As retailers around the country this week prepare for the annual day after Thanksgiving shopping tradition known as “Black Friday,” the National Retail Federation (NRF) on Monday released the results of its yearly study on organized retail crime (ORC) which may give some loss prevention (LP) professionals pause as they embark on their busiest season of the year.
According to the study, which was based on responses from 66 retailers across the nation, ORC levels have reached an all-time high with losses averaging $777,877 per $1 billion in sales, which is up 7 percent from last year’s record of $726, 351. Additionally, 92 percent of companies surveyed reported that they had been a victim of ORC in the past year and 71 percent of respondents said that ORC incidents were increasing.
Among the reasons cited by retailers for the increase include the ability of thieves to easily sell stolen goods online, gift card fraud, staff shortages in stores, and high demand for certain brand name items.
The step taken by some states to raise the felony theft threshold was also cited as a contributing factor. Despite the fact that at least 34 states have ORC laws on the books, 73 percent of retailers believe that a federal ORC legislation is needed to put a serious dent in the crime as theft gangs often operate across state lines.
“Retailers continue to deal with increasing challenges and complications surrounding organized retail crime,” said NRF Vice President of Loss Prevention Bob Moraca. “These criminals find new ways to expand their networks and manipulate the retail supply chain every day. The retail industry is fighting this battle by upgrading technology, improving relationships with local law enforcement and taking steps such as tightening return policies, but it is a never-ending battle.”
The items most commonly targeted by ORC gangs, according to study, include; designer clothes, laundry detergent, baby formula, razors, designer handbags, denim pants, deodorant, high-end liquor, teeth whitening strips, and cell phones. The top cities where ORC occurred were:
- New York
- Los Angeles
- Miami
- Chicago, Houston
- San Francisco/Oakland
- Atlanta
- Baltimore
- Orlando
- Northern New Jersey, Washington, Philadelphia, Arlington/Dallas/Fort Worth
- Ft. Lauderdale, Seattle
Return Fraud
Another ORC-related loss prevention challenge for retailers is return fraud, which is of particular concern this time of year with the busy holiday shopping season. Retailers say they expect an average 11.1 percent of sales to be returned during the holidays this year with about 10.3 percent of those returns being fraudulent. The number of returns has dropped over the past year, when 12.9 percent of holiday sales were expected to be returned and is still less than 2015 when 15 percent was expected to be returned.
Although there is a spotlight on return fraud during the holidays, it remains a significant problem for retailers in general throughout the year and is one of the major reasons behind the success of ORC gangs. Retailers estimated that just less than 12 percent of all returns on average are missing a receipt and of those, more than two in 10 are expected to be fraudulent.
Many retailers try to combat return fraud by issuing gift cards or store credit for returned merchandise but these are often sold online for cash. However, the good news is that fraudulent returns have dropped overall to an estimated average of 8.2 percent of all returns, which is down slightly from 10.8 percent in 2017.
Retailers Fight Back
As part as an effort to mitigate the effects of ORC, retailers have taken a number of different steps to try and curb it. In fact, more than one in four retailers has implemented new return policies to address ORC. Additionally, more than a third of retailers (37.9 percent) have changed their point-of-sale policies, which is up significantly over 2015 when just over 20 percent of retailers said they had done so. Retailers are also being more diligent about cracking down on trespassers as 13.6 percent of those polled in this year’s survey said they had made changes to their trespass policy versus just 8.8 percent in 2017.
Despite these policy changes, however; many retailers still have not devoted loss prevention staff to specifically tackle ORC. According to the study, more than half of the retailers surveyed responded that none of their loss prevention employees have ORC as their primary job responsibility. Of those that do have dedicated, full-time ORC staff within their LP teams, they have an average of 11 employees with ORC as their primary focus.
And, unlike in years past, many more C-suite leaders in retail are now aware of the problems posed by ORC and are supportive of their LP teams in combatting it. In fact, just over 60 percent of those polled in the survey said that top management understands the complexity and severity of ORC.
Retailers spend an average of about 10 percent of their LP budget on fighting ORC, with about a quarter spending more than that.
For more information about the NRF’s “2018 Organized Retail Crime Survey” or to obtain a full copy of the results, click here.
