'India world's only nation to bring down shrinkage'

India is the world’s only country where the shrink rate came down between 2010 and 2011, according to the Global Retail Theft Barometer 2011. The achievement is commendable given that the country’s shrinkage rates (as percentage of sales) have in the past five years been the highest in the world.

The rate of shrinkage — inventory losses due to crime and administrative error —has come down by 12.5 per cent over the year. That is, from 2.72 per cent in 2010 to 2.38 per cent in 2011. Among the 43 countries surveyed, Taiwan stood at the bottom of the list at 0.91 per cent, meaning it faced the lowest losses due to shrink.

 

The Asia Pacific region accounted for the lowest increase in the shrink rates in the world, standing at an increase of 0.8 per cent over last year.

In India, shoplifters accounted for the largest source of retail shrinkage (47.6 per cent), followed by employees (25.5 per cent). Internal errors were another 18.5 per cent of the shrinkage.

In the Asia Pacific region, India accounted for the highest retail shrinkage caused by suppliers and vendors. The percentage source of retail shrinkage by suppliers/ vendors in India stood at 8.4 per cent.

Apparels were the most stolen item in India. Shoplifting, as a source of shrinkage, was the highest in Asia Pacific region compared to the other regions in the world and stood at 53.3 per cent.

In the global context, the US faced the maximum amount of losses due to shrinkage at a cost of $ 45.32 billion. The country with the lowest monetary losses in terms of shrinkage was Singapore at US $174 million. India faced losses to the tune of US $778 million (Rs 3470 crore).

According to Dharmesh Lamba, General Manager, Customer Management, South Asia, Checkpoint Systems India, the big market and high volumes contribute to high shrinkage in the country. “However, the good economic situation has helped the country bring down the shrinkage compared to the other nations,” he noted.

The Global Retail Theft Barometer 2011 has been conducted by the Centre for Retail Research in the UK, with an underwritten grant from Checkpoint Systems, a global firm providing solutions for shrink management, apparel solutions and merchandise visibility.

In the Asia Pacific region, shaving products were the most high-risk product in the beauty segment followed by perfumes and lip gloss/lipsticks. In the grocery category, high-quality seafood/fish was the most stolen item, followed by fresh meat and candies/chocolates. In the apparel category, accessories were the most stolen item followed by tailored clothing and children’s wear.

Retailers in India have also been taking effective measures to tackle shrinkage. Govind Shrikhande, MD, Shoppers Stop said the department store chain’s shrinkage rates were below 0.5 per cent.

“This is more or less appropriate taking into consideration the nature of the business. Good technology, good accounting practices along with proper housekeeping should be able to control shrinkage.”

His firm had a unique perpetual inventory control system that facilitated daily counting of the stock and their regular update to prevent shrinkage.

Lamba also elaborated that till 2005 there was no loss prevention cell among the retailers. But they have started forming such cells atleast in the organised retail sector.

He cited Radio Frequency Electronic Article Surveillance (RFEAS), a technology to identify shoplifters, as the primary method used by retailers in India to prevent shrinkage. He added that successful retailers in India like the Future Group, Aditya Birla Retail, Koutons and Lilliput have put the necessary technology in place.

He said that top retailers in India and the world were increasingly giving incentives to the employees for identifying thefts committed by fellow employees.

Checkpoint’s Lamba, however, said advanced technologies like radio frequency identification, which included fixing chips on the inventory, had to still penetrate into the Indian retail sector.

“We are conducting discussions with the retailers on this technology. Top-end retailers in India would adopt the technology by 2012-13, as currently it is not economically viable,” he said.

Talking about the way ahead, Lamba said though technology could be used effectively to bring down shrinkage, internal checks by retailers was of utmost necessity.

“We can only assist in bringing shrinkage down by 50 per cent. The rest has to be done by the retailers internally,” he added.