Organized retail crime remains a growing threat

From brazen merchandise heists by aggressive gangs to sophisticated ecommerce fraud teams, organized retail crime is a growing concern for retailers. While ORC was a hot issue even before 2020, the pandemic environment has led criminals to expand their attacks across multiple channels.

As retailers battle professional thieves both in the store and across digital channels, they now need a greater focus on data, intelligence and investigations.

ORC goes omnichannel

Organized retail crime now costs retailers an average of $700,000 per $1 billion in sales, and three-fourths of retailers saw an increase in ORC in 2020, according to NRF’s 2020 Organized Retail Crime Survey.

ORC was on the rise before 2020, but the societal changes and shift to digital from the pandemic have led to an increase in the problem. More than two-thirds of retailers said the pandemic increased the overall risk for their organization, according to NRF’s 2021 National Retail Security Survey, and 57 percent indicated a rise in ORC.

Part of that was driven by a giant leap to online shopping since the shutdowns in March 2020, says Tony Sheppard, director of loss prevention solutions at ThinkLP. Since then, criminals have been making greater use of online channels not only to perpetrate crimes but to liquidate their stolen merchandise.

“At the end of the day, it’s still about supply and demand. The demand for product online skyrocketed, and as a result, so too did the demand for stolen product,” he says. “The big shift was just led by the growth in online shopping.”

Not surprisingly, store closures and restrictions at the start of the pandemic led some criminals to change the channels in which they operate; 39 percent of respondents in the 2021 survey said the greatest increase in fraud was in multichannel sales like buy online, pick up in store — up from 19 percent the previous year.

BOPIS has become a popular channel for theft because criminals can enact a card-not-present transaction, then receive the merchandise outside. “It’s a very easy avenue,” says Gail Morris, director of investigations at Williams-Sonoma, Inc. “Retailers have been more accommodating, and there’s just more opportunity to [steal] without even coming into the store.”

Criminals aren’t necessarily changing their strategies but simply taking advantage of the new environment, Morris says. Another growing omnichannel ORC scheme involves returning stolen merchandise without receipts and claiming it was a gift or defective. Many are now taking advantage of omnichannel capabilities by stealing and selling across multiple channels, often with the same retailer.

“They try to socially engineer care center people on the phone. They may say they have something that doesn’t work and return a box of rocks because we just look at the tracking number,” Morris says. “It’s a scheme that has been around for years, but it’s easier to get away with because businesses are heavily focused on their ecommerce channels.

Brazen in-store attacks

Since the pandemic, societal changes and new law enforcement and prosecution policies in many cities have also changed the environment for in-store theft: 65 percent of respondents in the 2021 survey said ORC gangs now exhibit greater levels of violence and aggression than they have before.

While only 29 percent of retailers reported an average dollar value loss of $1,000 in 2019, that number rose to 50 percent in 2020. The most common items targeted by ORC gangs include designer clothing, laundry detergent, designer handbags, allergy medicine, razors, high-end liquor and pain relievers. When targeting high-value items, a small group can make off with thousands of dollars in merchandise in less than a minute.

“It used to be you’d see a $500 or $1,000 theft in each incident. Now you’ve got groups coming in and stealing three, four, eight, 12 thousand dollars in one trip,” Sheppard says.

Audacious thefts have even led to store closures in some cities. After closing at least 10 stores in San Francisco since 2019, Walgreens announced in mid-October it would close five more stores in the city due to organized retail crime. Walgreens spokesperson Phil Caruso told the Associated Press that despite increased security, retail theft at stores in the city had grown to five times the chain’s national average.

And at a Senate committee hearing in early November 2021, Ben Dugan, director of organized retail crime for CVS, said the problem is growing worse because of a lack of regulations in online marketplaces. In many ORC gangs, “boosters” steal products and get high rates from a “fence” because they can quickly sell them as third-party sellers on online marketplaces. The average professional thief that targets a CVS gets away with $2,000 in merchandise in only two minutes, Dugan said.

“The ease with which online sellers can open and close their sites, especially undetected, is directly related to this increase in criminal activity in our stores,” he said.

Mitigating the risk

Due to the increasingly aggressive nature of criminals, retailers have scaled back intervention at the store level, Shepherd says. Instead, many are now using dedicated ORC teams that operate beyond the store level to target the fencers and third-party online sellers where most merchandise ends up. This requires systems for store personnel to report activities and track data to pass on to ORC teams for investigation. In many cases, these teams now act as quasi-law enforcement, engaging in surveillance and performing controlled sales and buys.

“Many years ago, that was only done by law enforcement,” Shepherd says. “Obviously, they need to make sure they are doing it safely, but they’re tracking all of that for evidentiary purposes when it comes to prosecution.”

The NRF report found that half of retailers are allocating additional technology resources while another 50 percent are allocating capital to specific LP equipment. While new machine learning and artificial intelligence systems can help the process, it’s not always a feasible solution for many retailers, Morris says.

She believes retailers need the same human eyes on their ecommerce systems as they do their stores, and that they should stay abreast of ongoing fraud trends.

“You need capital, systems to integrate with, people to train. It’s not a quick turnaround. It can be like turning an ocean freighter,” Morris says. “You need to start with the tools you have and lead your people to react quickly to emerging trends.”