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India tops global retail theft barometer

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For the second year in a row, retailers in country found facing highest incidence of shoplifting, employee theft.

India’s fledgling retail industry has topped the ‘Global Retail Theft Barometer’ survey for 2009. The country topped the retail “shrinkage” rate — a term that bunches shoplifting, employee theft and process failures — in 41 countries surveyed across the world, for the second year in a row.

Retailers in the country have the highest ‘shrinkage rate’ at 3.2 per cent of sales. This amounts to a shrinkage loss of $2.6 billion, “equivalent to $156.22 (about Rs 7,350) honest tax per family,” according to the survey conducted by Britain’s Centre for Retail Research, with funding from Checkpoint Systems, a company supplying technology solutions to the retail industry.

The study, based on a survey of over 1,000 retailers, monitored the shrinkage rate — and the cost of shrinkage — in the global retail industry between July 2008 and June 2009. India’s shrinkage went up from 3.1 per cent of sales last year to 3.2 per cent of sales this year, representing an increase of $82 million.

According to the theft patterns in India, shoplifting was the biggest cause of retail shrinkage (45.2 per cent), while employee theft was the second-largest (23.3 per cent). Administrative errors contributed to 22.6 per cent of the losses.

“This is in line with global trends, where shoplifting is the major source of shrinkage,” said Checkpoint’s Country Manager Dharmesh Lamba

The most-stolen merchandise in India were small, expensive & “mobile” items, such as electronics, cosmetics, alcohol, food, clothing and jewellery. Lamba felt cuts in spending on loss prevention had pushed up shrinkage rates.

“While most businesses have suffered as a result of the recession, few have been as hard-hit as the retail industry. This year’s study shows the adverse effect of cutting spending too deeply in the area of loss prevention,” he said.

The expenditure on security in India, at $158 million, represents 0.19 per cent of retail sales, which is lower than the global average of 0.31 per cent.

The survey also found a rise in shrinkage in all regions surveyed, with North America accounting for the greatest increase of 8.1 per cent, followed by West Asia-Africa (7.5 per cent) and Europe (4.7 per cent).

The other countries showing high shrinkage are Morocco, at 1.79 per cent, and Mexico, at 1.75 per cent. The lowest rates of shrinkage were found in Australia (0.99 per cent), Hong Kong (0.92 per cent) & Taiwan (0.89 per cent).

India’s retail sector has been growing at about 30-40 percent annually over the past decade, according to research firm KPMG. Though the growth rate projections now stand lowered, it is still seen as a sector with immense potential.

Global companies are also keen to set up base in the country, but have been held back by the restrictions on foreign direct investment aimed at protecting the large number of mom-and-pop stores that dominate this sector.

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