For years, loss prevention professionals have voiced concerns about combatting the growing problem of organized retail crime (ORC) syndicates, which systematically steal a wide variety of merchandise from retailers both large and small across the country. And while merchants have formed various groups dedicated to fighting ORC and even managed to get legislation passed in more than half of the nation’s state legislatures to help curb the onslaught, losses attributed to ORC have continued to mount. What’s more troubling, it seems that thieves have honed their craft to greater perfection within the past year, pilfering even greater amounts of goods from brick-and-mortar stores.
According to the results of the National Retail Federation’s 12th annual Organized Retail Crime Survey, 83 percent of merchants surveyed reported seeing an increase in ORC activity in the past year. In fact, the survey, which polled 59 senior loss prevention executives, found that 100 percent of companies had experienced ORC in the past year, up from 97 percent in 2015. The average loss due to ORC also increased from nearly $454,000 per $1 billion in sales in 2015 to just over $700,000 this year.
While the number of retailers victimized by ORC has been relatively high over the past four to five years, Bob Moraca, vice president of loss prevention for the NRF, says he was surprised that every single merchant polled in this year’s survey admitted that they had fallen victim to it.
“I don’t think I have ever done a survey where you have 100 percent agreement on anything. You can’t get everybody to agree on the color red sometimes, so it surprised me a bit,” he adds. “It kind of confirmed our thoughts from the conversations we’ve had with our retail organizations that the problem is a growing one.”
Moraca also pointed to the results of the annual National Retail Security Survey, which for the last two years has shown that shoplifting/external theft (including ORC) has accounted for a greater percentage of inventory shrink than employee/internal theft, as proof of just how big a problem ORC has become.
“When we look at the different components of shrink, historically the number one issue was internal threats. In other words, it was employees misappropriating funds or product out the back door through the store room or the supply chain with knowledge of how the organization operates,” Moraca explains. “I think retailers are doing a better job of understanding the internal threats and are putting security countermeasures in place to thwart it.”
One finding in this year’s survey that was particularly troubling to Moraca was that shoplifters are starting to become more aggressive. Only 3.4 percent of retailers saw a decrease in aggressive tactics, while 96.5 percent reported an increase or the same levels of aggression. In addition, about one in six retailers (17.2 percent) felt that the level of aggression was much higher than the previous year.
“We’ve had individuals push, shove and some have even used mace or pepper spray. This is happening to store associates who are not resisting in any way,” Moraca says.
Despite the fact that 34 states now have ORC laws on the books, Moraca says there has been a “decriminalization” effort in some states to reduce shoplifting to a misdemeanor offense which has subsequently emboldened many theft rings. In fact, according to research from The Pew Charitable Trusts, 30 states and the District of Columbia increased the threshold for shoplifting felonies from 2001 to 2015.
“The amount of theft that used to be a felony, say $500… they are moving it up to $800 or $1,000,” Moraca says. “These criminals are pretty savvy. If the limit for a felony is $1,000, they will steal $850 or $900 worth of goods at a time and make sure they stay under those guidelines.”
Surprisingly, according to the survey, 56 percent of retailers in states with ORC laws said they had seen no increase in support from law enforcement. Moraca stresses, however, that it is vital for merchants and loss prevention professionals to remain engaged with law enforcement partners to help them understand the types of problems ORC can create in the community.
The survey also found that cargo theft continues to be a significant problem for retailers as 44 percent of respondents reported that they had been victimized by the crime in the last 12 months, which is up from 38 percent in 2015 and 35 percent in 2014. While these cargo theft numbers are still not as high as what was reported from 2011 to 2013 when the percentage of retailers impacted hovered around 50 percent, it does demonstrate that the crime has started to pick up again.
Although ORC gangs steal a wide variety of merchandise, the survey shows that they do have some distinct preferences and often target a mix of high-end goods and everyday items. Among the most popular ORC items, according to survey respondents, included:
- Designer clothes (45 percent)
- Designer handbags (35 percent)
- Infant formula and laundry detergent (25 percent)
- Allergy medicine and razors (22.5 percent)
- High-end liquor and denim pants (20 percent)
- Energy drinks and teeth whitening strips (17.5 percent)
- High-end vacuums (15 percent)
- Pain relievers and cell phones (12.5 percent)
- Laptops/tablets (10 percent)
ORC gangs often use a combination of physical locations - storefronts, pawn shops, flea markets and kiosks – and online marketplaces to fence stolen goods. Sixty-three percent of those surveyed said they had recovered merchandise from a physical location and another 58 percent said they had identified stolen merchandise from an e-fencing operation.
Aside from hocking stolen merchandise, some criminals are finding ways to manipulate store return policies as way to profit from theft schemes. According to the survey, 68 percent of respondents said they had experienced thieves returning stolen merchandise for store credit, which is often resold to secondary-market buyers in the form of gift cards. However, the number has dropped since 2013, when 78 percent of stores reported experiencing this problem.
Los Angeles continued to be the hardest hit area for ORC in the nation, a position it has held since 2012. Following in order were New York City, Chicago, Miami, Houston, San Francisco/Oakland, Arlington/Dallas/Fort Worth in Texas, Atlanta, Philadelphia and Orange County, Calif.
Despite the progress retailers have made in raising awareness about the pervasiveness of ORC and getting state lawmakers to stiffen penalties for those found guilty of the crime, Moraca believes that the passage of a federal law could help to put a greater dent in the problem.
“There are laws that do exist that help us, but when you go to a U.S. attorney with a major case – one that crosses state lines into an entire region with multiple incidents in multiple jurisdictions – it is a lot easier to get a prosecution and get the attention of law enforcement,” he says. “The federal ORC law would be the ultimate goal and it is something we are continuing to work on for our members.”
Click here for more information or to download the full survey results.
