India tops in retail shrinkage

By SiliconIndia   |   Wednesday, 26 November 2008, 02:59 Hrs   |    1 Comments
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India: 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 percent this year, an increase of 6.9 percent over last year. The study, prepared by the Centre for Retail Research, Nottingham, England and funded by Checkpoint Systems, which develops shrink-management solutions, has put India in the top position amongst countries worldwide, closely followed by Thailand, South Africa and Malaysia.

"In India, most retailers do not consider shrinkage as a major concern. Unfortunately it is an accepted fact. They do not realize that it is killing their bottom-line directly."

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

The total shrinkage in India in 2008 is $2.543 billion which is equivalent to 3.10 percent of retail sales -an increase of 6.9 percent as compared to 2007, when the figure was 2.9 percent. Of the external shrinkages in India, customer theft contributed to around 44.7 percent of shrinkage losses, employee theft was responsible for 23.7 percent as compared to 8.4 percent by suppliers or vendors. The remaining 23.2 percent was contributed by administrative errors. Further among the internal retail theft; merchandise theft was thought to be responsible for 27.8 percent of internal fraud, whereas cash, coupons, vouchers or gift cards contribute 32.0 percent of internal fraud, refund fraud and false markdowns contribute 14.6 percent of internal fraud with a collusion of 19.1 percent. Besides this large financial frauds were responsible for 6.5 percent 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 to $7,897 million. This is closely followed by employee thefts amounting to $3,503 million followed by supplier and vendor crime contributing to $1,160 million. The survey also reported that internal or administrative error including accounting mistakes, pricing errors and process failures contributed to $2,845 million.

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