Business & Economy

Increase in Theft and Inventory Losses Hits Indian Retail Stores

**Rising Theft and Inventory Losses Challenge Indian Retail Sector**

The Indian retail industry is grappling with increasing instances of theft and inventory losses, also known as shrinkage, as reported by the Economic Times. This issue is particularly pronounced in the fashion sector and in high-value, small-sized gadgets such as mobile phones, smartwatches, and headphones.

Trent Ltd, a Tata-owned retail company, highlighted in its annual report a significant increase in shrinkage, which rose to 0.41% of sales in the financial year 2023-24 from 0.22% in the previous year. This uptick is attributed to a substantial rise in sales volumes over the past few years. Trent, which operates the Westside and Zudio chains, has seen its sales almost double annually from 2021-22 to 2023-24.

Similarly, V-Mart Retail reported an increase in shrinkage from 0.4% in 2022-23 to 0.5% in 2023-24. Lalit Agarwal, Managing Director of V-Mart Retail, acknowledged the growing challenge, noting that shrinkage tends to increase with business growth. He also mentioned that the demand for more products from the younger generation, even during tough economic times, contributes to this issue.

The All India Mobile Retailers Association (AIMRA) noted a significant surge in shrinkage within cellphone retail stores, primarily due to employee theft. AIMRA Chairman Kailash Lakhyani explained that while monthly losses for retail chains used to range from ₹50,000 to ₹1 lakh five years ago, they now range between ₹5-10 lakh. The problem is exacerbated during major events like the Indian Premier League (IPL) and the festive season when some employees sell store inventory in the grey market to fund bets.

Despite measures such as filing police complaints and claiming insurance, the pain of shrinkage remains. Most Indian retailers, unlike their Western counterparts, are hesitant to disclose shrinkage figures publicly, as it may reflect poorly on their operational controls and security measures. Devangshu Dutta, Chief Executive of Third Eyesight, a retail consultancy, noted that economic tightening and high inflation, as experienced in India recently, tend to increase shrinkage.

Retailers have been implementing stricter audits to control these losses. For instance, cellphone and electronic stores have started conducting daily audits. Shoe retailer Woodland has established local audit teams to maintain shrinkage at 0.2% of sales, with penalties for staff if it exceeds this limit, according to Harkirat Singh, Managing Director of Woodland.

Kumar Rajagopalan, Chief Executive of the Retailers Association of India (RAI), stated that while a shrinkage rate up to 0.5% of sales is manageable, the global average is between 1.5-2%. He also highlighted that high return rates in India, often with products in unsellable condition, add to the shrinkage burden.

Comparatively, a 2023 retail security survey by the US-based National Retail Federation reported an average shrink rate increase from 1.4% in 2021 to 1.6% in 2022, amounting to $112.1 billion in losses in 2022, up from $93.9 billion in the previous year. This underscores the global nature of the shrinkage challenge faced by retailers.

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