Organized retailers are mushrooming by leaps and bounds in India and across the world. Also growing with them is the problem of retail shrinkage. This article tries to throw light on the various forms of retail shrinkage and the challenges faced by the retailers in this regard. It also tries to find the common methods adopted by retailers to put a check on the loss of merchandise by way of these `unforeseen' discounts.

Over the last few years, retail has been one of the fastest growing sectors in the Indian economy contributing to about 10% of the GDP. Organized retail is expected to grow to 8-10% of the Indian retail industry by the end of the year 2010 and FDI in retail is one of the most talked about topics as of now. While the future of the retail industry appears to be bright, there are certain obstacles scarring the glossy picture. Retail shrinkage is one such problem that has grown due to the retail boom. The second annual Global Retail Theft Barometer 2008 Survey, covering 920 large retailers across 36 countries rated India first with the highest shrinkage rate of 3.10% in 2008, an increase of 6.9% over the previous year. This study put India in the topmost position closely followed by Thailand, South Africa and Malaysia. This study was undertaken by the Center for Retail Research, Nottingham, England and was funded by Checkpoint Systems Inc., a company which has been at the forefront of developing shrink-management solutions that are being used by retailers across the world. The organized retail sector in India lost $2.54 bn, or 3.1% of total sales, in 2008 due to shrinkage, according to The Global Retail Theft Barometer 2008.

There are various reasons for retail shrinkage, employee theft being the most important one. The industry estimates show that around 40-50% of retailers lose their stock due to employee theft. This is closely followed by shoplifting, which account for 30-40% of stock shrinkage and the rest due to administrative errors and vendor thefts. Studies show that there are an estimated 25 million shoplifters (1 in 11 Americans) in United States. Even famous and rich personalities have been caught in the act of stealing merchandise, which they can afford! Though the losses are not as big, Indian retailers are also now facing the problem of `the five finger discount', which is the common terminology or slang used for shoplifting in several countries including the US and Australia. Indian retailers incur an average loss of 30-40% of their businesses and many of the leading retailers record an average of 3 to 5 shoplifting cases per day.

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