Organized retail crime (ORC) is wreaking havoc on the retail industry at an unprecedented scale. The relentless surge in sophisticated, coordinated theft operations across the nation -mainly driven by economic pressures, weaknesses in legislation and the rise of online marketplaces- has triggered a spike in financial losses for retailers.

Gone are the days when a simple sensor at the door could deter the sticky-fingered masses. Organized crime is not just petty theft; it’s a full-blown assault on the very foundations of retail, leaving store owners to wonder if they are running a business or starring in their own personal heist movie.

Far more sophisticated, ORC has evolved into a complex, multi-billion-dollar criminal enterprise that’s leaving retailers scrambling for solutions.

As store owners and managers grapple with shrinking profit margins and mounting losses, questions about this pervasive issue abound. What exactly constitutes ORC? How does it differ from traditional theft? And most importantly, what can be done to combat it?

In this high-stakes game of retail roulette, where risk and uncertainty are ever-present, the house may not always win, but it’s certainly not going down without a fight.

What exactly is organized retail crime?

Organized retail crime (ORC) refers to professional shoplifting, cargo theft, retail crime rings and other organized crime occurring in retail environments. Key characteristics of ORC include:

– Coordination: these are not isolated incidents, but planned operations involving multiple perpetrators with defined roles.

– Scale: these groups often target multiple stores or chains, sometimes across different states or regions.

– Profitability: the stolen goods are resold through various channels, often at a significant profit.

– Sophistication: criminals use advanced techniques and technology to circumvent security measures.

– Continuous operation: unlike opportunistic shoplifters, ORC perpetrators treat their activities as an ongoing criminal enterprise.

– High-value targets: they often focus on easily resold, high-value items such as designer clothes, electronics, or over-the-counter medications.

– Fencing operations: stolen goods are often sold through complex networks, including online marketplaces, pawn shops, or flea markets.

What are the typical characteristics of an ORC group?

Coordinated theft differs from standard shoplifting by involving at least three people and focusing on profit rather than personal use. These groups operate like businesses, with a hierarchical structure: “boosters” steal the merchandise, “fencers” handle the resale of the stolen goods, and leaders oversee and manage the entire operation. They use advanced tech for covert communication, supply specialized tools, and have expert knowledge of store policies to avoid detection.

Their activities include producing fake IDs and credit cards for fraud, and they leverage strong networks for quick resale of stolen merchandise, often operating across different regions to evade law enforcement. These organizations recruit and train new members, constantly adapting to evolving security measures, making them a persistent threat to the industry.

What are the most common types of ORC?

At the forefront are professional shoplifting operations, cargo theft, large-scale price tag switching, and return or refund fraud. Employee-involved schemes such as inventory manipulation and point-of-sale fraud are also prevalent. Gift card and credit card fraud, often linked to identity theft, pose significant threats too. 

Which retail sectors are most affected?

Everyday consumer goods like baby formula and alcohol are prime targets for theft due to their consistent demand and easy resale. Batteries and shaving razor blades are also common targets.

Beauty products such as cosmetics and perfumes are frequently stolen for their compact size, high value, and strong appeal in the secondary market. 

The apparel industry also experiences significant losses, with clothing stores targeted by thieves looking for profitable resale opportunities.

Consumer electronics, including smartphones, laptops, and gaming consoles, are also highly sought after by criminals. 

The healthcare sector is not immune either, with over-the-counter medications and health products often stolen in large quantities.

How much does ORC cost retailers annually?

NRF’s 2023 Security Survey, revealed that organized retail crime cost retailers $112.1 billion annually in 2022, reflecting an increase in the shrink rate from 1.4% in 2021 to 1.6% in 2022.

Major retailers are feeling the effects of this trend. Target’s CEO Brian Cornell said that the company expects shrink to slash approximately $500 million from its profitability in 2023.

Lowe’s shrink in FY 2022 rose to $997 million, up from $796 million in FY 2021. Similarly, department store Macy’s reported that shrink cost them approximately $11.2 million in the last quarter of 2023.

How can retailers identify suspicious activity in their stores?

By observing several key indicators. Unusual shopping patterns, such as large groups entering the store, splitting up, and regrouping, can suggest coordinated theft efforts. 

High-value items that are frequently stolen, especially those easily resold, can signal ORC activity. Suspicious transactions, including multiple purchases or returns without receipts, including the use of counterfeit or cloned payment methods are red flags.

Additionally, finding empty packaging in stores or fitting rooms may also suggest theft. 

How can employee training help combat theft?

Employee training helps combat theft by equipping staff with the skills to identify suspicious behaviors and criminal patterns, and by implementing strict protocols for receiving and shipping procedures. Training usually includes prevention techniques like proper merchandise handling, security tagging, and engaging with customers to deter theft. 

To complement these preventive measures, clear reporting procedures and safety protocols enable employees to effectively and safely address incidents.

Regular updates to training keep staff informed about emerging ORC trends, ensuring that their strategies remain effective and current.

What legal measures exist to combat ORC, and how can retailers partner with law enforcement to tackle this issue?

Founded in 2018, the Washington Organized Retail Crime Association (WAORCA) was established by a coalition of retail professionals, law enforcement, and community leaders to tackle organized retail crime. 

These collaborative efforts have been complemented by significant legislative action across the country. Since March 2022, twenty states have enacted new legislation to address organized retail crime. For example, California’s Retail Theft Reduction Act allows prosecutors to charge repeat offenders with grand theft if the total stolen exceeds a set threshold, even if individual incidents don’t qualify for a felony. 

This trend of legislative action has extended to the federal level as well. The Combating Organized Retail Crime Act of 2023 enables federal charges for organized retail theft where stolen items’ total value meets or exceeds $5,000 within a year. The INFORM Act, effective June 2023, targets online sales of stolen goods by requiring identity verification for high-volume third-party sellers on online marketplaces, aiming to deter anonymous bulk reselling of stolen items.

Cross-training, technology integration, coordinated sting operations, and prosecution support enhance these efforts. Public-private partnerships, lobbying for stronger ORC laws, and community outreach further strengthen these measures. 

How does retail crime impact consumer prices and safety?

Efforts to combat crime can lead to higher costs for retailers, as investments in security may result in increased prices for consumers.

The impact of these crimes extends beyond just financial losses, forcing some retailers to make drastic decisions. Eight in 10 retailers have reported an increase in violence and aggression from ORC perpetrators in 2022, with stores like Target seeing a 120% rise in theft incidents and having to close stores over safety concerns.

Nike has also permanently closed one of its historic Portland locations, due to a rise in stolen merchandise.

During Dollar General’s Q4 2023 earnings call, “shrink” was mentioned 37 times, highlighting its significant impact. AI analysis identified theft and mis-rings at self-checkouts, prompting the retailer to remove these systems from 9,000 stores and impose a five-item limit at remaining locations.

Moreover, the implications of organized retail crime stretch far beyond the retail sector itself. These crime groups are often linked to broader criminal activities, including human, weapons, and drug trafficking, affecting overall consumer safety.

What technologies can help improve inventory management and prevent fraud? 

Retailers should start by investing in advanced inventory tracking systems, such as real-time management software that monitors stock levels across locations and identifies unusual depletion patterns. Regular cycle counts and reconciliation are essential for maintaining accuracy and spotting discrepancies that might signal theft. Diagnosing retail shrink involves categorizing it into external and internal shrink, with further breakdowns to cover gaps due to inventory miscounts or shipment errors rather than theft or fraud.

Another key aspect is strategic merchandising and product placement. High-value or frequently targeted items should be stored in secured areas with limited access and displayed in ways that make bulk theft more difficult. Implementing locked showcases, security wraps, or spider wraps for expensive items can mitigate theft while still allowing customer access. 

Building on these foundational strategies, retailers can further enhance their loss prevention efforts by implementing a comprehensive suite of technological solutions.

Some have adopted a multi-faceted approach, combining POS (Point of Sale) solutions with intelligent analytics, additional security personnel, and facial recognition systems.

POS systems help prevent theft by integrating advanced security features directly into the sales process. These systems offer real-time inventory management, enhanced by RFID (Radio Frequency Identification) tags, which allow for precise tracking of merchandise throughout the store. 

This technology has become widespread in the industry, with 93% of North American retailers utilizing it to some extent. These tags not only automate the checkout process by scanning items quickly and accurately but also work with Electronic Article Surveillance (EAS) systems to prevent shoplifting by triggering alarms if unpaid items are taken from the store. 

Combining RFID technology with advanced surveillance systems, such as in-store video technology or IoT sensors, can be a powerful way to combat coordinated theft. In early 2024, Giant Eagle began testing IoT-based monitoring in its convenience stores and used the platform to reduce losses and maintain $72 million worth of inventory.

Some companies have transformed their distribution centers by using AI-powered drones to navigate warehouses and analyze inventory in real-time. This technology has reduced shrink rates from 2% to nearly zero and saved over $200,000 by quickly identifying issues like damaged goods, misplaced items, and empty pallet locations.

Meanwhile, in-store video surveillance remains a key preventative measure for detecting potential crimes in real time, with some companies also testing employee body cams.

How can retailers effectively address shrink without relying on exaggerated claims?

The exaggeration of retail crime has resulted in misguided approaches that focus on increased policing and punitive measures, while insiders suggest retailers may be misattributing losses to theft without fully understanding the true causes. This highlights the need for accurate, data-driven strategies to address the real issues behind shrink.

PRISM (Predictive Risk & Insight to Shrink Management), our advanced asset protection solution, provides the clarity that retailers need to mitigate risk effectively. With a 98% prediction rate and 77% accuracy in store-level insights, our technology offers actionable intelligence on shrink patterns, helping to reduce losses and boost profitability. 

By integrating root cause analysis, shrink analytics, and risk assessments from diverse data sources, PRISM optimizes inventory management, and improves staff training. Its customizable, scalable design adapts to any retailer’s needs, enhancing operational efficiency in complex environments.