'shrinkage' originates from English, specifically formed from the verb 'shrink' plus the suffix '-age', where 'shrink' ultimately comes from Old English 'scrincan' meaning 'to contract' and the suffix '-age' came from Old French '-age' meaning 'action or result'.

'shrinkage' changed from Middle English formations such as 'shrinkinge' (derived from the verb 'shrink') and eventually became the modern English word 'shrinkage'.

Initially, it meant 'the act or process of shrinking (becoming smaller)'; over time it also came to mean 'a decrease or loss in amount or value' and, in commerce, specifically 'loss of inventory'.