The Hindu Business Line : Retailers brace up to tackle ‘shrinkage’ issues

New Delhi, March 2 Goods are vanishing off the shelves faster than ever and for all the wrong reasons. Losses due to pilferage or breakages known as ‘shrinkage ratio’ in retail parlance are eating into the bottom lines of retail majors, forcing them to take remedial measures.

A study by consultancy firm TechnoPak places India on top of the list in retail supply chain losses. The study, which checked how many items were lost as a percentage between manufacturing and point of sale, put India’s total shrinkage ratio at 2.9 per cent.

The shrinkages witnessed by Indian retailers are in the range of 0.3 per cent to 1.5 per cent of sales. Some of the most pilfered goods from new format stores include cosmetics, alcohol, women’s apparel, razors, perfumes, small electronic gadgets like CDs and video games.

“Almost all retail majors globally have gone through this problem and even the highly organised western retail is still coping and coming to terms with it. It is time for Indian retailers to adopt global best practices to check profit erosions due to shrinkages,” Mr Robert Gregory, Retail Analyst, Plant Retail, said.

According to researched reports, total global shrinkage costs retailers in 32 countries as much as $98,630 million, equivalent to 1.36 per cent of their retail sales.

Observing that retail has to be innovative, he said, “An effective supply chain management, proper logistics planning and proper use of security devices can bring down the losses tremendously”.

Noting that shrinkages ratios are a reality, Subhiksha Trading Services Managing Director, Mr R. Subramanian, said for Subhiksha the shrinkage margin is a little over 0.25 per cent.

“Our smaller store formats itself have helped tackle the issue. In smaller stores, the number of store attendants to customer ratio is high, therefore customer pilferages are remote.”

Reliance Retail’s Vice-President Operations and Strategy, Hypermarkets, Mr Charles Synder, notes that “besides good customer services, a thorough check on receiving orders is the key to minimising losses due to shrinkages.

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