Taking the Bite Out of Organized Retail Crime

Aug. 22, 2014
Information sharing and solid loss prevention management strategies can help deter gang-related store theft

“Store robbers…always work in gangs of two, three, or four in number, in order that their operations may be quickly conducted…. The first thing to be done upon locating in a large town or city is to select the place upon which they design to work.… When they finally decide upon a store to be robbed, they are fully posted with regard to everything that pertains to the business….”

A hundred and fifteen years ago, Allan Pinkerton, America’s “first detective” and founder of the Pinkerton National Detective Agency, penned those words in his book “Thirty Years a Detective: A Thorough and Comprehensive Exposé of Criminal Practice of All Grades and Classes”. In 2014, the tenth year that the National Retail Federation (NRF) conducted its Organized Retail Crime Survey, ORC has remained a staple of criminal enterprise in the United States, accounting for known losses in the neighborhood of $30 billion annually.

Just as classic literature remains relevant to us even after the passage of hundreds or even thousands of years (think of “Romeo and Juliet”, for example, being retold as “West Side Story”), Pinkerton’s observations about criminal actions are still valid today. Although ORC hasn’t been widely recognized during the last century, this type of crime has finally earned its place in the spotlight. With over 80 percent of the senior loss prevention executives surveyed revealing to the NRF that their businesses were victimized by ORC in the previous year, it is no surprise that retailers are studying the scope of this issue and formulating responses to it.

Turning the Tide

ORC gangs heist merchandise that can be turned for a quick profit. Changes in theft trends occur because of a combination of shifting product desirability, the ease with which the thieves can cash in on the goods, and advanced theft deterrents.

Bill Phelps, who has 29 years of experience in retail theft prevention and investigations, owns Eagle Management, a consulting company for retailers requiring assistance with theft prevention or investigations. Phelps rattles off a list of over-the-counter and health-and-beauty products that are particularly hard-hit ORC items. “Plan B emergency contraception, pregnancy tests, Nexium, sleep aids, wrinkle creams, razors and baby formula are huge in the Midwest,” he says.

Jeremy Tippett, an ORC investigator and instructor in the Baltimore-Washington, D.C. area, echoes Phelps’s take on the oft-boosted products, but added that laundry detergent has become an extraordinary problem. “At one point, we could not even keep Tide on the shelves,” he says. “It was such a targeted item that many stores had to place security labels on the bottles. It was nicknamed ‘liquid gold.’”

What Do You Have in Your Wallet?

Christopher J. McGourty, executive director of the National Anti-Organized Retail Crime Association (NAORCA), also points out that the high-end “usual suspects” being targeted globally by ORC groups include watches, jewelry, handbags and cell phones. In addition, he warns retailers about the renaissance of an old problem: “We have recently seen a huge spike in counterfeit money being passed nationwide.”

Phelps adds that cards have become a hot item, too—particularly telephone calling cards. “Some ORC groups have computer people who can make a hundred non-activated calling cards usable each day,” he says.

Adam Parker, Director of Loss Prevention for Lamps Plus, sees a trend in the use of counterfeit credit cards. “ORC activity in the form of shoplifting is not as common at our stores because of the product mix, which is lighting and home décor,” he points out. “However, counterfeit credit cards, particularly when used toward the purchase of gift cards, seems to be a favorite of these ORC rings.”

McGourty also notes the problems with credit cards: “Credit card numbers are being skimmed and transferred to other cards, and used to purchase gift cards,” he notes. “Gift card fraud continues to plague retailers, and we are starting to see this fraud spill into the hospitality industry, as well.”

Parker points out that gift cards purchased with counterfeit credit cards are perfect for any occasion. “Gift cards are a cash equivalent and are very easy for the fraudsters to resell,” he points out.

In a similar fashion, according to the NRF survey, thieves are also employing the old returning-stolen-merchandise-for-credit scam—then reselling the store credits at a discounted price.

Virtual Flea Markets

Once ORC items are boosted, they have to be turned around in order for the thieves to make a profit. The typical outlets for merchandise stolen by ORC rings have been swap meets, also called flea markets; via professional fences, who pay pennies on the dollar for ripped-off goods; or in pawn shops, which will take in higher-value items.

Phelps recently encountered over 30 types of H&B items available from one seller in a local flea market. “They were all half-price,” he observes. “The key to ORC is that the thieves don’t have places to hide the stolen merchandise and keep it on hand for a long time. They need to move product in less than forty-eight hours,” he says.

Phelps also ferreted out a truck driver tangentially involved with ORC groups. “The local trucker admitted he does side runs for a guy who palletizes mixed stolen items and ships them to smaller storage units,” he reveals. “The products are then moved or sold within a day. After all, the more quickly they move it, the more they can sell.”

While these outlets remain old standbys, the virtual world of Internet commerce is playing a bigger part than ever in the process of disposing of ill-gotten gains.

The NRF survey revealed that retailers “believe that more than one-third of items labeled ‘new in box,’ or ‘new with tags’ on auction and blog sites are stolen or were fraudulently obtained.”

Building a Better Mousetrap

Tippett headlines the beginning of McAfee Institute’s online course that leads to a Certified Organized Retail Crime Investigator (CORCI) credential. The training incorporates information crucial to determining whether an online seller may be offering stolen goods for sale. Some of the tips include investigating a seller’s longevity and reputation on a site such as eBay. Several early small-dollar transactions that result in marvelous feedback, coupled with one or later changes of user name, may indicate that a seller offering new products at well-below MSRP is really fencing hot items.

Another method for finding a store’s stolen merchandise online is to research sellers who use the Craigslist web site to determine whether they are have multiple listings of the same items (or lots of the same product). Seller identities can sometimes be determined by conducting an online search for the phone number or e-mail address posted in the ads. Retailers using these and other methods have found their stolen merchandise for sale on the Internet, sometimes identifying their own tags in the online photographs of goods known to have been stolen from their stores.

Once a store identifies its stolen merchandise being resold on the Internet, there is help available from the online auction companies. Some of them have vigorously stepped up to the plate and partnered with retailers to help get stolen merchandise off their sites. A quick response can be counted on from eBay, for example, which makes an effort to prevent stolen and counterfeit goods from being listed, as well as to identify the sellers of such items.

Loss prevention professionals need all the information they can get their hands on in order to identify where their products end up. Tippett says that CEO Josh McAfee tapped him for participation with the CORCI course not only because of his expertise in the field, but because he is a dedicated trainer. “I always look forward to diving into investigations, as well as training others in ORC,” Tippett admits. “ORC training is so important that I believe everyone in the loss prevention community, plus law enforcement, should be exposed to the ins and outs of this underground, illegal business.”

Parker says that at Lamps Plus, training is a priority. “I believe the associates on the frontline are the greatest tool to help combat ORC. We spend a great deal of time training and building cooperation amongst all store associates, which I believe is key to detecting and preventing ORC,” he says.

Phelps agrees that educating employees is important. “The ultimate deterrent is customer service,” he says. “I do random audits of stores, and I see what one person greeting people coming into a department or area can do to control theft. The last thing a thief wants is to be helped or recognized.”

Phelps adds that communication is a big piece of a deterrent strategy. “If the guy down the block is getting hit, so are you,” he says. “So use that type of thinking to plan ahead. Meet with LP and managers in other stores so you can see first-hand what works.”

He also advocates restricting the number of products on the shelves to reduce item vulnerability: “Look at your past sales,” he says. “If you’re selling ten of a product every day, then you know you need to keep at least eleven on the shelf—the additional one for a customer who might see the item and impulse-buy.”

McGourty believes that being proactive is important, too. “We have to find solutions that work for the retail industry as a whole,” he says. “We can’t just sit around crying ‘victim.’”

He likens ORC to being preyed upon on a personal level: “The NRF has reported for the last 10 years that 93 to 98 percent of retailers have been victims of ORC. If someone in our families were being victimized for 10 years, we would find a solution,” he says.

Laws against criminals associated with ORC seem to positively impact the problem. While federal legislation has not yet been adopted, respondents to the NRF survey have seen a reduction of ORC activity in the 26 states that do have such laws in place. The legislation has also made it easier to garner increased cooperation with law enforcement and to more effectively prosecute the thieves.

The effectiveness of ORC legislation can be demonstrated by looking at Great Britain, which has addressed ORC since 1968 in the same law it passed against simple shoplifting. The penalty for any kind of shop theft is a seven-year prison term, and the UK experiences fewer problems with ORC gang activity.

Because of recent heightened attention on ORC, it may seem as though ORC has just emerged as a problem. But any type of crime will appear to increase once better statistics are kept, the public becomes aware of it, and legislation to combat it is proposed.

However, retail crime is not new, and neither are effective deterrents. More advanced technology can assist with better surveillance, more effective product security devices, and smarter audit software, but the basic elements have been in place as long as this type of crime has existed.

Observe your staff’s actions, conduct random spot-checks, make your employees your partners in providing excellent customer service to everyone who enters the store. Control the number of products on the shelves. Become an integral part of the store’s business model. Hire a solid LP department, and vigorously prosecute thieves. Share information and techniques with your competitors and your colleagues. And of course, training, training, training. Allan Pinkerton could have told you that.

About the Author

Liz Martinez is a college instructor and retail security trainer and consultant, with a specialty in ORC. She is the author of the book The Retail Manager’s Guide to Crime and Loss Prevention: Protecting Your Business from Theft, Fraud and Violence. She can be reached through her Web site at www.LizMartinez.com.

About the Author

Liz Martinez

Liz Martinez is a consultant and an expert witness in retail security, particularly organized retail crime, and in forensic linguistics. She is a Ph.D. candidate in linguistics at Arizona State University with a research focus on false confessions, and she serves as the Programs Chair for the Phoenix chapter of ASIS International. She is the author of the book The Retail Manager’s Guide to Crime & Loss Prevention: Protecting Your Business from Theft, Fraud and Violence (Looseleaf Law, 2004) and the novel Sticks and Stones, as well as hundreds of articles and short stories. She can be reached via www.LinkedIn.com/in/LizCMartinez.