Definition
Shrink is inventory you paid for but cannot account for through sales, caused by theft, waste, damage or record-keeping mistakes.
In the store it is the gap between the stock your records say you should have and what you count, usually shown as a percentage of sales. For fuel, the word is also used for losses between delivery and sale.
Rising shrink is a signal, not a diagnosis. Track it by category and by period so you can tell theft from receiving errors and spoilage.