Magazines Archives - 2008 August

Loss Prevention - Not the usual suspects: Retail crime virulent in the US
Story 2 - Focus

Organised retail crime in the US has ballooned into a US$30-billion problem, according to the Federal Bureau of Investigation. Joan Bergmann discusses the extent, complexity and seriousness of this large-scale larceny in the industry.

A gunman walks into your store. What do you do? What do your people do? What if a group of people start collecting merchandise and try to bluff their way out without paying or being apprehended? Who should try to stop them and how? Have any of such incidents occurred
in your stores? A guy with a gun these days is more than likely part of a larger group of people
trying to grab huge quantities of merchandise for resale in places such as pawn shops, flea markets or at auction sites on the Internet.

If these incidents have not happened yet, chances are they will. These are not simply shoplifting or
employee theft, the usual suspects in retail losses that cannot be accounted for. The issue is far more virulent and, often, frightening. In the US, the issue of organised retail crime (ORC) has been bubbling over the past few years. The National Retail Federation (NRF) is focusing on it as a separate area of concern, worthy of studies and reports.

Is Asia immune? Forget it! The most recent attempt to describe and quantify the problem is the NRF’s Fourth Annual Organised Retail Crime study, issued in June 2008. In the study, 85% of US retailers say they were ORC victims in 2007, up from 79% in 2006.

The ORC study included 114 retail executives, representing all segments of retailing, including department and speciality stores, drugstores, supermarkets, mass merchants and home-improvement retailers.

The NRF defines ORC as the act by a group or gang to obtain “retail merchandise in substantial quantities through theft or fraud as part of a commercial enterprise”. It cites a report by the US Federal Bureau of Investigation (FBI) that organised crime accounts for retail losses of US$30 billion in the country each year. This staggering figure includes only those retail crimes and losses investigated by the FBI.

Both theft and fraud are the usual crimes that organised gangs perpetrate. The techniques generally consist of “boosters” who “steal to order” and fence operators who convert the goods to cash or
drugs. Additionally, more sophisticated techniques include ticket switching or changing
the UPC (universal product code), and the use of stolen or cloned credit cards to obtain merchandise or produce fictitious receipts to return the products they have stolen to the retailer they stole from.
Study respondents were also asked to rank ORC as a threat to their company, with the choices in descending order of severity being: Severe; significant; important; concerned; and not an issue. The
answers that got the most responses were: Significant (28%); important (30%); and concerned (28%). Only 8% chose severe while 7% considered it a non-issue. The study revealed the products most popularly targeted by ORC gangs as those with high demand and which command
near-retail resale prices. These include designer apparel; health-and-beauty items such as Benadryl, Crest Whitestrips, Prilosec, Similac infant formula; home electronics; and gift cards.

Further, as the Internet continues to grow, so does its use by ORC gangs to sell stolen goods. eBay and other auction sites are favoured venues because trade is usually accomplished anonymously without identifying anything about the seller. In fact, the NRF has estimated that as much as 40% of new, tagged merchandise sold through online auction sites is stolen or obtained in other illegal ways.

When its study asked whether respondents had ever “identified or recovered” stolen merchandise and/or gift cards, some 68% said “yes”, up from 61% a year earlier. When posed the same question in the area of e-fencing, 68% of the respondents also replied in the affirmative, with some 63% indicating they had seen an increase in e-fencing over the past year.

That e-fencing is growing in popularity can be attributed to the fact that thieves make more money selling “new-in-the box” and “new-with-price tags” merchandise and gift cards online than
they do via more traditional fencing operations or pawn shops. Respondents were divided when asked if they believe that the top management in their companies understood the complexity and seriousness of ORC. Barely more than half, or 54%, said “yes” while 48% said “no”.

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