Leakage (retail)

Additionally, in retail trade, leakage, or shrinkage can also be the loss of stock without payment, usually due to fraud by employees or shoplifters. The opposite of leakage would be displaced sales. Sources of shrinkage may also be administrative errors or vendor fraud, which is least possible. In the retail industry, it is widely accepted that 2-3% of revenue is lost every year due to shrinkage. The majority of large retailers refer to it as 'acceptable cost of trading'. When the shrinkage is due to employee theft usually this occurred at the point of sale terminal.^[3][4]

Revenue is the movement of assets into a company. Revenue leakage, is when those movements of funds are not as good as they must be: if, for instance, a purchaser, who should be paying the full price of something, manages in one way or another, maybe fraudulently, maybe through manipulations of the system, to get a discount. Firms clearly have to protect themselves against this. Better value management can stop revenue and margin leaks and lead to material improvements. Especially amid an economic downturn, given the complexity of decision making and the pressures associated with the quest for deals volume, there is a characteristic tendency to wind up even less disciplined in giving discounts and exceptions to essential evaluating, policies, terms and conditions. Adequately examining transaction evaluating enables companies to distinguish the hidden sources of revenue leakage and to achieve improved estimating opportunities and profit. A price or pocket edge waterfall examination provides a measure of the achieved net and pocketed prices or edges against set defined price targets.^[5]

A leakage analysis is considered to be one of the most profitable tools in deciding on particular commercial enterprises with retail potential in a given locale. The Retail Leakage and Surplus Analysis inspect the quantitative part of the community's retail opportunities. It is a manual for seeing retail opportunities yet it is not an investigation that demonstrates unconditional opportunities. Leakage/Surplus reports indicate supply (retail deals) estimates sales to customers by establishments. Sales to firms are strongly avoided. Demand (retail potential) gauges the expected amount spent by consumers at retail stores.^[6]

The Leakage/Surplus Factor introduces a clear picture of retail opportunity. This is a measure of the relationship between supply and demand that ranges from +100 (total leakage) to - 100 (total surplus). A positive worth speaks to "leakage" of retail opportunity outside the trading area. A negative value represents a surplus of retail sales, a market where consumers are drawn in from outside the trading area. The Retail Gap represents the difference between Retail Potential and Retail Sales. The right аnalysis can point to "discount investments" that may not be pаying off well.^{[7][8][9][10]}

In a similar way to the physical world, leakage can occur when shoppers buy online. Digital shoppers are usually unaware (or mistaken) of the physical location of the company they are buying from. This can give rise to an increase in unsatisfied demand for digital shopping services in certain locations where the provision of e-commerce is limited. For example, if the retailers in a particular town or city are not able to service the demands of local online shoppers, they are likely to look elsewhere; often toward very large online retailers with global coverage, to satisfy their demand for certain goods. Digital commerce leakage away from businesses in a place is a potential threat to their long term stability and survival. It creates an opportunity for large online retailers to target local shoppers. Measurement of digital leakage is a way to assess the extent to which the Internet is a threat to the high street.^[11]