Indian retail is increasingly facing shrinkage challenges, leading to a rise in inventory loss due to various factors like shoplifting by customers, theft by employees, and vendor fraud, as reported by the Economic Times. Companies like Tata-owned Trent Ltd and V-Mart Retail have reported a surge in shrinkage from the financial year 2022-23 to 2023-24. Trent’s shrinkage swelled to 0.41% of sales, primarily due to significant volume growth, while V-Mart Retail saw an increase from 0.4% to 0.5% over the same period.
Shrinkage has become a new challenge for the retail industry, with several large and regional chains reporting a surge, mostly by employees, according to the All India Mobile Retailers Association. Previously ranging from ₹50,000 to ₹1 lakh per month, the shrinkage value has spiked to ₹5-10 lakh per month for retail chains, reflecting a worrisome trend.
The increase in shrinkage is often observed during events like the Indian Premier League (IPL) and festive seasons, where employees attempt to sell store inventory in the grey market to make quick money. Retailers have been filing police complaints and claiming insurance in response to such incidents.
Despite the challenges, retailers are implementing stricter audits to combat losses. Companies like Woodland have set up local audit teams to control shrinkage at 0.2% of sales, penalizing staff in case of excess shrinkage. The Retailers Association of India reassures that shrinkage levels till 0.5% are manageable, significantly below the global average of 1.5-2%.
It’s noted that retailers in India refrain from disclosing shrinkage numbers unlike their western counterparts, highlighting the sensitivity of the issue. Experts attribute the rise in shrinkage to economic tightening, high inflation, and specific product categories like apparel, shoes, and gadgets being more prone to shrinkage due to their high value and risk-reward ratio.
In conclusion, as shrinkage poses a growing challenge for Indian retailers, adopting stricter security measures, improving inventory management practices, and investing in loss prevention strategies are crucial to safeguard profits and ensure operational efficiency.
