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The rise of organized retail crime (and what retailers can do about it)

Illustration of person stealing from a store.

Ever run into a store for a quick buy, only to find the product you want is locked up next to a ‘Call for help’ button? Suddenly, your quick stop just got a bit longer.  You find yourself waiting for an employee to come and physically open a display case that holds products like deodorant, toothpaste, eye drops, and even laundry detergent.

This experience is a frustrating one for both retail employees and consumers alike. The question is, why is it so common in 2023? While locking away products may seem like an easy answer to preventing shoplifting, retailers are facing something bigger than just employee theft or the swipe of a few products here and there. Organized retail crime (ORC).

Over the past few years, this new breed of retail crime has posed a growing threat, one that accounts for billions of dollars in annual losses. In this article, we’re going to cover everything retailers need to know about organized retail crime: how it works, the impact it has on retail, and strategies to combat ORC.

What is organized retail crime (ORC)?

Organized retail crime is exactly what it sounds like – an organized retail theft performed by a group of individuals. The goal? Stealing larger quantities of products from a retail business and selling them for financial gain.

Typically, ORC will involve detailed and strategic plans with a large network of individuals divided into two groups: 

  • The individuals who carry out the crime within the storefront
  • Those who sell the stolen merchandise

Once the stolen products are secured, ORC groups have been known to sell them on online auction sites, at flea markets, and even to other retailers.

What makes organized retail crime (ORC) different from shoplifting?

While organized retail crime is often conflated with traditional shoplifting, the two are very different practices. Both are illegal and involve stealing merchandise from retailers – but only one (ORC) operates such large-scale theft.

Carefully planned operations

Unlike shoplifting, which is often spontaneous and targets small or lower-value retail merchandise that is accessible on store shelves, organized retail crime targets high-value items that can easily be resold. This includes electronics, luxury goods, and medical supplies that cannot be hidden easily in a bag or pocket. Organized retail theft is not an easy feat; it requires an incredible amount of planning, along with training several contributors so they can work together effectively within targeted retail stores.

Teamwork

While shoplifting is typically performed by one individual who steals a limited number of products for personal consumption and use, organized retail crime is a much bigger operation. It requires anywhere from 5 to 100 individuals working together to steal large quantities of products and resell them within the public market for profit. During an organized event, several people will work together using tactics like distraction and intimidation to divert staff attention while they swiftly pilfer goods.

Reselling merchandise across multiple channels

Where the goal of shoplifting is to secure products for personal use, the goal in organized retail crime is to secure products to make a profit. Organized retail crime involves reselling stolen merchandise across multiple channels: online retailers, marketplaces or auction sites, or even third-party merchants who are unaware that the products are stolen. This large-scale criminal enterprise can be considered the largest differentiator between shoplifting and ORC.

How does ORC work?

As we mentioned, organized retail crime requires a large network of individuals. While an ambush may come to mind as the most common form of organized retail theft, there are more subtle methods that don’t involve a retail store takeover. Some of the most popular tactics include:

Barcode switching

One of the most common methods of organized retail crime is barcode switching. This involves consumers replacing the original barcode with a fake barcode ticket that scans at a much lower price. Once the item has been ‘purchased,’ the shoplifters can resell the product at a higher price than what they purchased and make a profit.

Grab-and-Run

The grab-and-run method (also known as flash robbery) is exactly as described: a group of shoppers enter a retail location, grab as much merchandise as possible, and run. What makes this type of organized crime so difficult to combat is numbers. If there are only a handful of employees up against a crowd of professional shoplifters, it becomes very difficult to stop each person.

Receipt fraud

Receipt fraud, which falls under the umbrella of return fraud, occurs when thieves create a fake receipt for the merchandise they’ve stolen. They then use this receipt to ‘return’ the product and receive a refund for an item they didn’t purchase in the first place. According to the National Retail Federation, for every $100 accepted in returns, retailers saw $10.40 lost to fraud tactics.

Gift card fraud

One of the more well-known retail crimes is gift card fraud. This method involves purchasing gift cards with stolen credit cards or scamming consumers into purchasing the cards themselves. The gift cards are then resold at a profit. In 2022, the Federal Trade Commission found that consumers reported over 48,000 cases of gift card fraud, which accounted for losses over $228 million.

How much is ORC costing the retail industry?

Organized retail crime is nothing new; however, it’s getting increased attention in the media. News outlets frequently broadcast videos of smash-and-grab incidents, while large retailers like Target and Foot Locker are naming retail theft in earnings calls as a key reason for lower profit margins.

The National Retail Security Survey from National Retail Federation found that nationwide shrink increased to $94.5 billion in 2021. Along with this, 70% of retailers surveyed have expressed rising concern about ORC over the last five years. In addition to monumental profit loss for businesses, consumers are feeling the effects as well. The same study from NRF found that over 50% of shoppers noticed an increase in retail crimes within their communities.

The impact of organized retail crime

Financial losses

It’s no secret that ORC is costing retailers hundreds of millions of dollars each year. This Spring, Target announced that organized retail crime was to blame for $500 million more stolen merchandise this year compared with 2022. While companies and other law enforcement agencies and officials are struggling to fight professional shoplifting at the local level, ORC criminal rings are expanding at the global level. Meaning, it isn’t just a few hundred dollars’ worth of product here and there. NRF found that the average organized retail crime operation secured around $250,000 in stolen merchandise before law enforcement officials stepped in.

Operational disruption

No matter whether products have been stolen or not, the growing threat of organized retail theft has a major impact on operations. For example, popular and expensive products might need to be locked in cases, which adds an extra step for a store associate working with inventory and selling to customers. Additionally, when crimes do occur within the store or outside at an inventory drop-off location, retail workers experience a halt in their operational duties to address or report the situation. The results? Cost of time, energy, and resources for the retailer.

Safety concerns

Above all, the most concerning impact of organized retail crime is the safety of employees and shoppers alike. A trip to local retail stores or a grocery store should not be dangerous. And while there are methods that don’t involve direct violence, any type of crime committed in a store environment puts the shoppers and associates directly at risk. With the rise of this type of crime, we could see a labor shortage due to employees who simply don’t think working in retail environments is worth the risk. On the other hand, shoppers may continue to turn to e-commerce to avoid in-store confrontation.

Strategies to counter ORC

Tighter return policies

To combat criminal activity, many retailers are honing in on their return policies. From shorter return windows to charging customers for returns, the goal is to make it more difficult for thieves to return stolen items. Unfortunately, an increase in arduous returns processes may cause frustration among customers who aren’t engaged in criminal activities and expect a frictionless return experience.

Investing in technology

While employees can be the eyes and ears of a retail store, this shouldn’t replace technology like surveillance cameras, door alarms that monitor security tags, and RFID tagging that allows retailers to track real-time product details and locations. Additionally, stores with self-checkout portals can use AI video and predictive analytics to catch attempts of thievery, like failing to scan items.

Employee training

Store employees who are working on the ground may be the first to notice criminal activity or stolen goods. Retailers need to train their employees on how to best manage these situations for their safety and the safety of their customers. Any employees working on the ground level should not only know what steps to take during a crime, but also how to report the activity to law enforcement officials after a theft has taken place.

The future of organized retail crime

While retailers can take steps in-house to combat organized retail crime within their business, efforts from Congress will ultimately be what creates the largest impact. Ultimately, there’s still a long way to go when it comes to properly addressing expanding retail shrinkage and increased theft.

In 2022, Congress passed the Integrity, Notification, and Fairness in Online Retail Marketplaces for Consumers (INFORM Consumers) Act. Signed into law, this act requires online marketplaces to verify any high-volume third-party sellers, requiring information like bank account details, tax identification, and contact information. Any sellers who are not compliant are subject to suspension and violation fines.

In addition to transparency across the global digital marketplace, the Combating Organized Retail Crime Act has been presented to both the US House and Senate. If passed, this act would secure funds for an investigative division responsible for combating organized retail crime at federal, state, and local levels.

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