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Issue of January 2006 

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Combating retail shrinkage with RFID

Retail shrinkage is the difference between book stock and actual stock. It is the unaccounted loss of retail goods. Its main causes are theft by employees, administrative errors, shoplifting by customers or vendor fraud.

Rakesh Biyani, Director, Pantaloon feels that as India enforces the MRP system, the retailer has very little profit margin. Large retail outlets such as Big Bazaar and Pantaloon have investments in RFID, CCTV and antennas to reduce retail shrinkage. RFIDs in particular are being adopted widely by these retail majors. “If somebody steals goods without paying, it is the public who ends up paying for it. We identify compulsive shoplifters and often catch them three or more times in the same month. We try not to involve the police especially when teenagers are involved. This is where RFIDs are useful in protection of goods,” explains Biyani.

Dharmesh Lamba, Country Head, Checkpoint echoes the sentiments. He points out that India’s organised retail is only 3 percent while 97 percent is unorganised. “India is the second largest growing economy in retail, after China. Around 300 plus shopping malls are coming up in 2006 alone. New products launched globally are now launched simultaneously in India as well,” says Lamba.

In this context it is interesting to see that players like Checkpoint are entering the Indian market with their RFID solutions. John Davies, President, Global Apparel, Checkpoint plans to manufacture RFIDs and CCTV solutions in India. “As the retail segment in India keeps growing exponentially, RFID and other retail security products will play a more prominent role to control and combat retail shrinkage,” says Davies.

However, RFID has its own share of defects. Some RFID tags cannot be detected by the antennas if they are shielded by the hand or the body. A solution suggested is that the RFID label should be integrated in the package or the product itself so the exact location of the RFID tag is not known. Another issue is threat to privacy. RFID can be used to trace customer behaviour or find customer specific information. The tags can be read even if they are kept in the cars or homes of the customer.

Issues notwithstanding, Gibson Vedamani, CEO, Retailer Association of India feels that RFID is responsible for transforming the retail scenario in India from traditional to modern. “The concept of shopping malls is gradually getting accepted not only in large metros but also in small townships. Consumers get a prominent display and open access to products, while RFID protects the retailer by providing product identification and security to prevent retail shrinkage,” he elaborates.

Kumar Dawada

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Indian Express - Business Publications Division

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