Will You Fall Victim To Organised Retail Crime?

    pc1By Ray Esposito.

    Organised retail crime (ORC) has become one of the more widely discussed topics in the loss prevention community.

    ORC is different than the traditional forms of shoplifting that most retailers encounter. Although the theft methods are the same, the scale, frequency and losses of each incident are much greater. Unlike the thrill-seeking teenager or the drug addict supporting a habit, ORC is a network of well-trained individuals whose sole purpose is to shoplift in large quantities for profit. As the name suggests, these shoplifters are more organised and tend to work in groups, allowing them to blitz a store, distract associates and provide lookouts to assist in the crime. These ORC ‘gangs’ rely on their experience, expertise and well-planned execution to hit stores quickly, while removing as much merchandise as possible.

    The objective of an ORC network is to re-sell the stolen merchandise through fences, diverters and even wholesalers. Goods are often shipped overseas, resold to merchants who believe it is discount-priced goods, or placed on black markets. Often, the merchandise makes its way to online auction sites for sale to the general public. The reach of an ORC gang can be global, extending well beyond a single country’s border.

     Who are these People?

    ORC groups are created with a well-established network of roles and responsibilities. Members come from various ethnic groups, age ranges and gender. In countries like the US for example, groups have been identified from South and Central America, Asia, Russia and North America. The central theme in ORC is that, regardless of size or cultural difference, the groups are well networked, well trained and well equipped. Ongoing intelligence indicates that roles and responsibilities extend up and down the organisations from the actual thieves to the organisers, fences, diverters and the sales personnel who get the merchandise back out to the market. While members are well trained and educated in their roles, knowledge and contact with other members is minimised, either by design or by nature, making it difficult for law enforcement to break up an entire ORC network.

     The Extent of the Problem

    The exact financial impact of ORC within the retail community is still undetermined, although an increased number of retailers have confirmed incidents of ORC. National news and television has highlighted only a fraction of these occurrences, but even these show hundreds of thousands of dollars worth of recovered goods. Various surveys and studies throughout the last five plus years have also shown alarming individual losses, but with little movement to overall industry statistics. At first glance, this contradiction seems to create a problem in any claims of increased ORC activity. Although difficult to place an industry-wide value on the costs of ORC, the investigation results and shoplifting apprehension numbers support the contention that a growing problem exists.

    Many larger retailers, who have quantified large ORC losses, have developed specific loss prevention teams to combat ORC. These task forces travel the country tracking incidents, following leads and gathering intelligence in an attempt to apprehend ORC groups. Through a coordination of efforts with local, state and federal law enforcement, some of these task forces are making a difference within their retail organisation.

     Who will become a Victim?

    Answering this question is difficult when talking to an individual retail company. The majority of the known ORC incidents suggest that it is more prevalent in department stores and large specialty store environments; however, this may be more a condition of loss prevention focus than actual occurrence. It seems more likely and prudent to assume that victimisation depends more on retail business factors than just the square footage. The most important factors to consider include:

    • store location
    • merchandise type
    • resale value (street value)
    • loss prevention/operational measures

    The geographical location of the retail establishment does play a role in it becoming an ORC target. Although store location alone does not mean that a retailer is susceptible to increased loss, various risk assessment analysis has proven that certain geographic retail locations have seen more incidents of crime, including retail crimes, than others.

    Merchandise type and resale (street) value is considered a primary factor in a retailer’s target potential. ORC groups are attuned to consumer demands and trends, and target those items that they can turnover quickly. In addition to demand, thieves must think in terms of portability. A 55″ flat-screen television may have high demand and high resale value; however, it is often difficult for a shoplifter, organised or amateur, to walk out of the store carrying the television. Merchandise that is more portable to the thief is a larger target. Items often found to be in demand for ORC operators are trendy apparels, baby formula, razor blades and small electronics. Any merchandise that can be sold easily on the street or in various markets (black, overseas, wholesale) would be those of obvious choice for the ORC criminal.

    ORC networks and operators pick the targets and plan their operation well in advance. Learning the retail target’s environment is a part of their regular planning. They look for various security measures that are in place (EAS, CCTV and guards), employee awareness and customer service techniques, and operational procedures, such as how many employees work at given times, how employees service customers and so on. Retailers with fewer security measures and lack of operational controls increase their chances of being viewed as easy or profitable targets by the ORC networks.

     Indicators that a Retailer has become a Victim

    Studies in the US indicate that one in 11 people shoplift. Additionally, since shoplifting and theft are near the top of the crime statistics in many countries, it is fairly safe to assume that all retailers experience some degree of external theft. The extent of the incidents and its bottom line impact is dependent on the quality of loss prevention controls and measures used to deter shoplifting. Unfortunately, there appears to be no single or simple answer to whether or not a retailer is being victimised by an organised group.

    Knowing whether or not the loss of merchandise is from ORC or from what can be classified as ‘general shoplifting’ can be difficult. The easiest or most direct determinant is to witness or apprehend a unified group who has stolen large quantities of merchandise. That, along with certain indicators of the perpetrators, such as quantities of other retailer’s merchandise, information on the network, choice of targets and so on will provide proof that a network is operating within a retail environment. Based on ORC practices, one could then assume that a single location is most likely not the only target.

    The best indicator is the tracking of inventory losses in specific items or stock keeping units (SKUs). The capacity to track losses at the SKU level during inventory periods will help determine if a specific item is being targeted. More effective and timely is the implementation of cycle counts, which is a proactive tool that allows retailers to track potential shortages as they occur, rather than awaiting less frequent inventory results. The benefit is the ability to identify issues and add deterrence factors and reactionary processes as quickly as possible to avoid larger losses from sustained problems – ORC or otherwise.

     The Final Determination

    For a small- to mid-size retailer, the potential for falling victim to ORC may be less than that of larger retail partners. The best precaution is a holistic approach to shoplifting in general, including employee training, education and awareness, strong operational controls, development and testing of the on-the-floor customer service practices of employees and for identified problem locations, and the allocation of physical security measures to raise the deterrence level. ORC may be more frequent or the industry’s awareness of the issue may have increased; either way, it makes sense to stay informed and think proactively.

    Ray Esposito is a solutions expert with 20+ years of experience in specialty retail, department store, grocery, and restaurant industries. Ray is currently the Senior Vice President of Strategic Initiatives at LP Innovations, a US based loss prevention specialist. He can be contacted at www.lpinnovations.com