With shrinkage rates increasing and retail sales going down, Datamonitor, an independent market analyst, has warned that retailers are going to face shrinkage rates of almost $115 billion for 2009.

This comes in the light of a recent report carried out by the company in which they highlight the effects of the global downturn and the subsequent rise of shrinkage rates.

The report also warns that retailers have to shift some of their perception away from customer merchandise theft and start looking at their own employees.

Datamonitor have outlined that over half the losses incurred by shrinkage can be attributed to Point of Sale (POS), such as cashier error or deliberate theft and fraudulent transactions.

“Retailers have long focused their attention on customer merchandise theft. Efforts and big budgets have been spent on expensive closed circuit television (CCTV), digital recording, electronic security tagging, and alarms to prevent and monitor customer theft,” comments Christine Bardwell, retail technology analyst at Datamonitor and the report’s author.

“General employee and cashier caused shrinkage, whether intentional or not, is now a massive concern in most retail organisations.”

To combat this, retailers are urged to invest in two forms of technology. The first is data mining, which helps highlight irregular patterns in POS transactions and identify weaknesses and fraud in the system. It also proves successful in picking up external crime such as credit card fraud.

The second technology is CCTV, which can be used to supply visual evidence of the shrinkage occurring.

“Retailers need to be efficient in dealing with shrink. Loss prevention will be a high priority in the coming years because of the hard business climate so there will be growing pressure on retailers to invest,” said Bardwell.

“Using technology to uncover internal fraud quickly will enable them to discipline or retrain the staff responsible without further damage to the bottom line.”