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A Decade Later, Organized Retail Crime Still Major Problem for Retailers, According to NRF’s 10th Annual ORC Survey

Retailers allocating more resources to combat ORC, Federal legislation still needed

A decade has passed since NRF first surveyed its community of loss prevention and security executives about the impact organized retail crime has on their company, and with the release of the 2014 survey, it’s evident that the $30 billion a year problem still poses serious threats to retailers of all sizes throughout the country. According to the National Retail Federation’s 10thannual Organized Retail Crime Survey, which polled 76 senior retail loss prevention executives, eight in 10 (88.2%) retailers report that they have been a victim of ORC in the past year, down slightly from 93.5 percent last year.

Although retail stores take most of the brunt of ORC activity, criminals are now finding ways to manipulate retailers’ online operations. For the first time, NRF asked about the impact organized retail crime has on their online operations: and nearly half (48.3%) say their online operations are affected.

“Few retail crimes reach the level of concern among retailers that organized retail crime does,” said Senior Advisor, Asset Protection Rich Mellor. “For the better part of 15 years, savvy criminals and the enterprises they’re a part of have forced retailers to change how they deal with fraud, including maximizing efforts to partner with and educate law enforcement. These partnerships have become a crucial part of the fight against retail crime gangs, and while those invested in tracking down retail criminal enterprises can point to some success, it’s evident there’s still a big fight ahead of us.”

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Retailers investing more in combating organized retail crime

Thanks to increasing support from the C-suite and other senior executives at retail companies many loss prevention executives say they are allocating additional resources to combat ORC. Overall, three-quarters (74.7%) of those surveyed say they are allocating resources. Of that group, one in five (22.7%) are adding staff resources, 34.7 percent are adding technology resources and 17.3 percent are adding budget resources. Additionally, when it comes to personnel, a number of retailers report investing more than 1 million dollars annually on staffing ORC investigation teams.

When asked about their company’s overall ORC case value for the past 12 months, 13.2 percent of retailers estimate the value to be more than $5 million; the average case value for those who have lost money to organized retail crime is $2.8 million.

“Tighter budgets in retail have made it taxing on some retail companies to adequately prepare for and even prevent organized retail crime from happening in their stores, however, more and more retailers are seeing the value of investing in loss prevention to combat this multi-billion dollar problem that continues to evolve in terms of its scope and sophistication,” said Mellor.

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State laws helping, but Federal legislation would go a long way in fight against

organized retail crime

As of May 2014, 24 states have enacted laws against criminals who are found to be associated with an organized retail crime gang, a significant feat that states and retailers have worked diligently on for more than 10 years.

In an effort to gauge the level of impact these laws have had on retailers’ ability to prosecute criminals associated with ORC and the level of support they receive from law enforcement, NRF asked retailers this year if they felt state organized retail crime laws were having any impact on their efforts to curb ORC activity.

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According to the survey, three in 10 (30.6%) of those polled said they have noticed a reduction in ORC activity in states where laws are present. Additionally, of those retailers who have a presence in states with existing ORC laws, more than half (52.1%) noticed a positive impact on their ability to prosecute ORC offenders more effectively; nine in 10 (88.5%) said they have noticed an increase in support from law enforcement agencies when actively investigating organized retail crime cases. Specifically, 51.9 percent said they’ve noticed an increase in support from local/county law enforcement, 26.9 percent said state law enforcement and 9.6 percent said federal law enforcement. In states without ORC laws and where retailers have a presence, six in 10 (63.5%) say they haven’t noticed any changes in support from law enforcement.

Because organized retail crime gangs have the means to transport stolen products through multiple states and even overseas, the need for Federal legislation is greater than ever. According to the survey, one in five (21.5%) respondents say they know of instances where stolen products have been illegally exported outside the United States.

 “We commend the retailers and states who have dedicated significant attention and resources to put retail crime laws in place, and we are hopeful that these state laws will lead to even greater success with prosecuting retail crime gangs in the future,” said NRF Vice President, Supply Chain and Customs Policy Jon Gold. “And while state laws are putting a dent in the level of ORC cases each year, we believe Federal ORC legislation is still needed to help support the effective efforts at the state level since the criminals tend to operate across multiple states.”

Criminal “fence” operations impacting 6 in 10 retailers

Two of the biggest components of organized retail crime are physical and e-fence operations. According to the survey, 63.6 percent of respondents say they have identified or recovered stolen merchandise from a physical fence, such as a pawn shop, flea market or temporary store set up; 68.2 percent say they have recovered merchandise from an e-fencing location, such as a third party website, auction site or blog. Retailers on average believe that more than one-third (34%) of items labeled “new in box,” or “new with tags” on auction and blog sites are stolen or were fraudulently obtained.

Additionally, 42.4 percent say they have seen an increase in physical fencing activity in the past 12 months, and more than half (53.9%) have seen an increase in e-fencing activity.

Savvy criminals are also finding ways to manipulate well-intentioned policies for innocent shoppers who need to return items to the store. According to the survey, more than three-quarters (76.9%) of respondents say they have experienced thieves returning stolen merchandise for store credit, to then sell that merchandise credit to secondary market buyers or sellers – unchanged from the 77.8 percent last year.

“The intricate scheme that criminals today use to manipulate and defraud retailers could eventually impact how retailers accept returned items, which is extremely unfortunate for innocent shoppers who simply need to return something back to the store,” said Mellor.

Cargo theft instances happening more at the store, according to retailers

Despite their best efforts to curb cargo theft in the supply chain, retailers are still grappling with the costly issue. According to the survey, more than one-third (35.4%) of retailers surveyed said they were victims of cargo theft in the past year. Specifically, one-quarter (24.2%) of respondents said they’ve experienced cargo theft at the store, 41.4 percent said the theft took place en route from manufacturer to distribution center, 51.7 percent said it occurred en route from distribution center to the store, and 13.8 percent said it occurred at the distribution center.

Top Cities for Organized Retail Crime Activity

Organized retail crime gangs wreak havoc throughout the country, but many cities have remained top locations for ORC activity for the past several years, including Los Angeles, Miami and San Francisco. The top 10 locations that retailers say have the most criminal activity are (by rank):

  1. Los Angeles
  2. Miami
  3. Chicago
  4. New York
  5. Houston
  6. Atlanta
  7. Baltimore
  8. San Francisco/Oakland
  9. Arlington/Dallas/Fort Worth
  10. Detroit

About the Survey

The 10th annual 2014 NRF Organized Retail Crime survey was conducted March 24 – April 21, 2014 by the National Retail Federation. Senior loss prevention executives at 76 retail companies completed the survey with the purpose of identifying the depth of organized retail crime throughout the entire industry. This year’s survey features responses from executives representing department/big-box stores, discount, drug, grocery, restaurant and specialty retailers.

NRF is the world’s largest retail trade association, representing discount and department stores, home goods and specialty stores, Main Street merchants, grocers, wholesalers, chain restaurants and Internet retailers from the United States and more than 45 countries. Retail is the nation’s largest private sector employer, supporting one in four U.S. jobs – 42 million working Americans. Contributing $2.5 trillion to annual GDP, retail is a daily barometer for the nation’s economy. NRF’s This is Retail campaign highlights the industry’s opportunities for life-long careers, how retailers strengthen communities, and the critical role that retail plays in driving innovation.

Download the 2014 Crime Survey by clicking here.

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