Organized retail crime (ORC) is a significant source of loss for US retailers. Exactly how significant is notoriously difficult to tease out, but new data from the National Retail Federation (NRF) puts average losses at $726,351 per $1 billion in sales, with a median loss of $260,870.
In addition to high losses, retailers are also witnessing a growing amount of ORC activity in their stores, according to the NRF’s 2017 Organized Retail Crime Survey released in November.
Two out of three responding retailers said ORC has worsened in the last twelve months compared to the twelve months previous, with 30 percent reporting a “significant increase” in ORC. Fewer than 7 percent said ORC has decreased during the same period. “Organized retail crime continues to be one of the biggest challenges to retailers of all sizes…with criminals getting smarter, more brazen, more aggressive,” according to Bob Moraca, CPP, CFE, MBA, vice president for loss prevention at the NRF.
As for what’s driving the increase, ORC investigators on the front line point the finger at problems well beyond a store’s front door. “It’s drugs,” said Mike Powell, an ORC investigator for Kroger. “There is no doubt the oxy epidemic is driving ORC business.” Nathan Bandaries, an organized retail crime manager at Albertsons, agrees. “Ninety percent of the boosters we catch are on drugs. They wake up desperate because they only have a matter of hours to ‘get well’—to go steal and navigate to their dealers. It’s a cycle that repeats itself, day after day,” said Bandaries.
That desperation may partly be behind the increase in aggression that retailers described in the NRF survey. Twenty-seven percent said ORC thieves exhibited “much more” aggression and violence over the last twelve months; 21 percent said “somewhat more.” Moraca explained, “More and more, these criminals are coming in and menacing employees, pushing and shoving customers, shouting at everyone to get down on the floor, and those kinds of things. We haven’t seen this type of violence in a long time.”
Despite retailers reporting worrisome and worsening data, resources to fight it may be on the verge of stagnating. Only 40 percent said their companies are allocating more resources to fight ORC, down from about half of retailers that noted increased spending in both 2016 and 2015. Only 17 percent are currently adding staff resources, a marked decline from 2016 when more than 40 percent of retailers added personnel to fight ORC. Those figures are worrying as a consensus of experts suggests that highly trained and dedicated security teams with a sufficient budget, often working with law enforcement to identify and prosecute offenders, have proven to be the most reliable way to impact ORC rings.
The leveling off of resources to fight ORC may be a consequence of another point of concern in the new NRF data. Although select years have seen spikes, the percent of retail respondents that think top company leaders appreciate the severity of ORC is largely unchanged over the last decade.
“The trend is moving away from staffing at the retail end, and some retailers have lost their ORC programs altogether,” noted Sgt. Rich Rossman, vice president of the Coalition of Law Enforcement and Retail (CLEAR), a partnership created in 2008 to encourage cooperation between retail corporations and law enforcement agencies. The problem is compounded by the rise in violent crime in some areas of the country, which has forced law enforcement to shift its attention away from property crime investigations toward public safety, he added.
For retailers, being able to identify the bottom line impact of ORC is crucial to combat it, according to Rossman. “Some retailers have done a phenomenal job—and are adding to their ORC programs. Those are the ones that can peel back the layers of the crime to identify its true impact. For example, when a crew goes in and wipes out ten SKUs, looking a little deeper at that and understanding that because products are not on the shelves, they’re losing that revenue.” It’s that type of full accounting and understanding of the problem that retailers risk losing if they scale back funding and staffing ORC units, according to Rossman. “That’s all dependent on whether retailers dedicate the resources and manpower that’s required,” he said.
A good understanding of losses to ORC versus amateur shoplifting provides an important foundation to a successful LP effort to prevent external theft, notes a 2016 report for the ECR Community Shrinkage and On-Shelf Availability Group, Amplifying Risk in Retail Stores. “It matters for a number of reasons, the most important of all being that research has shown that the impact of interventions designed to stop or minimize theft vary considerably in their effectiveness depending upon the type of offender,” according to the report by University of Leicester’s Adrian Beck. “Deterring and indeed detecting professional thieves often requires a very different approach.”
Perhaps the worst-case scenario for LP is a sort of death spiral, in which fewer resources allocated to ORC makes it more difficult to identify ORC as being the cause of loss, which in turn suggests that ORC is becoming less significant, which leads to less management concern. The cycle might then repeat: even fewer resources, even less ORC data capture, even less management concern, and still fewer resources.
One data point in the new survey may suggest that this is a real possibility. In the last twelve months, 56 percent of retailers said they had identified stolen merchandise or gift cards being sold online, down significantly from 75 percent in 2016. The NRF report concludes, however, that “this could be due in part to diminishing resources allocated to fight ORC and recover stolen merchandise.” If retailers cut their number of ORC investigators, then it’s natural they will identify less of their goods online.
The data point also runs counter to what law enforcement and ORC investigators focused on the problem are witnessing. “The primary change has been the availability of so many social networks on which you can now pass off the product. It has opened up so many avenues for people to get rid of their product,” said Sgt. Rossman, who is in the organized retail crime division in the Broward County (Fla.) Sheriff’s Office. “In the years past that was hard; you had to go to a fence. Now you can be a booster and your own fence—and get rid of your stolen products through social media.”
At retailers that are leading the fight against ORC through dedicated ORC units, investigators highlighted the same challenge, including Kroger’s Mike Powell. “Social media has brought about a huge change in ORC because it doesn’t matter what level of criminal you are, it gives you an outlet.” Several experts noted the persistent challenge of fighting back against e-fencing because new online outlets pop up as soon as others disappear.
The risk that ORC could slip as a priority is a concern, and so is the number of states that have raised the limits for felony theft, which may threaten the seriousness with which law enforcement perceives the issue. “For example, in California, because of Prop 47, data could show fewer incidents. But that doesn’t mean it’s happening less,” according to Aaron Moreno, senior director for government relations at the California Grocers Association. “It’s because it’s gotten to the point that a lot of stores don’t report the incident because the person is long gone and it’s going to be a misdemeanor anyway.”
In light of the evolving threat and uncertain support, most leaders in the fight against ORC stress the need for consistency—in soliciting top management’s attention, in tracking trends, in educating stakeholders, and in forging and strengthening partnerships.
“Is there more emphasis on ORC nowadays? Absolutely. Are we more knowledgeable about losses due to ORC? Yes. But we have to continue learning about ORC because it is constantly changing, in what boosters are taking, in what fences are buying, by region, and in what crimes are being committed,” said Bandaries. “Another aspect is the education piece. Law enforcement, prosecutors, politicians—we have to keep educating these groups,” he said. Kroger’s Mike Powell echoed the point and added that providing continuing education on ORC to store staff is important so that LP departments can better understand the impact and scope of ORC in their stores.
Like several other experts, Sgt. Rossman sees the latest ORC data and current challenges within the context of the longer fight. “In the last five to ten years, ORC has come to the forefront, and we’ve made progress in coming together to meet the challenges it raises—and the partnerships have gotten better,” he said. “But the problem was there ten years before that, and it will be here ten years from now, and if we retreat at all, it’s going to get much worse,” Rossman warned.
Sidebar:LPM Online Digital Magazine Focused on ORC
The December 2017 edition of LPM Online was focused on organized retail crime (ORC), which included this feature article by Garett Seivold. Below is a look at the other excellent articles in our digital magazine that publishes on even-numbered months. All editions of LPM Online can be accessed at LPM-online.com.
Organized Retail Crime Is a Community Concern
Curt Crum is a career law enforcement officer with the Boise (ID) Police Department and president of the national Coalition of Law Enforcement and Retail (CLEAR). LPM’s Jim Lee, LPC, gets Crum’s insights into the community problem of ORC.
Inside the ORC Interview
Dave Thompson, CFI, offers a written treatise on Wicklander-Zulawski’s perspective on interviewing ORC offenders as well as a video discussing the subject.
An Update on Emerging Issues in ORC
The Loss Prevention Research Council (LPRC) has been looking at ORC since the early 2000s. In this article the LPRC team provides an update on what they’ve learned along the way and where ORC is heading.
Intelligence: The Most Important Tool in the Fight Against ORC
Read about one company’s solution to preventing retail crime through information, intelligence, and collaboration.
ORC: Arming Ourselves with Education
LPM’s Jacque Brittain, LPC, provides a preview of a new ORC education course created by the Loss Prevention Foundation with help from a team of LP industry experts.
Cargo Theft: Our Industry Problem
One of the asset protection industry’s experts on retail supply chain provides a compelling argument for why cargo theft is not just a trucking and insurance problem but an LP industry problem that must be addressed.
Rise of the Robots?
Mobile security devices may sound like something out of Star Wars, but retailers are starting to implement robotic technology.
The Unintended Consequences of California’s Proposition 47 on Retail Theft
This podcast features a panel of experts on how increasing the felony threshold has negatively impacted retailers.
If you’ve missed any of our previous LPM Online editions, go to the Archives page at the end of the digital magazine to see what you’ve missed. Be sure to be an LPM digital subscriber, so you are the first to know when new issues are available. If you haven’t already, sign up on the SUBSCRIBE NOW link at LossPreventionMedia.com. (NOTE: If you are already subscribed and signed in, the previous link will take you to the online version of the most recent print issue of LP Magazine.)