that leaves it to their judgement at eleven at night.
What to fix first, in order
Start with the things that cost nothing. Count more often on fewer lines. Fix goods-in. Turn on the exception reports your electronic point of sale system already produces. Tag the twenty lines that actually disappear rather than the category they sit in. Move the highest theft lines to a sightline, not into a locked cabinet that also stops people buying them.
Only then argue about guards. Loss prevention has a point of diminishing return that arrives sooner than most people expect, and past it you are paying for the feeling of having done something.
Where this shows up in the game
Shops are part of Business Baron's full game, and e-commerce is one of the five business types you can run in the free game. The game calculates gross margin from actual stock movements rather than list prices, so waste and theft show up where they belong. A security budget has to earn its place against the margin it protects, like anything else.