Sophisticated Stealing: A New Criminal Enterprise

Already widely recognized as a growing criminal trend, organized retail crime (ORC) is going global with rising rates of thefts being reported across all geographic regions around the world. As a result, retailers are under greater pressure to complement technology with processes and investigative resources that can help to prevent, deter and reduce the impact of the problem.

According to the latest Global Retail Theft Barometer (GRTB), ORC was one of the leading contributors to the estimated $119 billion in shrink in the global retail industry, one of the highest figures ever recorded.

What is ORC?
ORC is commonly identified as groups or gangs of individuals who coordinate their activities to illegally obtain large quantities of desirable retail merchandise through both theft and fraudulent activities. ORC gangs differ from opportunist shoplifters by operating and organizing as a professional business with quotas, revenue plans and managing inventory — often running underground activities as part of a commercial enterprise where they resell or exchange the stolen merchandise for cash or drugs.

ORC in the U.S.
The National Retail Federation (NRF) revealed that in 2012 alone, a staggering 96 percent of U.S. retailers had been a victim of ORC activity. It also revealed that cargo thefts had risen by 2.5 percent with 52.1 percent of respondents falling victim to such activities over the past 12 months. The majority of these incidents occurred en route from the distribution center to the retailer's store, enabling ORC gangs to obtain big shipments of products.

The scope of this problem is further revealed by data from the Federal Bureau of Investigation's Unified Crime Report, which indicates that ORC is currently resulting in bigger losses than auto theft, burglary and larceny.

Professor Joshua Bamfield, director for the Center of Retail Research, has noted that ORC has had an increased impact on retailers in most countries, particularly in the last five years. Earlier in the 2000s, inquiries about ORC carried out by the Center for Retail Research yielded little response except in the U.S., Canada, Latin America, The Netherlands and Italy.

However, by 2011, the growth in retail crime meant that retailers in every continent were experiencing appreciable losses from ORC activity. The latest GRTB survey revealed that 58.4 percent of North America retailers suffered an increase in ORC activity. Nearly 42 percent of European retailers were also affected.

Unfortunately, for many retailers it is difficult to distinguish shoplifting from ORC activity. However, according to Professor Bamfield, there are a number of common traits associated with ORC activity that retailers need to be aware of, including:
  • Individual retail crimes, or "opportunist shoplifting," are typically small-scale thefts and do not normally attract the attention of specialist police crime units.
  • Individual retailers lack the time and resources to follow up ORC activity, which will typically target a large number of stores and operations. By being more aware of this activity, retailers can pre-empt possible attacks and raise the alarm if suspected ORC activity is in operation.
  • In order to effectively monitor and manage the impact of ORC across the retail industries, collaboration between loss prevention teams and law enforcement is required to prevent the problem escalating any further.
  • Retail crime requires only low skills and can be an entry-level occupation for gang members. Unfortunately, there are many individuals available for these roles and even when gang members are apprehended they can quickly be replaced.
Professor Bamfield noted that we are still in a position where adequate figures of the impact of ORC are sparse and we must change that. It should be a priority moving forward to determine exactly how much is lost by retailers in each country to ORC. In order to prevent such crimes, increased collaboration between the most affected retailers and specialist police units must be encouraged.

The opportunist vs. the organized
ORC activities are well planned and managed by a specific chain of command. Goods can be "ordered in" by those in control, with gang hierarchies determining the role each member is required to fulfill. The most common of these includes a booster and fence.

Generally, boosters act as the professional shoplifters, physically stealing the merchandise from the retail store and delivering it at a pre-determined location where it can be sold by the fences.

The fence pays the booster a pre-agreed amount for the type of merchandise and quantity.  The fence in turn sells the stolen merchandise through different distribution channels, ranging from online auction sites like to even wholesalers who service retailers.  Retail buyers, looking for the best price, often end up purchasing from wholesalers the merchandise that was already stolen from them, perpetuating a vicious cycle that fuels the ORC business model.

Typical shoplifting methods and distractions are not as effective as many ORC criminals will use devices to defeat Electronic Article Surveillance (EAS) systems, or create bogus receipts to obtain valuable refunds.

The impact of ORC on inventory management and the supply chain can also damage a retailer's reputation. Whatever the cause of shrink — shoplifting, employee theft, vendor fraud or organized retail crime — it is undoubtedly a major factor inhibiting the availability of merchandise during shopping and purchase decision-making.

For retailers, greater attention and resources must be allocated to ensure the shelves are properly stocked at all times and are replenished immediately as merchandise leaves the store. While retailers understand the economic impact of out-of-stock or lost-stock situations — lower sales and profits — they also realize that when shoppers aren't able to buy a specific item because it's out of stock, they're highly likely to leave the store and buy their goods elsewhere.

Understanding ORC tactics
From hijacking merchandise-laden trailers from loading docks, or stealing racks of high-value products like razor blades, for example, there are a number of ways that ORC gangs operate. Other tactics include cart "walkouts," where the shoplifters simply enter a store, fill up a shopping cart with the designated goods and then walk out to transfer the goods to a waiting vehicle nearby, often strategically parked near an emergency exit.

These new opportunities transform the possibilities for ORC gangs — which can source merchandise locally only to distribute it on a global level, and at a much higher price. With increasing online retail sales, it is easy to see why the growth of online shopping is resulting in new opportunities for ORC activities. For example, fences will often resell their product back to the same retailers it was stolen from using a network of distributors. Not only does this practice reinforce the ORC business model, it undermines retailers' ability to track inventory and prevent the purchasing of stolen goods.

Fraudulent receipts and gift cards can also be used with great effect and often do not raise suspicions with busy retail employees. Fraudulent receipts enable stolen goods to be returned to retailers for a refund. Alternatively, shoplifters can purchase gift cards using stolen credit cards or purchase low-value gift cards only to reprogram them for a higher value.

ORC gangs may also recruit employees from leading retailers to work from the inside. This not only presents a unique opportunity for ORC gang leaders to covertly obtain merchandise, but also provides a wealth of new methods to obtain larger quantities of goods to resell. Whether it's leaving a back door open, providing computer passwords, alarm codes or management and security schedules, dishonest employees can help ORC gangs effortlessly walk away with high-value merchandise.

Helping retailers
As retailers begin to recognize an increase in ORC activities, many are turning to their anti-theft and merchandise availability solution partners to help develop and implement systems to identify and prevent such events in the future.

For example, application software is now available that provides retailers with the tools to monitor a vast array of data to help determine key trends and identify suspicious behavior in store. EAS antennas and sensors can provide a strong visual deterrent to shoplifters considering targeting a specific store or chain. With a range of alarms to detect common ORC tools such foil-lined bags or magnets, retailers can identify when a potential shoplifter enters a store and which entrance or exit was used.  It enables retailers to gather information required for in-store security and personnel to respond quickly.

Additionally, by enabling item-specific Electronic Product Codes (EPC) numbers with RFID labels or tags, retailers can identify which products have been stolen, and alert staff if the products are returned to the store for a refund, helping to reduce refund fraud. The advantage of this heightened awareness is that retailers also improve inventory accuracy and merchandise availability on the shelves, as unique EPCs help identify exactly which items have been stolen.

By installing such sophisticated, multi-layer protection solutions, retailers can ensure they receive notification if any merchandise is tampered with in the store. If the shoplifters attempt to hide merchandise in their clothing, the EAS antenna at the entrance of the store will alarm.  In addition, the security device attached to the merchandise will also start alarming for 5 minutes at 95 decibels, clearly identifying the individual. 

Supplier fraud and retail loss
RFID antennas can also be used to deter and detect fraudulent supplier activity when used in retailer delivery zones. With EPC numbers and RFID labels or tags applied to merchandise at source, RFID antennas can monitor the exact quantity and type of products being delivered in-store. For example, if a retailer ordered 10 boxes of 10 red t-shirts but the supplier only delivered 10 boxes of eight red t-shirts, security would be alerted so that the situation could be immediately resolved.

Collaboration is king
While retailers can deter and detect ORC activities in-store using an abundance of possible solutions, by collating data and sharing intelligence, retailers can help build a centralized database of information relevant to retail crime. This could be used to highlight the top crime trends, hot spots for criminal activity based on region or list the current highly sought-after products that are, as a result, high-risk.

For example, the National Business Crime Solution in the UK is a national initiative that links businesses with law enforcement agencies to enable easy reporting of business or retail crimes. It is underpinned by a live information and intelligence-sharing platform, which is used by a number of UK retailers for incident reporting and widely used to combat retail crime in the U.S. Registered users enter business crime data into the system and the information is collated, analyzed and disseminated to other participating retail members locally, regionally, nationally or by sector.

By analyzing and sharing crime intelligence perpetrated against UK businesses, it provides specialist support in order to identify key criminal trends and national prolific offenders in a bid to reduce criminal activity across the UK.

The possibility of a not-for-profit hub that uses partnerships and intelligence sharing bodies to feed data into a common hub would not only greatly enhance the value of such data, but also provide a more coordinated and consistent response to retail crime across a region.

By working with other retailers and law-enforcement officials, and training employees accordingly, retailers can not only improve the awareness of specific ORC threats but also share valuable information to prevent further ORC activities from developing. By doing this, retail outlets can ensure they are adequately protected and equipped to detect ORC activities on site leading to the apprehension and prosecution of professional shoplifters and serious criminals working as ORC gang leaders.

Innovative technologies, staff training and working collaboratively with law enforcement significantly contribute to reducing the impact of ORC and deterring criminal activities from taking place in store.

From EAS hardware, application-specific software, high-theft solutions to RFID merchandise visibility solutions, retailers have a wealth of options available to ensure they have the best protection, both in-store and throughout the wholesale supply chain.

Farrokh Abadi is president of Checkpoint Systems.
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