The Victims of a Victimless Crime: The Future of Organized Retail Crime

The economy, trust, and violence are all prominent topics in the news, and they might provide valuable perspectives on the future of organized retail crime (ORC). Looking backward, we can anticipate the future, but the conclusion isn’t encouraging. Historical evidence shows that abundant stolen goods markets, low government confidence, and high inflation lead to an increase in both property and violent crimes.

Today, it’s still unclear how severe the property crime problem is; however, most experts agree it is severely under-estimated due to underreporting. It’s clear that retailers, legislators, and regulatory bodies are on the clock and must work together to find solutions before it’s too late.

The Property Crime Data is not Accurate

Theft data cannot be relied upon without a significant change in how it is collected. A leading specialty clothing company polled in 2021 found approximately $1.7 million in losses due to organized retail crime that went unreported to the police. On average, the ten global and national businesses surveyed estimated that fewer than 10 percent of ORC incidents were reported to the police during the same period.

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Detective Mike Zacher investigates property crimes in the Portland Metro Area. When asked about the underreporting, Zacher said, “there are several reasons for this resistance to reporting, the most significant being that retailers may have seen little to no response from law enforcement in certain jurisdictions in the past. This lack of response may be due to several factors for law enforcement, including understaffing, higher priority calls for service, and lack of follow-up from past theft reports. Loss prevention and associates at retailers may have their own internal rules and regulations regarding contacting the police or security.”

As a result, retailers are often reluctant to invest time and resources into reporting what they see as low-priority crimes or instances not likely to be investigated. The lack of reporting makes it difficult for investigators to link suspects with multiple thefts and for politicians to pass legitimate, sustainable, and relevant property crime laws. Without more accurate data, it will be challenging to progress in combating this problem that could grow much worse.

“It’s challenging to build cases on ORC suspects with little information on the totality of losses across different retailers. Failing to report thefts skews uniform crime reporting statistics by making it appear that thefts and other property-related crimes are decreasing when that is not the case. The message is that retailers need to continue reporting their crimes,” Zacher said.

What percentage of ORC goes unreported? We don’t know. Companies are not required to disclose ORC incidents, with most of them incorporating ORC incidents in their yearly losses or shrink. Most retailers treat major ORC crimes as a cost of doing business—but it’s sometimes too costly.

During 2021-2022 many significant retailers continued to close their locations due to shoplifting, with San Francisco and Portland in particular catching media attention. Many politicians and news outlets quickly chastised the reasoning, claiming that the retailers’ statements were unfounded while, at the same time, shedding light on the brazenness of the ORC incidents that were occurring.

When Walgreens announced they were closing locations due to shoplifting in 2021, the San Francisco police department fought back, stating the specific location “only had seven reported shoplifting incidents this year and a total of 23 since 2018.” They further added that Walgreens “had fewer than two recorded shoplifting incidents a month on average since 2018.” On the contrary, a security guard from Walgreens near the closed store said they see anywhere from 10-50 shoplifting incidents daily. San Francisco Police Chief William Scott said, “The statistics are counter to the narrative,” while also recognizing that some crimes may go unreported. Therein lies the problem—we cannot trust the numbers, and trust is essential.

Low Trust in Our Institutions Leads to a Higher Crime Rate

Trust is the glue that holds society together. While many factors contribute to social cohesion, trust is undoubtedly essential. When people trust their institutions—whether the government, the police, or the banking system—they are more likely to obey the law and follow social norms. On the other hand, when people lack trust in these institutions, they are more likely to engage in criminal behavior.

Today’s governmental trust is at historic lows. Since the end of World War II, institutional confidence in the United States has been declining. A society with low trust may have far-reaching consequences for day-to-day life. Distrust encourages conflict and animosity, which are the building blocks of violence. We’ve seen this play out in several ways recently, with a rise in mass shootings, steep increases in racially motivated crimes, and an increase in so-called “lone wolf” assaults.

According to the evidence, low levels of trust are linked to higher theft rates. A report published by the Urban Institute discovered that people who reported having less faith in society were more likely to admit to shoplifting. Other studies have found similar results, suggesting a significant relationship between trust and property theft.

This lack of trust is not limited to the government and extends to other institutions. According to The Reagan National Defense Survey, fewer than half of Americans say they have confidence in the military, and only about one-third say the same about the Supreme Court.

There is no quick solution to this issue, but trust is crucial for any society to function smoothly without crime. Trust may be challenging to come by with an increasingly probable economic downturn.

High Crime Rates Have Followed Periods of High Inflation

The unemployment rate has long been used as a predictor of criminal behavior, arguing that criminals will be more eager in conditions of high unemployment. This idea has come under fire in recent years, primarily due to the Great Recession of 2008. During this time, crime rates trended down or remained flat, despite the high unemployment rate. The decline led some experts to suggest that inflation may play a more significant role in property theft than the economy’s overall health. Inflation rates were low during the recession, which may explain why crime rates did not spike as predicted. Richard Rosenfeld first proposed this theory in 2008, gaining traction among experts in the field.

Recently, there has been a renewed interest in the relationship between inflation and crime rates as inflation hits 40-year highs in the United States. During sustained inflation in the 1970s, crime rates in the United States rose dramatically. The link between inflation and crime results from a decrease in people’s purchasing power, leading to greater dissatisfaction and desperation among those already cash strapped. Inflation and crime have a long and complicated history.

Following World War I in Germany, there was a period of hyperinflation that increased violent crimes. Inflation rose significantly throughout Europe and the United States from the early 1980s through 2010, resulting in an upswing in criminal activity. After severe inflation hit Argentina and Venezuela, political instability and increased criminality prevailed. Inflation can contribute to a climate that promotes crime because it may lead to social upheaval and chaos.

Richard Rosenfeld, a professor at the University of Missouri-St. Louis stated, “Inflation is a public safety concern. The research suggests that as prices rise, crimes, especially those committed to obtaining something of value, rise.”

Inflation can harm everyone, but according to a Bank of American Institute study, it typically affects low-income families, minorities, and rural Americans the most, exacerbating inequality and a higher need for cheaper goods. Low-income families are frequently “exposed” to items particularly impacted by inflation, such as energy and food, leading some to a more affordable stolen goods market.

As the price of goods rises, so does the cost of stolen goods on the secondary market. This market provides a built-in mechanism for inflation to lead to higher crime rates. Thus, while inflation may not be the primary cause of crime, it can contribute to increased criminal activity. As prices rise, the demand for cheap stolen goods grows, strengthening incentives to increase the supply of stolen merchandise and fence locations to sell them.

The Link Between Stolen Goods Markets and Crime Rates

A study conducted at the University of Warwick concluded that the size of the stolen goods market directly influenced criminal activity in a region. The London School of Economics found the theft of stolen products decreases when there are no locations to sell them. Both studies concluded most criminals are looking for financial gain, and when there are no locations to sell stolen products, they are less likely to be stolen. A growing body of evidence suggests that illegal fencing locations play a significant role in the crime rate, with the size of the stolen goods market directly related to the level of crime in an area. The data suggests reducing the market size could lead to a reduction in crime rates. While more research is needed, the data provides a compelling case for stolen goods markets’ role in the crime, and some of the biggest online marketplaces should take notice.

Many in the general public are unaware companies like eBay and Amazon are used as a marketplace to sell stolen goods. Stolen goods marketplaces, or fences, are now largely immune from legal action. Historically, the penalty for trading stolen goods has been minimal, and the risk of being discovered even lower. Furthermore, e-commerce giants such as eBay and Amazon are not companies that can be criminally charged in most circumstances.

Critics claim that while companies like Amazon, eBay, and Facebook have tried to address the problem, more is needed. One of the most prominent concerns is that these sites don’t provide enough information about where the items originated. Due to the lack of transparency, detecting stolen items and taking action against vendors becomes difficult.

The lack of communication between the platforms and law enforcement makes solving fraud and abuse cases difficult. The bottom line is that strict actions must be taken to prevent these illicit activities from happening on these prominent digital marketplaces.

“What fuels this as an enterprise is the ease of reselling stolen merchandise on online marketplaces,” said Illinois Attorney General Kwame Raoul. “It’s no longer the age where it’s done at flea markets, in the alley, or parking lots.”

Petit Theft Offenders Often Lead to Violent Offenders

A growing body of evidence suggests that retail crime can lead to violent crime. Studies have found that nearly one-third of respondents who had been involved in retail crime said they had also committed a violent crime, suggesting a direct link between the two types of criminal activity:

1. Retail crimes are often committed by those looking for financial gain.
2. Offenders use violence to accomplish financial gain.

The study’s findings highlight the importance of addressing the stolen goods market criminals use to benefit from their crimes financially. Although some local stolen goods markets may operate independently, many are linked to more extensive and sophisticated organized criminal enterprises. These markets sometimes provide a venue for selling stolen goods obtained through burglaries, robberies, and other property crimes. In other cases, the stolen goods may be part of a more extensive illegal operation, such as trafficking illicit drugs or weapons. In either case, the presence of a local stolen goods market can significantly impact public safety.

According to the FBI’s Uniform Crime Report, commercial robberies have doubled in 2022 compared to 2021. Since the onset of the ‘inflation problem,’ New York City robberies are up 48 percent, burglaries are up 32 percent, and larcenies are up 57 percent. Rosenfeld said, “These kinds of crimes we expect to increase due to a large rise in inflation, which we’ve seen in the United States for many months.” He said that with the rising cost of living, people are more likely to resort to desperate measures to make ends meet. Fiscal challenges and inflation often lead to higher unemployment rates, creating a perfect storm for increased criminal activity.

Who is to Blame?

Some call for immediate action based on the assumption that policies and laws are to blame. It is critical to note that these policies could be based on inaccurate data. “The data is simply awful,” said one loss prevention specialist. According to all retailers surveyed, ORC incidents have increased, and many incidents have gone unreported, meaning the accurate scale is unknown. Scott Glenn, vice president of asset protection at The Home Depot, was quoted in a CNBC interview saying, “Previously, I thought maybe it was a little bit overblown,” I’ve seen it in real life. I’ve seen it growing. I’ve seen the impact of it. I’ve seen the videos of it. I’ve seen all the different cases and the files we have over this. And so, it is not only growing over the past five years, I would say it’s grown incrementally over the past two, during the pandemic.”

In the wake of recent protests and riots, many cities have taken a hard stance against retail crime. This stance has led to increased task forces and strategies to combat these crimes. However, some feel this is not a sustainable solution.

One loss prevention professional stated, “The solution needs to start with the numbers. The public and our policymakers need to see what is out there and how bad the problem is. Without the data, there will continue to be a cyclical approach to this problem, only focusing on one facet.”

Disagreement over the data and the ORC problem amongst insiders is business as usual. Many in the industry have publicly argued that the numbers do not support what they see daily; retailers’ losses are massive and widespread. The National Retail Federation (NRF) has estimated losses from organized retail theft only average $700k / $1B in sales (.07 percent of total sales). “Only .07 cents per $100 of sales sounds more like a tax than a problem,” stated a mail goer that was surveyed.

Fiscally ‘it is a small problem sentiment’ could be why so many in the industry disagree with the NRF and estimate the losses are significantly higher. The truth, like most things, the reality is probably in the middle. Data moves the needle, and the answer to a sustainable solution can not lie in sensational or clickbait headlines.

A ‘case-based surveillance’ process collects crime data similar to COVID-19 data. “We count every case, and that’s just not accurate anymore,” said Dr. Marcus Plescia, chief medical officer at the Association of State and Territorial Health Officials [Link]. With rapid at-home Covid tests, Americans can now privately know whether they are infected with the coronavirus yet are not required to report the infection affecting the data accuracy.” There is no longer an aggregate total of cases to base strategy on—like ORC today.

There is a Solution in the Works

Policymakers are noticing. Democratic Illinois Sen. Dick Durbin co-authored the original Bill for the INFORM Consumers Act, requiring some sellers on sites such as Amazon, eBay, and Meta’s Facebook Marketplace to provide a verifiable bank account, tax I.D., and working contact information. The House has passed the Bill and is awaiting a vote in the Senate. The Bill can help law enforcement identify, investigate, and prosecute illegal activity online by providing better tools and information about who is behind online postings. It would also help to protect consumers by ensuring that they have recourse if they are defrauded or otherwise harmed by someone they’ve interacted with online.

The legislation aims to protect consumers from fraud and other illegal activity related to online marketplaces. The Bill has received support from several consumer advocacy groups. If it passes the Senate and is signed into law, it would take effect 180 days later.

Public opinion is now in the retailer’s corner. If opinion holds, law enforcement can enforce larceny laws, and our D.A.s are willing to prosecute, retailers need to provide the data to support all involved to take the upper hand. There are still a lot of “ifs,” and only time will tell. The retail industry will need to supply their meaningful theft data to the local government as ORC thefts fade into social media archives to ensure the unreported majority have their voices heard.

The pandemic has shown how data can be tricky. Are COVID-19 hospitalizations rising, or are people entering the hospital for unrelated reasons and incidentally testing positive for the virus? Case and incident counts have played a paramount role in shaping the policy responses for ORC and COVID-19. If our retailers resist supplying meaningful and measurable data to local and state decision-makers, a comprehensive strategy shift in policy is an excellent place to start.

Who are the Victims of Retail Crime?

We must continue seeking statistical information to forecast crime rates as an industry. Such efforts generate insights into societal and economic factors contributing to criminal incentives producing more criminal offenders.

Given the substantial evidence showing that inflation increases crime, ORC is underreported, and violence is a byproduct of retail theft, public safety must now be an immediate objective of US monetary policy and major retailers alike. We should shift the focus from the act of dishonesty to monetary and risk-based policy.

Studies show dishonesty, in all forms, is not a moral dilemma but a risk assessment; a weighting of benefits versus cost (likelihood of being caught or severity of punishment). Have you ever not paid for parking? Did you rationalize its morality or the possibility of being caught? Not paying for parking is stealing and inherently dishonest, yet we all justify the crime as victimless.

Theft from a retail company is still seen today as a victimless crime with a low likelihood of punishment. There is no one-size-fits-all solution, but we can learn from dishonesty and accept it as a fundamental part of the human condition. We have yet to connect the dots to show how closely retail theft negatively affects our society.

There are victims—and they are all of us! Without education, understanding, and a shift away from knee-jerk-driven policy focusing on offenders versus those financially benefiting, we will continue to be unable to connect the dots with the key stakeholders. Managing theft cannot be solved in silos.

Alexander Snyder

Alexander Snyder is an experienced regional security manager, having worked for multiple global NYSE-listed corporations. He has managed security operations in six time zones and assisted in many global security operation initiatives. He is a contributor to various online and print media outlets specializing in Loss Prevention.

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