How is shrinkage defined in a retail or inventory context?

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Shrinkage in a retail or inventory context refers to the loss of inventory that cannot be attributed directly to sales activity. This includes items that are missing, stolen, or damaged in ways that are not accounted for. The correct definition is focused on the unexplained loss of products, which is precisely what option B describes.

The phenomenon of shrinkage can negatively impact a retailer's profitability and inventory management, as it represents a discrepancy between the recorded inventory and the actual inventory available. Accurately identifying shrinkage is crucial for businesses to implement effective loss prevention strategies.

Other options do not capture the essence of shrinkage as they describe different scenarios. High turnover of inventory focuses on the sales rate rather than loss, excessive discounts pertain to pricing strategy rather than inventory loss, and damage during handling, while a concern for retailers, is still a definable cause of loss rather than the unexplained nature that shrinkage implies.

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