Leakage (retail)

The economic definition of leakage is situation in which, an income exits a economy instead of staying within. In retail, leakage refers to consumers spending money outside the local market. For instance, crossing a border to buy goods instead of making the same purchase from local shops.

Alternatively a retail leakage, can be called a negative Retail Trade Gap or a Surplus factor. Many small- to medium-sized communities experience leakage of retail expenditures as local citizens drive to a neighbouring town to shop at national retail chains (e.g. Tesco, ASDA etc.) or eat at national restaurant chains (e.g. Slug and Lettuce, Harvester). Attracting such national retail chain stores and restaurants to a community can prevent this type of expenditure leakage and create local jobs.

Shrinkage

In addition, in retail trade, leakage, or shrinkage can also mean the loss of stock without payment, typically due to theft 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 is widely accepted that 2-3% of revenue is lost every year due to shrinkage. Majority of the 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.