Police dispute Sh3bn claim of shrinkage by retailers
Posted Sunday, August 19 2012 at 16:33
The police have downplayed claims by Nakumatt Supermarkets that retailers are losing up to Sh3 billion annually through diversion of stock, shoplifting and undercharging at the till.
Police spokesman Eric Kiraithe said supermarkets should obtain police abstracts for the losses if they were that big for tax return purposes.
“We have no records on shoplifting partly because retailers do not report it as shoplifting, but theft. In instances where they arrest someone, they just take back the stolen item and let them go scot free,” Mr Kiraithe said.
Nakumatt said last week that retailers were losing up to 1.5 per cent of their sales to shrinkage, which includes shoplifting, theft by employees and underpayment for items through substitution of price tags.
With turnover by retailers estimated at Sh200 billion, the losses to the industry would be Sh3 billion. In the case of Nakumatt whose turnover is estimated at Sh35 billion, the losses could be in the range of Sh200 million.
“What we previously thought to be small time cases of shoplifting has evolved to become an organised crime, leading to high shrinkage rates on our stockholding,” said Atul Shah, the managing director of Nakumatt Holdings.
“Shrinkage occurs on many fronts and not just shoplifting. This means you cannot report to police and get an abstract for the overall figure. However, we do report to police at least three shoplifting and general theft incidents,” added Shah.
Nakumatt said 50 cases of shoplifting are detected across its branches in a month while another 30 cases in a month involve fraud attempts through use of its customer loyalty cards or bank credit cards. It said 10 cases in a month involve collusion between staff and external individuals.
Other retailers admitted that shrinkage was a big concern in the industry, saying they were losing millions of shillings through to the criminals.
“Shrinkage affects everyone in this market,” said Wills Kimani the business development and marketing manager at Naivas Supermarket Limited.
However, none of the retail chains could say exactly how much they are losing. Shrinkage of up to 2.5 per cent of stock is acceptable globally.
Shrinkage takes many forms, from price tag substitution, supplier fraud, customers sneaking unpaid items out of stores, cashier error and collusion between staff and third parties to remove goods out of an outlet’s inventory.
Nakumatt said it was putting in place measures to curb the malpractice and had called in investigators to conduct a thorough audit on how much it loses through shrinkage.
“The only drawback is the existing penal code measures which we feel are not punitive enough and may need some judicial review in light of the massive losses retailers continue to incur,” said Mr Shah.
He argued that shoplifting and employee collusion maybe driving out fledgling retailers out of business.
In June, the National Retail Federation, a body that represents retailers from 45 countries including the US, reported that shrinkage was at 1.49 per cent of $37.1 billion retail sales compared to 1.41 per cent of $34.5 billion retail sales in 2011.
The study was based on the National Retail Security Survey conducted earlier in the year.
According to supermarkets, shoplifters often pass off as well-to-do customers.