Building Your Defenses Against Organized Retail Crime

Shoplifting is a persistent challenge for retailers trying balance a pleasant shopping environment against a drain on their merchandise, profits, and patience. According to the 2010 National Retail Security Survey (NRSS), total inventory shrinkage has shown modest declines over two decades1 (probably due to better inventory controls) but losses remain unacceptably high. US shrink measured $35.28 billion, or 1.49% of 2010 retail sales2 — more than auto theft, burglary, larceny, and robbery combined. Worldwide, shrink accounts for more than $107 billion.

Shoplifting accounts for 31% of investigated US cases of shrinkage—even more for high-risk categories like off-price outlets and apparel stores.4 And although recordkeeping differences complicate direct comparisons, indications are strong that shoplifting is an even greater problem in European and Asia-Pacific markets5, where cross-border gangs steal high-end merchandise, then quickly leave the country to avoid prosecution.

A growing proportion of shoplifting losses stem from a disturbing new source: 25% of investigated US shoplifting cases are due to organized criminal gangs. The rise of Organized Retail Crime (ORC) raises the stakes in retailers’ constant struggle to control losses without alienating honest shoppers, and it demands new strategies and technologies to protect retail merchandise, profits, employees, and customers.

Organized Retail Crime refers to groups of people who illegally obtain merchandise in substantial quantities through theft and fraud for the purpose of resale. It is typically a two-stage process: theft of the merchandise, followed by monetization of the stolen goods, including related financial crimes such as credit- and gift-card fraud, return fraud, and smuggling. It is distinct from employee fraud (although collusion is common), merchandise counterfeiting, after-hours “smash and grab” theft, and theft by habitual local offenders, ORC is a source of increasing concern in the retail community. Almost all retailers—94.5%—report that they have been victims, and 84.8% report increased incidents over the past three years. Retailer reports put ORC losses at an average $6,842 per instance compared with $438 for shoplifting incidents in 2009, so the financial impact of ORC is much greater than incident percentages indicate. And because thieves steal in bulk and concentrate on categories that are easy to resell, indirect losses include inventory turns on popular items no longer available for sale, and “frozen out-of-stock” conditions when shelves have been picked clean of a popular style or size. Frozen out-of-stock conditions are corrected only after the next physical inventory, reorder, and shipping cycle. So assuming a six-month physical inventory cycle, they keep a store’s most popular items from being replenished in the right quantities for more than a quarter of a year—resulting in lost sales opportunity. The scale of the ORC problem is significant. The most recent FBI study, in 2005, estimated direct US economic losses from ORC between $15 and $30 billion, and a more recent European Union study11 of cross-border retail crime estimated losses there at €7.6 billion ($US 10.4 billion) from cross-border activity alone.

Register Here to download this informative white paper on how to protect your self from this growing threat.

Filed under Loss Prevention; Booster Bag Detection; Metal DetectionKeywords EAS; electronic article surveillance; fraud; inventory accuracy; shoplifting; shrink

Published on 5/30/2012 Permalink

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