New Strategies to Combat Organized Retail Crime

Nancy ChisholmShoplifting persistently challenges retailers trying to balance a pleasant shopping environment against a drain on their merchandise, profits and patience. While total inventory shrinkage has modestly declined over the past two decades, losses remain unacceptably high. Currently, shoplifting is 31 percent of investigated U.S. cases of shrinkage. Most disturbing, however is that 25 percent of investigated U.S. shoplifting cases are perpetrated by 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.

ORC refers to groups of people who illegally obtain merchandise in substantial quantities through theft and fraud for the purpose of resale, using a two-stage process: 1) theft of merchandise, 2) monetization of stolen goods, including related financial crimes such as credit/gift card/return fraud and smuggling.

Almost all retailers — 94.5 percent — report having been victims, and 84.8 percent report increased incidents over the past three years, with ORC losses averaging $6,842 per instance compared to $438 for shoplifting incidents in 2009, so ORC's financial impact is much greater than incident percentages indicate. And because thieves steal in bulk and concentrate on easy-to-resell categories, indirect losses include inventory turns on popular items no longer available for sale, and "frozen out-of-stock" conditions when shelves are depleted of a popular style or size.

Retailers have three general lines of defense against ORC: 1) extending and refining current store-by-store efforts, 2) deploying new technologies, and 3) an organized response across stores, regions, and chains, and with assistance of law enforcement agencies and public policymakers.

Enhancing current approaches

Environment — "We prosecute" signage, hard to remove "Sold only in (retailer name)" stickers on items, small store layout changes, and ORC-aware changes to fitting room policies/staffing and visible technologies like Electronic Article Surveillance (EAS) and video surveillance.

Personnel — "Loss Prevention Greeters" at store entrance monitor the exit and flag suspect behavior to help reduce shoplifting, whether opportunistic, habitual or organized.

Antifraud measures — Stricter policies governing cash receipts can have a big impact: marking "cash plus store credit" purchase receipts with cash amount blocks the most lucrative form of return fraud. And "this store only" return policies at high-risk stores significantly impair gift-card consolidation and online monetization.

Detection — Expanding established EAS and video surveillance programs based on patterns of organized crime raises the risk of detection, making stores far less attractive targets. Utilizing video surveillance to monitor suspicious or repeating ORC criminals and alerting store associates if theft occurs provides another opportunity to raise the risk of detection.

Deploying new technologies

Extensions of EAS technologies specifically targeting ORC include:

  • Jammer detectors that respond to signals thieves use to overwhelm the electronic resonances on which EAS detectors depend.
  • Booster-bag detectors that detect aluminum-foil-lined containers carried into stores.
  • Selective remote alarms that redirect data from jammer detectors and booster-bag detectors to notify staff that a thief has entered the store.

New applications of video surveillance help combat shoplifting of all kinds, and ORC in particular:

  • Linking jammer and booster-bag detectors to digital video surveillance helps stores capture pictures of potential thieves entering and leaving the store. When item-level information from RFID tags are integrated into loss prevention, stores can link video evidence of theft events to goods recovered from thieves at storefront or in the parking lot.
  • Advanced technologies extend video surveillance to include facial recognition, monitoring of "exception behaviors" typical of gang theft, and storewide surveillance tracking likely thieves.
  • Pervasive video: shelf-level cameras linked to advanced detectors can provide an end-to-end record of theft events, together with filtering out activities of legitimate shoppers.

Organized retail defense

The final step in fighting ORC will come when retailers organize, turning the gangs' most powerful method against them, with strategies including:

  • Predictive analytics — integrating information from EAS, jammer, booster-bag, and RFID detectors, video surveillance, human intelligence and more can identify theft patterns within and across stores, for efficient deterrent deployments, countermeasures and enforcement.
  • Real-time adaptive analytics — monitoring point-of-sale data, store traffic, and real-time inventory lift from both sales and theft will help stores align associate staffing to shopper behavior patterns to maximize sales and minimize theft.
  • Collaboration and enforcement — the retail industry, together with government and law-enforcement agencies, are beginning to organize against the ORC problem and extend through public-private partnerships all the way to national legislative initiatives and cross-border extradition agreements.

Conclusion

Organized Retail Crime is emerging as a significant threat to retailers worldwide. Its growing incidence and sophistication, the high costs per incident, and advanced opportunities for monetization reveal a global problem requiring immediate, sustained attention.

Extensions of current policies and technologies are helpful, but not enough: integration, adaptation, and information-sharing are strategic keys that will reverse the trend. With targeted programs and investments, retailers can expect the direct benefits of loss reduction, and indirect benefits from more efficient, cost-effective staff deployment, improved deterrence and recovery, and ultimately, a better, safer shopping experience for customers.

Nancy Chisholm is the vice president and general manager of loss prevention solutions for Tyco Retail Solutions, a global provider of integrated retail performance and security solutions.

Originally published July 3, 2012 at Apparel.com

Filed under Loss PreventionKeywords loss prevention; retail security; shoplifting; shrink; store; traffic intelligence; video surveillance

Published on 7/17/2012 Permalink

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