While organized retailers are burgeoning by leaps and bounds in India, the problem of retail shrinkage has become a burning issue these days. India has been ranked No. 1 in retail shrinkage according to the fifth annual edition of Global Retail Theft Barometer 2011 (IIFL, 2011). The article tries to find out the reason for the same. The present article not only discusses the various forms of retail shrinkage and the challenges faced by Indian retailers in this regard but also gives valuable suggestions to them.