India once again tops the retail shrinkage survey

The second annual Global Retail Theft Barometer 2008 Survey, covering 920 large retailers across 36 countries has rated India with the highest shrinkage rate at 3.10 per cent this year, an increase of 6.9 per cent over last year. This revelation has put India in the topmost position amongst countries worldwide, closely following Thailand, South Africa and Malaysia in the ascending order.

This study is prepared by the Centre for Retail Research, Nottingham, England and is funded by Checkpoint Systems Inc. Checkpoint Systems Inc has been at the forefront of developing shrink-management solutions that is benefiting retailers globally.

''In India, most retailers do not consider shrinkage as a major concern. Unfortunately, it is an accepted fact. They do not realise that it is killing there bottom-line directly. For instance, a jacket costing Rs2,000 stolen in a store and the net margin of the retailer being 10 per cent, the retailer will have to sell 10 Jackets to recover the cost of the stolen merchandise,'' said Dharmesh J Lamba, country manager of Checkpoint Systems India Private Limited.

According to the report, the countries with the highest shrinkage (as a percentage of sales) this year was: India (shrinkage 3.10 per cent of retail sales), Mexico (1.68 per cent), Thailand (1.59 per cent), South Africa (1.59 per cent) and Malaysia (1.53 per cent). The lowest rates of shrinkage were found in Japan, Austria and Switzerland (all 1.01 per cent), Germany (1.10 per cent) and Denmark (1.20 per cent).

The total shrinkage in India in 2008 is a $2.543 billion, which is equivalent to 3.10 per cent of retail sales - an increase of 6.9 per cent as compared to 2007, when the figure was 2.90 per cent. Of the external shrinkage in India, customer theft contributed around 44.7 per cent of shrinkage losses, employee theft was responsible for 23.7 per cent as compared to 8.4 per cent by suppliers / vendors. The remaining 23.2 per cent was contributed by aAdministrative errors. Further, among the internal retail theft, merchandise theft was thought to be responsible for 27.8 per cent of internal fraud, whereas cash, coupons, vouchers or gift cards contribute 32.0 per cent of internal fraud, refund fraud and false markdowns contribute 14.6 per cent of internal fraud with a collusion of 19.1 per cent. Besides this large financial frauds were responsible for 6.5 per cent of the internal retail theft of 2008.

The total costs of retail crime and waste loss in Asia-Pacific was $15,405 million with the largest source of loss being dishonest customers contributing $7,897 million. This is closely followed by employee thefts amounting to $3,503 million followed by supplier and vendor crime contributing $1,160 million. Lastly, the survey reported that internal or administrative errors, including accounting mistakes, pricing errors and process failures, contributed to $2,845 million loss.

In the Asia-Pacific regions, including Australia, India, Japan, Malaysia, Singapore and Thailand, the highest average rates of shrinkage were seen in apparel/clothing and fashion/accessories (1.71 per cent) followed by vehicle/autoparts/DIY hardware/building material retail (1.70 per cent) and cosmetics/perfumes/beauty supply/pharmacy (1.66 per cent). The lowest rates were in footwear/shoes/sports and sporting goods (0.66 per cent), jewellery/watches (0.83 per cent) and the least in discount/variety retail/warehouse clubs (0.87 per cent).

Checkpoint Systems Inc., established in 1969, is traded on the New York Stock Exchange with an annual company turnover of $930 million. It commands 45 per cent market share worldwide in the Electronic Article Surveillance (EAS) systems and 80 per cent in the radio frequency based EAS systems (anti-shoplifting systems). It provides shrink management solutions to over half of the world's top 200 largest global retailers. It has a presence in 80 countries and a global network of more than 25 service bureaus in the world's apparel manufacturing space; 32 direct subsidiaries throughout Asia Pacific, Europe and the American continent. Pantaloons, Metro Cash & Carry, Aditya Birla Group, Koutons Retail, Ritu Kumar, Lilliput are few of the many brands Checkpoint is associated with in India.