Already recognised as a criminal trend, Organised Retail Crime (ORC) is going global with rising rates of thefts being reported across all world regions. As a result, retailers are under greater pressure to complement technology with processes and investigative resources that can help 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 £4.9 billion lost annually by the UK retail industry, one of the highest figures ever recorded for the UK.
What is Organised Retail Crime (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.
In the US, the Organised Retail Crime Act of 2008 defines ORC as the ‘acquisition of retail merchandise by illegal means for the purposes of reselling items into the marketplace’. It is agreed that ORC activities will contain at least one of the following four basic elements:
1.Theft from a retail establishment in quantities that would not be considered ‘normal’ for personal consumption
2.The resale of large quantities of stolen items
3.Receiving, concealing, transporting and/or disposing stolen items in quantities that again, would not be considered ‘normal’ for personal consumption
4.Coordinating or organising any activity that contributes to the above offences being committed.
The scenario
The scale of the ORC problem is highlighted in the most recent GRTB report, which revealed losses from ORC related theft increased by 13.4 percent globally in 2011.
However, for many regions, ORC is an emerging problem, and this has resulted in difficulties monitoring its growth, as there is no current consensus on what ORC is or how to respond or prosecute it. However, while not all countries directly monitor ORC, there is an abundance of regional data on shoplifting and retail crime, much of which could be attributed to gang-related thefts.
ORC in the US
The National Retail Federation (NRF), the world’s largest retail trade association which represents retailers of all types and sizes from the United States and more than 45 countries around the world, revealed that in 2012 alone, a staggering 96 percent of US 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 centre 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. This highlights the growing problem facing retailers as ORC continues to be favoured by many criminals aiming to illegally obtain large quantities of merchandise to fund their operations.
ORC in China
According to statistics released last year by the Loss Prevention Committee of China’s General Chamber of Commerce, the total losses caused by shoplifting in 2011 totalled 219.6 billion yuan, a year on year increase of 16.7 percent. The figure accounted for 1.55 percent of the country’s total consumer retail sales. China’s criminal law sets a limit of 500 yuan for theft. Only people stealing goods worth more than 500 yuan can be seriously punished.
A 2012 report on Loss Prevention in Chinese Hypermarkets and Supermarkets revealed that 46% of thefts orchestrated by ORC gangs were successful.
ORC in Japan
According to a report from the National Shoplifting Prevention Organisation (NSPO) in Japan, shoplifting has remained at a consistent level throughout 2012, with ORC identified as one of the leading contributors. The biggest trends in retail crime noted in the report include an increase in stolen goods available for resale online, while employee fraud was also on the rise, two factors which might be in part related to ORC activities.
The NSPO has identified shoplifting not only as a retail issue, but one that has considerable impact on wider society. Following the reported increase in shoplifting at many Japanese retailers, local government and prefecture police departments are looking to loss prevention specialists for support. However a lack of communication between these associations has resulted in many retailers acting independently and therefore not being able to make an adequate impact on the problem.
To help combat retail crime, and the rising trend for ORC, the NSPO is coordinating the views of these associations to create a single voice which is used to communicate the effective measures of one regional or industry organisation to another, with the shared aim of reducing ORC activity and minimising incidents of shoplifting in all regions.
ORC in Australia
In Australia, shoplifting and employee fraud accounts for up to 77 percent of all retail losses, with 11.7 percent of these incidents reported to be carried out by ‘semi-professional’ shoplifters, who are typically individuals who engage in shoplifting activities at least once a week, use more skilled techniques and unlike opportunistic shoplifters, are more likely to engage in the reselling of stolen merchandise.
However, local law states that shoplifters who are caught carrying recognised ORC devices such as booster or foil-lined bags, are considered to be ‘equipped to steal’ and therefore can be detained for the intent to shoplift. Outlined in the Victoria Crimes Act 1958, any individuals caught with the intent to steal or ‘equipped for stealing’ can be charged and sentenced for up to two years in prison. Acting as a powerful deterrent to potential shoplifters, the Australian law gives retailers the power to detain an individual when suspicions arise and not strictly after a crime has been committed. This may account for the relatively low number of ORC incidents compared to other countries.
ORC in Latin America
Argentina
A 2011 study of Argentinean supermarkets revealed that ORC was responsible for at least 65 per cent of all loss. Of the typical ORC tactics used, 26pc of merchandise was stolen by thieves placing the goods under clothing or in pockets. A further 39% was stolen using foil-lined shopping bags. The GRTB 2011 also ranked Argentina in 11th place based on global shoplifting rates, with an annual shrinkage rate of 1.55% of gross sales revenue.
ORC in Europe
In Europe, the GRTB revealed that ORC was one of the three largest contributors to the rise in retail theft over the past 12 months. Whereas retailers in the US are familiar with ORC tactics, European retailers have had relatively little experience dealing with such trends and as the following research demonstrates, it is clear that ORC is a growing problem.
ORC in Germany
Despite the cost of shoplifting reaching over five million Euros a day in Germany, shoplifting incidents are now on the decline, as a result of an increased use of loss prevention technologies and by improved training for retail employees. Retailers are now ensuring all employees know how shoplifters operate, what merchandise shoplifters are likely to target, and how best to defensively merchandise these goods, such as alcohol, cosmetics, tobacco and razors, to reduce shoplifting attempts in store.
Investment in loss prevention technologies may also be helping the country’s declining shoplifting rates, with over one billion spent each year protecting the merchandise at the store without affecting the shopper experience. Legal consequences also act as a significant deterrent, with punishment for shoplifting ranging from a fine to up to five years imprisonment, depending on individual circumstances. For organised criminal groups, those identified as members can receive up to five years, while leaders face up to ten years.
Despite these measures, many German retailers are still anticipating an increase in ORC gang activity, according to a study published by the EHI Retail Institute. The results of the study, which saw the Institute interview over 90 retailers representing more than 14,000 stores, were based on respondents ranking the biggest perceived threats to shoplifting levels, including organised shoplifting, violence towards staff, customer theft and graffiti or vandalism.
ORC in France
In France, it is difficult to get a clear picture of the current impact of ORC. The French National Supervisory Body on Crime and Punishment (ONDRP) released a report on ‘Organised Crime and Crime in France’ in 2011 which identifies organised crime as a growing problem, with over 28,000 incidents of criminal activity. However, criminal activity in this instance also includes robberies and violent assaults on both property and people.
ORC in Spain
In Spain, the latest figures reveal that over 94 percent of retail stores have been victims of theft orchestrated by ORC gangs. Over 85 percent of these incidents occurred within the last three years alone. The House of Parliament in Spain has responded to this growing problem and is assessing the opportunities to introduce a new law, which would see ORC convicted criminals serving up to four years in prison.
ORC in the UK
There are currently few statistics relating to the impact of ORC in the UK. The most recent British Retail Consortium Retail Crime Survey in fact highlighted the need to ensure a ‘more effective mechanism for recording and analysing business crime to ensure that the links to serious and organised crime are better understood’.
Speaking about the rise of Organised Retail Crime in the UK, Professor Joshua Bamfield, Director for the Centre of Retail Research, said: “Organised Retail Crime has had an increased impact on retailers in most countries, particularly in the last five years. Earlier in the 2000’s, enquiries about ORC carried out by the Centre for Retail Research got little response except in the US, Canada, Latin America, the Netherlands and Italy.”
He added: “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 the impact of ORC was most significant in North America where 58.4 percent of retailers suffered an increase in ORC activity. Europe was also affected here, with 41.7 percent of retailers claiming to have experienced increased losses from organised crime. However, anecdotal evidence suggests that ORC could be increasing.”
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 said: “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. However, in order to do this, the industry must accept that this problem will only get rapidly worse until it tackles it on both a regional and national level.”
The opportunist versus the organised
Far from the image of the small-scale, opportunist shoplifter, ORC gangs are highly organised. 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 fulfil. The most common of these includes a booster and fence. Here we take a closer look at the roles played by gang members, including:
Boosters
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 on by the fences.
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 eBay.com 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.
Both ‘fences’ and ‘boosters’ play a significant role in the success of ORC gang activities. For instance, a fence can’t sell a store’s merchandise if it’s not stolen to begin with. However, fences will traditionally have a number of other sources providing stolen merchandise to resell. The partnership between these roles is beneficial for both sides – the booster expands the fence’s product line, while the fence expands the market for the booster’s stolen merchandise. Here, both roles complement each other’s businesses as they offer each other the opportunity for increased volume and sales.
Despite existing independently from each other, the relationship between a fence and a booster is one of function, convenience and is a mutually beneficial partnership for both parties. “With these designated roles in place and equipped with comprehensive shopping lists of what is ‘hot’ on the market, ORC is having a significant influence on shoplifting figures. Those individuals operating in these sophisticated and organised gangs have no concern for small-scale incidents of theft and must rely on much bigger targets. As a result, this means typical shoplifting methods and distractions are not as effective as many ORC criminals will use devices to defeat EAS systems, or create bogus receipts to obtain valuable refunds.”
The impact of ORC on inventory management and the supply chain can also be damaging to a retailer’s reputation. One of the big contributors to out-of-stock situations is shrink. Whatever the cause of shrink – shoplifting, employee theft, vendor fraud or organised retail crime – it is undoubtedly a major factor inhibiting the availability of merchandise during shopping and purchase decision-making.
For retailers, more attention and resources must be allocated to ensuring 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 realise 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. For example, the Retail Feedback Group’s 2012 Supermarket Experience survey noted that an astonishing 50 percent of shoppers who couldn’t find an item in stock went to another store to purchase it.
Regardless of the reason for out-of-stock merchandise – supply chain inefficiencies, poor in-store merchandise tracking, theft, technology gaps or simple human error – solving this problem is foremost on retailers’ minds.
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 ‘walk outs’, which are still effectively used by ORC gangs around the world. Shoplifters simply enter a store, fill up a shopping trolley or 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 – who can source merchandise locally only to distribute it on a global level, and at a much higher price. With the £8 billion in reported online UK sales in December 2012, 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.
These are just some of the tactics used to obtain the goods, but what happens when it’s time to resell? One of the biggest advantages to the success of ORC gang activities, and in particular to the work of the fences, is the rise in popularity of e-commerce. With no need to rely on a face-to-face transaction, large quantities of merchandise can be posted online and resold at an increased price.
Helping retailers
As retailers begin to recognise 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. Professional shoplifters are increasingly adopting sophisticated technologies to avoid detection so it is only right that retailers do the same.
For example, application software is now available and provides retailers with the tools to monitor a vast array of data to help determine key trends and identify suspicious behaviour in store.
Recent advances in Electronic Article Surveillance (EAS) technology provides retailers with the tools to both deter and monitor potential shoplifters. For example, EAS antennas and sensors can provide a strong visual deterrent to shoplifters considering targeting a specific store or chain in question. With a range of alarms to detect common ORC tools, including 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 quickly respond accordingly.
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 taken from the store.
By installing such sophisticated, multi-layer protection solutions, retailers can ensure they receive notification if any merchandise is tampered with within the store. If the shoplifters attempt to hide the merchandise on its person, 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 five minutes at 95 decibels, clearly identifying the individual and the shoplifting attempt.
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 available to reduce ORC activity, by collating data and sharing intelligence, retailers can help build a centralised 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 a list of 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 USA. Registered users enter business crime data into the system and the information is collated, analysed and disseminated to other participating retail members locally, regionally, nationally or by sector.
By analysing 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 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.
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 options available to ensure they have protection, both in-store and throughout the wholesale supply chain.
