Shoplifting Employee theft Indian retail businesses see decline

Retailers noted that the decline was most pronounced in the clothing, footwear and fashion categories, with the next highest rates seen in gadgets categories such as mobile phones, smart watches and headphones

Cramps tend to increase during events such as the Indian Premier League (IPL) and the festive season

Rimjhim Singh New Delhi

The Indian retail sector is increasingly concerned about inventory shrinkage, which refers to inventory losses due to customer theft, employee theft, supplier fraud and supply chain errors. According to a report published in the Economic Times (ET), the percentage of sales in Indian retail chains has increased.

The report quoted industry officials who attributed the increase to an increase in thefts accompanying an increase in sales volume.

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In its annual report, Trent Limited, a Tata-owned company, said the decline in sales as a percentage of sales increased to 0.41 percent in FY24 from 0.22 percent in FY23, mainly due to significant volume growth. In FY20, the shrinkage rate was 0.21% and in FY22 it decreased to 0.19%. Trent saw its sales volume nearly double year-over-year in FY22, FY23 and FY24. Trent operates the Westside and Zudio chains.

Meanwhile, at V-Mart Retail, the shrinkage rate increased from 0.4% in FY23 to 0.5% in FY24.

Employee actions

The All India Mobile Retailers Association (AIMRA), which represents mobile retail stores, has noted an increase in declines reported by several large and regional retail chains, mainly due to employee actions. According to AIMRA CEO Kailash Lakhyani, who was quoted in the report, five years ago, the cut for these retail chains was typically Rs 50,000 to Rs 1,00,000 per month, but now it averages Rs 5,00,000 to Rs 10,00,000 per month.

He further said that contractions tend to increase during events such as the Indian Premier League (IPL) and the festive season, when some workers try to profit from selling inventory in gray market stores, sometimes to finance bets.

The report quoted Devangshu Dutta, chief executive officer (CEO) of Third Eyesight, as saying that shrinkage is a practical operating expense closely monitored by retailers. “However, they cannot publicly disclose these numbers if it reflects poorly on their operational control and security. “The contraction increases with economic tightening and high inflation, as has been the case in India over the last few years,” he said.

Retailers noted that the decline was most pronounced in the clothing, footwear and fashion categories, with the next highest rates seen in gadgets categories such as mobile phones, smart watches and headphones. These items have a higher risk/reward ratio due to their compact packaging and high value.

Rigorous audits

Retailers are implementing more stringent audits to reduce these losses. The report shows that mobile phone and electronics stores are now conducting daily audits.

According to shoe retailer Woodland CEO Harkirat Singh, the company has set up local audit teams instead of centralized ones to keep the sales decline at 0.2%.