Loss prevention has traditionally focused on shortage reduction through an emphasis on internal theft, external shoplifting, and operational controls. Resources to prevent these losses have been spent on developing programs and controls to stop loss from within the company.
Within the past couple of decades, however, retailers have identified the growing threat of organized retail crime (ORC) theft. Loss prevention departments are beginning to shift resources in order to investigate and resolve these more complex cases that are causing a large percentage of their overall external theft shortage. Loss prevention professionals currently responsible for handling cases of organized retail crime have realized the difficulty in investigating groups of criminals who operate by boosting merchandise from multiple retailers.
Organized retail crime investigators rely on incidents that occur at their specific retailer in order to gather necessary evidence to present to law enforcement for resolution.
Investigators may believe that a group has stopped their boosting activity and a case may become cold without progressing because they have not been seen in that particular retailer.
In reality, these criminals are boosting merchandise at many retailers, which make them difficult to track and apprehend.
A more effective way to attack this type of theft is to bring together retailers and law enforcement resources in order to share trends and case details.
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Today’s reality is that these organized criminals boost merchandise from any retailer who sells product that can be easily resold to a fencing operation. While flea markets, pawn shops, and makeshift stores have provided common places for the traditional booster of the past, online sales now allow an anonymous worldwide sales outlet.
E-fencing is now a national outlet for sophisticated organized retail crime rings. Because of the easy ability to resell boosted merchandise, boosters work with lists that include everything from electronics to baby formula and low-end apparel to high-end designer clothing. It is common to find a wide array of merchandise in their vehicles or in homes for resale.
Organized criminals commit crimes at all retailers, and for that reason, companies can–and should–work together in order to connect the dots for case identification and resolution.
Combining evidence and investigative resources (including information taken from interviews) will produce more rapid case closure, increased criminal charges, restitution, and extended sentencing, all of which are needed in order to reduce shortage and take criminals out of circulation.
Shortage Impact of ORC Theft
Organized retail crime costs the retail industry nearly $30 billion per year. According to a 2015 survey by the National Retail Federation (NRF), almost 97 percent of retailers report being victims of ORC theft activity within the last year.
ORC theft activity has been reported across all sectors of retail nationwide. In many closed cases, boosters were found to have been hitting multiple retailers for different types of product lines depending on what was hot for resale to traditional and online fence locations.
Organized retail crime is making a significant negative impact on shortage results. Retailers realizing the magnitude of the problem impacting their bottom line are responding by creating departments within LP in order to specifically identify and eliminate these ORC theft rings.
Economic and Community Impact
ORC theft losses contribute more negative impact than just company profits. Retailers pass losses to consumers in the form of higher prices. Companies must make their product pricing decisions based on many factors. One such factor is projected overall loss the company will incur over the year and what appropriate price will recover those lost profits. An increase in cost to the consumer is the most likely answer to recover those losses.
In addition to increased prices, ORC theft rings make desirable products unavailable to honest consumers. When these crime rings boost large quantities of merchandise from a store, the honest consumer is left with no option to purchase the product, thus impacting their shopping experience and negatively impacting sales for the retailer.
In many cases, the impacted retailer has no idea that the merchandise was stolen and replenishment does not arrive until a cycle inventory is completed later that year. Thus, every time a customer returns to attempt to purchase a particular product, the store will not have it in stock; the inventory system believes that it is still in the store when in fact it is being sold through a fence location instead.
Another negative impact of organized retail crime is that state governments lose out on needed sales tax revenues. When fewer products are sold through retailers who legitimately report and pay taxes, less money is contributed to fund government activity to improve our communities.
When ORC theft rings use refund fraud as their mode of operation, this decrease in taxes is doubled. When merchandise is returned to a store fraudulently, not only do local, state, and government programs lose out from the taxes that would have been collected on the original sale, but they also lose a second time because that return pulls sales revenue from the store.
Currently, the benefits for criminals to commit organized retail crime far outweigh the negatives. The financial benefits for being involved in ORC theft are too great for criminals to ignore.
Individual boosters report profits of over $100,000 a year in providing fence operators with merchandise for resell.
When boosters are caught in a store for shoplifting, they generally only have small amounts of product on them and will likely be charged with a misdemeanor shoplift for that one incident of theft. What is often overlooked by law enforcement and even some LP investigators is that, in many cases, the shoplift incident where the arrest occurred may have been the fifth or sixth location that the booster committed a theft that day. The rest of the merchandise may be sitting in their vehicle in the parking lot.
If the correct questions are not asked by LP professionals or law enforcement officers, or if a vehicle is not searched, then the scope of the activity will not be uncovered. In the case where a booster is only charged for theft from one location, the penalties are minor and little or no jail time will be served.
If an investigation does lead to the arrest of an ORC theft ring and those individuals are charged for the full amount of loss they were responsible for at that one particular retailer, the group will see slightly more jail time, but still insignificant punishment.
However, if a joint investigation by multiple retailers leads to the arrest of an ORC theft ring in which a much larger dollar loss is proven and multiple counts of theft are charged affecting multiple retailers, then punishment can increase significantly. This will lead to the temporary elimination of the theft ring. Taking these groups out of circulation keeps needed merchandise in the store for sale to legitimate customers. However, once the individuals are released, they may return to target different retailers or products that were not part of the original investigation and prosecution.
Connecting Retailers and Law Enforcement
Law enforcement has a wide variety of task forces or special departments that investigate property theft cases depending on location and governing body. In many cases, law enforcement resources are used by retailers only after a case has been put together and the majority of the needed evidence to prosecute has been obtained. As a result, retailers can provide assistance to one another by becoming involved in cross-retail investigations sharing. This will allow for cases to be put together more quickly when multiple retailers are involved in a case.
Often, the pieces of evidence needed to complete an ORC theft investigation can be found across different retail case files, waiting for someone to connect the dots. In addition, having joint retail documentation and evidence adds credibility to cases for prosecution. It allows for a strong case presentation to a law enforcement agency that will be able to assist in the final stages of the case being closed.
A company’s policies on information sharing must always be considered in relation to case details. However, general case information such as the mode of operation, subject descriptions, and pictures should be considered by retailers when attempting to identify and locate theft rings that are causing large amounts of loss.
Good resources are available for cross-retail investigations sharing. Many counties and states across the country have organizations that meet monthly or quarterly where law enforcement and retailers get together to discuss thefts and criminal trends. These “crime stoppers” or “property theft” associations are beneficial places to educate law enforcement and share case details in order to solicit support for cases by both law enforcement and other retailers in attendance.
In addition to the above suggestions, the easiest way to work together is by simply talking to other LP professionals. Sharing information via email that can be passed along to investigators in the field is a great way to work together. This is a quick and easy way to get information out to those responsible for investigating this type of activity within their company. It also increases the probability that your subject will be seen by other investigators and evidence can be obtained in order to bring your case to resolution.
This article was excerpted from “Connecting Retailers to Combat Organized Retail Theft,” which was originally published in 2006. This article was updated September 6, 2018.