Will You Fall Victim to Organized Retail Crime?

A Question for the Small to Mid-size Retailer

Organized Retail Crime (ORC) has become one of the more widely discussed topics in the loss prevention community. In January 2006, President Bush signed H.R.3402, which among other provisions required the Attorney General and the FBI to create an ORC Task Force to support the efforts of the retail community in combating the increase in organized theft.

Two retail support organizations, the National Retail Federation (NRF) and the Retail Industry Leader's Association (RILA), have developed a national database to allow retailers and law enforcement to track incidents, analyze possible patterns and help identify organized rings. The efforts of the NRF, RILA and individual retailers have helped to raise the level of support and commitment by the legislative and law enforcement communities. Even with increased support, the individual retailer is still on the front line and must see their efforts at prevention and protection as the first step in reducing organized retail crime.

 

More Than Just Shoplifting

ORC is different than the traditional forms of shoplifting that most retailers encounter. Although the theft methods are the same, the scale, frequency, and losses of each incident are much greater. Unlike the thrill seeking teenager or the drug addict supporting a habit, organized retail crime is a network of well trained individuals whose sole purpose is to shoplift in large quantities for profit. As the name suggests, these shoplifters are more organized and tend to work in groups allowing them to blitz a store, distract associates and provide lookouts to assist in the crime. These ORC "gangs" rely on their experience, expertise and well planned execution to hit stores quickly, while removing as much merchandise as possible.

The objective of an ORC network is to re-sell the stolen merchandise through fences, diverters and even wholesalers. Goods are often shipped overseas, resold to merchants who believe it is discount priced goods, or placed on black markets. Often the merchandise makes its way to online auction sites for sale to the general public.  The reach of an ORC "gang" can be global, extending well beyond a single country's border.

Who Are These People?

Organized Retail Crime groups are created with a well established network of roles and responsibilities. Members come from various ethnic groups, age ranges and gender. In the United States, groups have been identified from South and Central America, Asia, Russia and North America. The central theme in ORC is that regardless of size or cultural difference, the groups are well networked, well trained and well equipped. Ongoing intelligence indicates that roles and responsibilities extend up and down the organizations from the actual thieves, to the organizers, fences, diverters and the sales personnel who get the merchandise back out to the market. While members are well trained and educated in their roles, knowledge and contact with other members is minimized, either by design or by nature, making it difficult for law enforcement to break up an entire ORC network.

The Extent of the Problem

The exact financial impact of organized retail crime within the retail community is still undetermined. We do know that an increased number of retailers have confirmed incidents of ORC. National news and television has highlighted only a fraction of these occurrences, but even these show hundreds of thousands of dollars worth of recovered goods. Various surveys and studies throughout the last five plus years have also shown alarming individual losses but with little movement to overall industry statistics.  At first glance this contradiction seems to create a problem in any claims of increased ORC activity. Although difficult to place an industry-wide value on the costs of organized retail crime, the investigation results and shoplifting apprehension numbers support the contention that a growing problem exists.

Many larger retailers, who have quantified large ORC losses, have developed specific loss prevention teams to combat ORC. These task forces travel the country tracking incidents, following leads and gathering intelligence in an attempt to apprehend ORC groups. Through a coordination of efforts with local, state and federal law enforcement, some of these task forces are making a difference within their retail organization.

Will You Become a Victim?

Answering this question is difficult when talking to an individual retail company. The majority of the known ORC incidents suggest that it is more prevalent in department stores and large specialty store environments; however this may be more a condition of our focus than actual occurrence. It seems more likely and prudent to assume that victimization depends more on retail business factors than just the square footage. The most important factors to consider include:

• Store Location
• Merchandise Type
• Resell Value (Street Value)
• Loss Prevention / Operational Measures

The geographical location of the retail establishment does play a role in it becoming an ORC target. Although store location alone does not mean that a retailer is susceptible to increased loss, various risk assessment analysis has proven that certain geographic retail locations have seen more incidents of crime, including retail crimes, than others.

Merchandise Type and Resale (Street) Value is considered a primary factor in a retailer's target potential. ORC groups are much attuned to consumer demands and trends, and target those items with that they can turnover quickly. In addition to demand, thieves must think in terms of portability. A 55" flat-screen television may have high demand and high resale value; however it is often difficult for a shoplifter, organized or amateur, to walk out of the store carrying the television. Merchandise which is more portable to the thief is a larger target. Items often found to be in demand for ORC operators are trendy apparels, baby formula, razor blades and small electronics. Any merchandise that can be sold easily on the street or in various markets (black, overseas, wholesale) would be those of obvious choice for the ORC criminal.

ORC networks and operators pick the targets and plan their operation well in advance. Learning the retail target's environment is a part of their regular planning. What do they look for? Various security measures in place (EAS, CCTV, and guards), employee awareness and customer service techniques, and operational procedures, such as how many employees work at given times, how employees service customers, etc. Retailers with fewer security measures and lack of operational controls, increase their chances of being viewed as an easy or profitable target by the ORC networks.

How Do I Know That I am a Victim?

Studies suggest that 1 in 11 Americans shoplift. Additionally, since shoplifting and larceny top the FBI crime report for crime frequency, it is fairly safe to assume that all retailers experience some degree of external theft. The extent of the incidents and its bottom line impact is dependent on the quality of loss prevention controls and measures used to deter shoplifting. Unfortunately, there appears no single or simple answer to whether or not a retailer is being victimized by an organized group.

Knowing whether or not the loss of merchandise is from ORC or from what can be classified as "general shoplifting" can be difficult. The easiest or most direct determinant is to witness or apprehend a unified group who has stolen large quantities of your merchandise. That along with certain indicators of the perpetrators, such as quantities of other retailer's merchandise, information on the network, choice of targets, etc. will provide proof that a network is operating within your retail environment. Based on ORC practices, one could then assume that a single location is most likely not the only target.

The best indicator is the tracking of inventory losses in specific items or SKU's. The ability to track losses at the SKU level during inventory periods will help determine if a specific item is being targeted. More effective and timely is the implementation of cycle counts, which is a proactive tool that allows you to track potential shortages as they occur, rather than awaiting less frequent inventory results. The benefit is the ability to identify issues, add deterrence factors and reactionary processes as quickly as possible, to avoid larger losses from sustained problems - ORC or otherwise.

The Final Determination

As a small to mid size retailer, the potential for falling victim to ORC may be less than that of your larger retail partners. The best precaution is a holistic approach to shoplifting in general. Employee training, education and awareness, strong operational controls, development and testing of the on-the-floor customer service practices of your employees and for identified problem locations the allocation of physical security measures to raise the deterrence level. Organized Retail Crime may be more frequent or our awareness of the issue may have increased, either way it makes sense to stay informed and think proactively.

© 2008 LP Innovations, Inc.