Organized Retail Crime Continues to Be a Serious Threat to Merchants

On November 18, 2019 By admin

For those in the business of retail, worrying about operations, sales quotas, and local store marketing is one thing. Worrying about organized retail crime (or ORC’s) is another issue altogether.

According to an ORC study released by the National Retail Federation (NRF), despite advances in security technology and the shift of more stores towards e-commerce, it would seem that organized retail crime is continuing to grow, with nearly three-quarters of retailers surveyed reporting an increase during the period of 2017 to 2018.

The study on organized retail crime involves the input from 66 loss professionals at different types and sizes of retailers. According to the insights they have provided, return fraud has continued to grow as some retailers have broadened their policies to allow items that were bought online to be returned in-store.

Key Findings of the Organized Retail Crime Study

About 92% of companies responding to the survey said they had been victimized by ORC in the previous year, and 71% said that ORC activity is increasing. 

The top locations for ORC activity include many of the nation’s biggest retail markets — New York City, Los Angeles, Miami, and Chicago, among others.

Specifically, 38% of those surveyed said the number of online purchases returned to physical, brick-and-mortar locations had increased, and 29% said a growing number of those returns were fraudulent.

Other factors that contribute to the growth of organized retail crime include:

  • The ability to dispose of stolen goods more easily by selling them online.
  • The rise in the use of fraudulent gift cards
  • Criminal elements can identify stores experiencing staff shortages, and subsequently taking advantage of overwhelmed staff 

Furthermore, retail items from more top-tier, more buzz-worthy brands also tend to be more likely targets of ORC.

Interestingly, 29% of retailers surveyed said ORC activity occurred even before their merchandise reached their stores– usually in the form of cargo theft at different points in their respective supply chains. The study also pointed out that ORC incidents happening in supply chains have declined sharply from 44% two years ago. 

What Is Being Done to Combat Organized Retail Crime?

“Retailers continue to deal with increasing challenges and complications surrounding organized retail crime,” said Bob Moraca, NRF Vice President of Loss Prevention. “These criminals find new ways to expand their networks and manipulate the retail supply chain every day.”

The NRF’s 2018 ORC survey reveals that losses incurred by the retail sector due to organized crime in 2017-2018 have averaged a record $777,877 per $1 billion in sales. This statistic is an increase of 7% from the previous year’s $726,351.

What is the retail industry doing in response to these statistics? “The retail industry is fighting this battle by upgrading technology, improving relationships with local law enforcement and taking steps such as tightening return policies,” says Moraca. “But it is a never-ending battle.”

Indeed, more retailers have turned to better in-store security strategies to curb in-store theft. Video surveillance, RFID technology, and the use of smart security technology are some of the more common anti-crime measures employed by retailers today.

While the rise in organized retail crime means that retailers need to make security and anti-loss strategies more of a top priority, respondents of the NRF survey also believe laws should be tougher. 

The study noted that some states have changed the amount of goods that need to be stolen for a theft to qualify as a felony, so thieves may be able to steal more without risking a misdemeanor offense. 

Return Fraud Continues to Post a Threat to Retailers

One of the most serious threats faced by the retail industry today is return fraud.

According to retailers, an estimated average of 11% of their annual sales will be returned this year, and that 8 percent of those returns are likely to be fraudulent. In addition, retailers also expect an estimated 12% of returns to not include a receipt, and 21% of those are likely to be fraudulent as well

Furthermore, 38% of retailers surveyed reported in an increase in online purchases returned to a physical location, and 29% of survey respondents also cited an increase in those returns being fraudulent. 

About the NRF

Based in Washington, D.C., the National Retail Federation is the world’s largest retail trade association, representing the interests of all sorts of merchants from the United States and more than 45 countries. 

Their membership including internet retailers and brick-and-mortar stores of all kinds: discount and department stores, home goods and specialty stores, Main Street merchants, grocers, wholesalers, and even chain restaurants, among others.

Retail is the nation’s largest private-sector employer, supporting one in four U.S. jobs — 42 million working Americans. Contributing $2.6 trillion to annual GDP, retail is a daily barometer for the nation’s economy.

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