Electronic Tagging, RFID and EAS

This is an excellent overview of electronic tagging technologies in retail and supply chain applications.

Electronic tags are now used in a wide variety of retail and supply chain applications to curb theft, provide information about shopping trolley use, control access to store or office areas, transport, drive automated or semi-automated warehouse or transhipment facilities, manage inventories, and provide information about distribution systems. The market is divided into categories differentiated upon "traditional" lines by technology. Hence there are electronic article surveillance (EAS) products; radio frequency identification devices (RFID); and smart card devices which have developed in relation to different markets and technologies and are not generally seen as being part of the same family of products. There is no accepted phrase available which can be used to group this family: "intelligent tags" is one attempt but we use the term "electronic data tagging".

The main types of electronic tag relevant to the retail industry:

• Electronic article surveillance tags (EAS)


• Radio frequency identification devices (RFID)


• Smart cards (contactless)


• Intelligent tags

These are all devices which signal their presence and transmit data, if only 1 bit (ie present or absent) as in most EAS tags. Although they are very different products, they are relatively compact electronic devices and have a wide variety of applications. They are low cost and are likely to fall further in price. They are robust in the sense they are designed to last as long as the application and are available in a number of housings, the choice of which will depend on the precise use intended for the device. They will also be affected by developments in other business sectors, which will encourage innovation and bring down prices.

Read complete article here: Electronic Tagging, RFID and EAS - Centre for Retail Research

IS HIGHER SHRINK INEVITABLE IN A GLOBAL RECESSION?

Centre for Retail Research, Nottingham UK
Outstanding article on retail crime trends as they present themselves to retailers today. Much more reliable and less filled with moral panic button propaganda than the numerous posts below on this blog--nearly all of which refrence the same source as credible and worthy of serious consideration.

A couple telling quotes from the article are instructive:

It is probable that recession, unemployment, uncertainty, lower incomes and fear of the future may make some people more willing to steal or overcome their reservations about buying stolen goods. Without seeking to minimize their crimes, others may feel that the business, national and international failures which permitted the banking crisis and created a global recession devalues honesty and gives them some entitlement or justification to commit retail theft.

Every retailer is scrutinizing the amount spent in each budget category, including loss prevention. LP professionals are reporting this year that the loss prevention budget is very restricted and that they have to make the best of what they have received. But in a tough commercial environment like the present, where sales growth and operating cost control are both equally difficult to manage, loss prevention and shrink management may prove to be one of the few areas where improvements in net profitability can be made.

Cuts in loss prevention spending at a time when potential crime is rising may well be extremely short-sighted - particularly if the losses from higher shrinkage and out-of-stocks prove to be much greater than the gains from reduced LP budgets. Obviously every retailer has to make its own decision. Smaller LP projects dealing with discrete issues such as improving LP outcomes in the worst high-shrink retail outlets, new processes to reduce losses of high shrinkage lines, and investigating employee theft can produce rapid payback. The Pareto 80:20 rule still has wide applicability in loss prevention and means that the discriminating LP executive who chooses his or her projects carefully can have a considerable impact over performance. This is even more important now when the gains in shrinkage reduction are under threat

Retailers Organize Against Crime

Retailers Organize Against Crime

Global Retail Theft Barometer Study Finds Retail Theft Reaches $115 Billion Worldwide - AOL Money & Finance

“While most businesses have suffered as a result of the recession, few have been
as hard-hit as the retail industry,” said Rob van der Merwe, Chairman, President
and CEO of Checkpoint
Systems, Inc ., the sponsor of the study. “While retailers have had to cut
budgets in most areas, this year’s study shows the adverse effect of cutting
spending too deeply in the area of loss prevention. Prudent spending in this
area can have a very positive effect on bottom-line numbers, and act as a
force-multiplier, especially as budgets for training programs and security
personnel are reduced.”

Correlation Between Reduced Security Spending and Increase in Theft

“The 2009 study also found that retailers decreased their spending on loss
prevention and security by $900 million, no doubt in response to their general
need to trim budgets in tough times,” continued Professor Bamfield. “However ,
the correlation between $900 million in decreased security spending and a $10
billion increase in theft is very significant . It highlights the importance of
continued advancement and improvement of loss prevention programs, as reducing
theft is key to the success and growth of retailers’ businesses.”

Loss prevention spending in 2009 was equivalent to an average of 0.31% of retail sales.

Read full article at Global Retail Theft Barometer Study Finds Retail Theft Reaches $115 Billion Worldwide - AOL Money & Finance

eBay says 'consumer warning' really just retail giants' bad blood - St. Petersburg Times

eBay says 'consumer warning' really just retail giants' bad blood - St. Petersburg Times

Retail theft a problem during holidays | theft, city, holidays - News - The News Herald

As holiday shoppers rush to stores, so do thieves looking to blend in and make a profit off local retailers.
“Small businesses never expect that anybody in their stores are stealing from them, but that’s not the case,” said Doug Fleener, president for Dynamic Experiences Group, a retail consulting firm in Massachusetts.

Panama City stores have seen theft, too, store owners say. About a year ago, Out of the Box on West 23rd Street had an incident. Owners later took steps to make sure theft never occurred at the business again, said Linda Lee Bell, co-owner.

“It happened right under our nose,” Bell said.

Return fraud alone is expected cost retailers industrywide $2.7 billion during this holiday season. Retailers’ busiest time also makes them more vulnerable, Fleener said. Thieves will forge receipts and try to return boxes filled with rocks. Some claim never to have received an item ordered online.

Organized theft also is growing, according to a National Retail Federation survey. Florida law enforcement officials uncovered up to $100 million in stolen goods that was to be auctioned off last year, according to a 2008 Organized Retail Crime Survey.

Fraud is a big enough concern to catch the attention of the Better Business Bureau that covers Northwest Florida. The bureau released a press release to businesses warning them about fraud in September.

“Businesses are reporting it as a problem,” said Karen Szulczewski, bureau communications director.

Corporate representatives for Target, Victoria’s Secret and Justice Clothing for Girls did not return phone calls and e-mails seeking comment. Locally, stores referred questions to their headquarters. A Walmart spokeswoman did not answer questions asked or respond to a subsequent e-mail.

Read full article here -> Retail theft a problem during holidays theft, city, holidays - News - The News Herald

Shoplifting rings and weak economy spur retail theft -- DailyFinance

Retailers lost $36.3 billion to theft in 2008, up from $34.8 billion in 2007. While no projections are available yet for 2009, signs are that the problem is getting worse, says Joseph LaRocca, senior adviser on asset protection of the National Retail Federation (NRF). Fewer people are being detained in stores for shoplifting, but when they are stopped, they're more likely to run and even attack store employees, says LaRocca.

"Shoplifters are getting more aggressive," he says. "They're fighting, they're abusive, they're running.... It's a very disturbing trend." LaRocca attributes this escalation to the rise of shoplifting rings, gangs that steal large quantities of products for resale. These thieves are the reason you often find razor blades under lock and key in your local drugstore, says LaRocca, because small items that can be easily resold are a favorite target of pro shoplifters. "They're very organized, and they're very skilled," says LaRocca.

"They'll steal thousands of dollars in five minutes." They may even open entire stores stocked with stolen products, he says. Retailers are troubled enough by this trend that they're pressing the U.S. Congress to enact laws to facilitate federal prosecution of shoplifting gangs. A House subcommittee is holding hearings Thursday on the role of federal law enforcement in fighting the retail crime rings.

"A Matter of Greed"

LaRocca disputes claims that economic desperation could be driving a rise in shoplifting. The data show that the type of merchandise popular with shoplifters during this recession is still very similar to what was stolen years ago, he says."It's not a matter of need. It's a matter of greed," he says. "You don't need a $1,900 handbag.... Do you need a video game?"

Shoplifting rings and weak economy spur retail theft -- DailyFinance

Report: Jump in store theft cost your family $435 - Nov. 10, 2009

New global report shows that U.S. merchants suffered an almost 9% jump in store theft over the past year, forcing consumers to pay more for goods.

By Parija B. Kavilanz, CNNMoney.com senior writer

NEW YORK (CNNMoney.com) -- U.S. merchants suffered one of the biggest jumps in shoplifting and other retail crimes over the past year, a trend that cost the average American family about $435, according to a new report Tuesday.

Retail crimes such as shoplifting, employee theft and supply chain fraud rose 8.8% in the United States, to $42.2 billion, in the year ended in June, according to the 2009 Global Retail Theft Barometer report from the U.K.-based Center of Retail Research. In the prior year, retail crimes rose 1.5%.
"It is a shocking increase and something that retailers need to get to grips with quickly," said Joshua Bamfield, author of the report, which identified top trends in retail crimes in 41 countries, including the United States, China, India, Europe, Japan and Australia.

The report was based on a confidential survey of 1,069 large global retail companies
Bamfield said the 8.8% rise in retail crimes in the United States -- the biggest retail market in the world -- was largely spurred by the recession and affected about 1.6% of the nation's total retail sales in the 12-month period.

Reflecting the global scope of the downturn, he said retail crime rose 5.9% to $115 billion.
He said employee theft cost merchants about $18.7 billion in the period, shoplifting cost sellers $15 billion, and processing and other supply chain errors or fraud cost retailers about $6.8 billion.
What's worse is the cost of store crimes to consumers, which the report estimated at being about $435.17 per family over the past year.

"Prices on products would be lower on average if merchants did not have to incur lost revenue from store crimes," Bamfield said.

Most-stolen products

The report said thieves bagged a wide range of items, but tended to focus on expensive popular branded items. These included perfume, cosmetics, razor blades, small leather products and electronics such as the Wii gaming system, iPods and cellphones.
Satellite navigation equipment and laptops were also vulnerable categories, the report said. In supermarkets, thieves were targeting fresh meat and cheese.
Bamfield said the biggest driver of store theft is for resale. "It's primary to feed the habit for extra money," he said. "A lot of it funds criminal activity. So there's a societal cost on top on an economic cost of these trends."

And while merchants are at the frontline of these crime sprees, Bamfield said the repercussions are felt from manufacturer to store shelf.

"Retailers don't accurately know how much merchandise they have in stock if deliberate errors are made in processing that information," he said. "This can affect suppliers managing their production. Manufacturers and distributors are are impacted."

What's more worrying is that Bamfield said this uptick in retail crimes could last for a while. 'I think this trend is more than just a temporary response to the recession," he said.

For its part, the National Retail Federation (NRF) maintains that merchants cannot be solely responsible for trying to prevent organized retail crime. The group said tougher federal legislation is needed to contain the problem

"New federal laws will make organized retail crime part of our federal criminal statutes, giving law enforcement officers and prosecutors the tools they need to put these criminals behind bars," Joe LaRocca, an NRFofficial, said in a report earlier this month.

Report: Jump in store theft cost your family $435 - Nov. 10, 2009

Debunking Big Retail's Truthiness

September 22, 2008
Debunking Big Retail's Truthiness
In the waning days of Congress, a handful of retailers and their supporters are trying jam through a trio of bills that would place a serious and unnecessary burden on e-commerce. I have the honor of testifying today before the House Judiciary Committee's Subcommittee on Crime, Terrorism and Homeland Security, where I'll do my best to point out the danger of these prescriptive, ill-conceived bills.

At issue are three pieces of legislation -- H.R. 6713, H.R. 6491 and S. 3434 -- all of which ostensibly aim to address the problems of "organized retail crime" and "e-fencing."

What the bills really do, however, is cut law enforcers out of the law enforcement equation, giving retailers free reign to bully and intimidate online marketplaces and their customers.

All three bills would give retailers the power to force online marketplaces to interrogate their own customers about how they obtained items listed for sale. This has the effect of presuming that sellers are listing stolen items – unless they can affirmatively prove their ownership.

It's been clear for a long time that many traditional, brick-and-mortar retailers would like to see the online marketplace and its pro-consumer, pro-competition benefits simply disappear. These bills represent their best attempt to speed that process along.

In its written testimony before the Committee, the National Retail Federation maintains that online selling has "addictive qualities" and causes people to steal who've never stolen before. It's more than a little disturbing to have an organization that is so clearly out of touch with the Internet trying to legislate how it functions.

The sadly ironic thing about all of this is that major online retailers like eBay and Overstock have consistently received high marks for their strong cooperation with law enforcement in addressing legitimate e-fencing issues. Online marketplaces have no interest in hosting crime, and are actively engaged in cracking down on it, in away that allows legitimate commerce to flourish.

As is so often the case in this area, the real focus of retailers seems to be on squashing competition, rather than cracking down on criminals.

The Voice of the eCommerce Industry: Debunking Big Retail's Truthiness

House Judiciary Committee Hears From Federal Law Enforcement on Retail Crime | Reuters

WASHINGTON, Nov. 5 /PRNewswire-USNewswire/ --Representatives of three federal
law enforcement agencies told a House Judiciary Subcommittee today that more
needs to be done to combat organized retail crime (ORC) in the U.S.

In testimony before the House Judiciary, Subcommittee on Crime, Terrorism and
Homeland Security, officials from the FBI, U.S. Secret Service, U.S. Postal
Inspection Service, and Immigration and Customs Enforcement testified to the
challenges they face combating this growing crime.

"The Coalition Against Organized Retail Crime (CAORC) thanks Subcommittee
Chairman Robert C. "Bobby" Scott (D-VA) for holding this hearing and for his
commitment to providing federal law enforcement with the tools they need to
address this growing criminal activity," said the coalition.

Coalition testimony provided to the committee for the record can be viewed
here.

Organized Retail Crime involves sophisticated criminal networks made up of
many individuals who steal large quantities of goods from retailers and in
turn sell the goods for profit though pawn shops, flea markets and
increasingly on the Internet. Experts estimate organize retail crime losses in
the tens of billions of dollars annually.

Consumers are endangered when stolen goods are mishandled or altered before
being sold to unsuspecting consumers. This is of particular concern when
sensitive items such as baby formula, diabetic test strips and over the
counter medicine is involved. Recent investigations have uncovered these
sensitive health and beauty items stored at dangerous temperatures damaging
the safety and reliability of the product. In most cases, consumers are
unaware of the unlawful source of the products purchased from anonymous
sellers.

Retailers work closely with law enforcement to identify and investigate local
trends and to develop cases against these criminal networks. However, ORC
criminal networks often operate across state borders, exploiting legal gaps
arising from the existing patchwork of state and local laws. Consequently,
law enforcement is often unable to fully investigate and prosecute ORC
criminal networks. As a result, despite the close coordination between
retailers and law enforcement, according to the University of Florida, 2008
National Retail Security Survey, instances of ORC activity and losses
attributable to the crime continue to rise.

Federal legislation is necessary to bring the criminal code into the 21st
century by closing the legal gaps that have benefited ORC criminals too long.

Federal Legislation Currently Under Consideration:

The E-fencing Enforcement Act of 2009 (HR 1166), introduced by Chairman Robert
C. "Bobby" Scott (D-VA), would impose reasonable duties on online marketplaces
when there is good reason to believe that items listed for sale were acquired
unlawfully.

The Organized Retail Crime Act of 2009 (HR 1173), introduced by Rep. Brad
Ellsworth (D-IN), which modifies the federal criminal code to include ORC
activities, and makes the facilitation of ORC a crime. The legislation also
imposes practical reporting requirements on the operators of online
marketplaces and sellers when goods are suspected of having been acquired
through ORC.

The Combating Organized Retail Crime Act of 2009(S 470), introduced by Sen.
Dick Durbin (D-IL) would clarify existing law to give law enforcement the
tools to fight ORC, require on-line and off-line market places to investigate
suspicious sales, and place basic disclosure requirements on on-line
marketplaces.

About the Coalition Against Organized Retail Crime

The CAORC, formed in 2001, is composed of 37 national manufacturing and retail
organizations as well as individual companies that have come together to fight
this growing crime. The Coalition's web site can be accessed at
www.stopretailcrime.com. The CAORC has provided testimony to Congress on this
issue in March of 2005 and October of 2007. The Coalition strongly supports
enactment of pending federal legislation to combat ORC in the House of
Representatives. Those bills include: The E-Fencing Enforcement Act of 2009,
H.R. 1166, introduced by Chairman Scott, and the Organized Retail Crime Act of
2009, H.R. 1173, introduced by Reps. Brad Ellsworth and Jim Jordan.

Quotes from Members and Supporters of the Coalition Against Organized Retail
Crime

"The FBI estimates that organized retail crime costs retailers billions of
dollars annually, with proceeds from ORC often used to finance other criminal
enterprises such as drug trafficking and gang activity, including those
associated with terrorist factions. As a national retailer, Walgreens is
impacted by ORC throughout the country. That's why we're advocating for ORC
legislation in all states and support making ORC a federal criminal offense,
including criminalizing those activities that clearly promote and expand ORC,"
said Frank Muscato, Organized Retail Crime Investigations Supervisor,
Walgreen, Co.

"Organized retail crime impacts consumers as well as retailers, who must cover
losses and invest in additional security measures. Consumers are placed at
risk when package tampering occurs on consumer health care products, such as
infant formula and over-the-counter medications. These stolen products are
often repackaged and relabeled to falsely extend a product's expiration date
or to hide the fact that the item has been stolen. NACDS will continue to
work with lawmakers to pass strong legislation that will assist retailers and
law enforcement to combat the serious problem of organized retail crime," said
NACDS President and CEO Stephen C. Anderson, IOM, CAE.

"Organized retail crime (ORC) is a serious crime with real health and consumer
safety implications that endangers our neighborhoods and citizens. Consumers
are put in harm's way when stolen goods are mishandled or altered before being
sold to unsuspecting buyers and communities are endangered when illicit
proceeds from ORC are used to fund more dangerous and violent criminal
activity. Federal legislation is essential to give law enforcement the
necessary tools to combat these growing crimes and close the legal gaps
exploited by criminals for too long," said John Emling, Senior Vice President
of Government Affairs for the Retail Industry Leaders Association.

"Organized retail crime is a serious and ever-growing crime that poses serious
risks to the safety and well being of our communities. The growth of the
online marketplace has given criminals an unfettered avenue to fence their
goods to innocent consumers, including here in Cook County. Federal criminal
statutes are needed to provide law enforcement with the tools necessary to
deter and prosecute this complex criminal activity. I commend Senator Durbin's
leadership in introducing the Combating Organized Retail Crime Act (S 470) as
a means to combat organized conspiracies; including tightening regulations for
online auction sites that could serve as conduits for stolen goods," said
Thomas J. Dart Cook County Sheriff.

"The National Insurance Crime Bureau's (NICB) data and investigations show
that organized retail crime is a growing problem from coast to coast. Online
marketplaces often times become fraud victims as organized criminal rings
defraud Web sites and offer financial assistance to buyers and sellers in
transactions. Unfettered access to these online auctions negatively impacts
businesses and innocent consumers as a source to fence stolen goods. NICB
supports the Organized Retail Crime Act of 2009 as an effective means to
combat this problem. By tightening the requirements to sell items online and
beefing up federal criminal statutes, we can reduce the market for stolen
goods, making retail theft less attractive to the criminal rings," said the
National Insurance Crime Bureau.

"Organized retail crime is more sophisticated and more dangerous than petty
shoplifting as organized rings of criminals move from store to store stealing
large quantities of goods. They jeopardize the health and safety of consumers
by fencing goods to buyers unaware of their origins and increasingly use
internet auction sites, which conceal their identity. We support legislation
that gives law enforcement the tools they need to fight these criminals and
makes organized retail crime a federal felony for all the perpetrators
involved," said Leslie G. Sarasin, president and chief executive officer of
the Food Marketing Institute.

"The business of organized retail crime continues to proliferate throughout
the U.S. Winning the battle against organized retail crime begins with the
support of law enforcement, loss prevention teams and industry partners.
Winning the war requires specific legislation that will make criminals think
twice before participating in these illegal, often dangerous activities," said
Joe LaRocca, Senior Asset Protection Advisor, National Retail Federation.

"RAM strongly supports federal legislation to combat organized retail crime.
While we are backing legislation in our own state and feel that it is
necessary to update our criminal code in MA, we firmly believe that federal
legislation is needed to address this growing issue which has no state
boundaries," stated Jon Hurst, President of Retailers Association of
Massachusetts (RAM).

The Coalition Against Organized Retail Crime, hosted a briefing in advance of
today's hearing. A recording of the press conference is available by dialing
(800) 642-1687 and entering code 39367794.

SOURCE Coalition Against Organized Retail Crime

Liz Jennings of Coalition Against Organized Retail Crime, +1-703-600-2017

House Judiciary Committee Hears From Federal Law Enforcement on Retail Crime | Reuters

Day Two - Organized Retail Crime: Tackling a Multi-Billion Dollar Problem | NRF Loss Prevention Convention & EXPO Blog

Day Two - Organized Retail Crime: Tackling a Multi-Billion Dollar Problem | NRF Loss Prevention Convention & EXPO Blog

iAWFUL 6. Federal Bills on Organized Retail Crime

The Combating Organized Retail Crime Act of 2009 (S 470), the Organized Retail Crime Act of 2009 (HR 1173) and the E-Fencing Enforcement Act of 2009 (HR 1166). Together, the bills would mandate online and off-line marketplaces to investigate suspicious sales, place disclosure requirements on online marketplaces, impose obligations upon online marketplaces known to be used by high volume sellers of stolen merchandise and force online marketplaces to collect information that law enforcement can use to prosecute those that fence goods on their websites.


For more information:
Everything Old is New Again. Big Retailers go after eCommerce...again.

iAWFUL 6. Federal Bills on Organized Retail Crime

The Voice of the eCommerce Industry: Everything Old is New Again – Big Retailers Going After E-commerce Once More

The Voice of the eCommerce Industry: Everything Old is New Again – Big Retailers Going After E-commerce Once More

The Voice of the eCommerce Industry: Big Box Blame Game

The Voice of the eCommerce Industry: Big Box Blame Game

Retail Industry Presses Congress to Pass Bills to Fight Organized Retail Crime | Security Management

This article details the state of the Organized Retail Crime Act of 2009. We are at a crisis in our economic lives. Many tens of thousands of people have no place else to sell their wares, personal stuff, than on ebay, flee markets and swapmeets, Craigslist, and the likes. These avenues of trade have always been a popluar place of commerce in hard times. These acts by congress do no more to protect consumers and retailers than to eliminate their competition in the form of legislation that basically makes the outlet a suspected venue of organized criminal activity. So now you are a suspect if you go to ebay, flee-markets or swap-meets to sell in a tough environment.

Often these criminal gangs conduct countersurveillance, noting security sweeps and camera technology, before they hit a retailer. Once inside the store, the gangs use cellphones and hand signals to steal thousands of dollars worth of goods in minutes, LaRocca said.

A recent survey conducted by the NRF found that 9 out of ten retailers surveyed reported their companies were victims of ORC in the past year. That was up 8 percent from the prior year.

But ORC doesn’t only hurt retailers. State and local governments suffer from the loss of much needed sales and income tax revenue already depleted by a hurting economy. The practice also jeopardizes the health of American consumers. Many criminal gangs steal consumer goods— like baby formula and over-the-counter pharmaceuticals—that can expire or go bad, with the potential to harm or to kill a person when consumed.

Local and state law enforcement agencies have struggled to catch the criminal gangs as ORC has exploded over the past few years. According to Special Agent Danny Banks of the Florida Department of Law Enforcement, police efforts to combat retail crime were traditionally focused at the local level. But over the past five years, Banks said, police across the country have seen retail crime become well-organized, national, and very profitable

Tomorrow, the Subcommittee on Crime, Terrorism, and Homeland Security of the House Judiciary Committee will hold a hearing on federal law enforcement's role in fighting ORC..

Read full article at Retail Industry Presses Congress to Pass Bills to Fight Organized Retail Crime | Security Management

Lawmakers Want Organized Retail Crime as Federal Offense

This is pretty funny stuff if you think about it.

Making organized crime a federal issue is one thing, and it's not a new concern for the general public, business interests, or law makers. The mob has been around for quite a while, and there has been quite a bit of concern and laws enacted on the state and federal level for about a long fucking time now...

But to say that "law makers want to make organized retail crime a federal offense" is disingenuous at best. The headlines should read: "The Giant Multi-National Mega-Retailers Coalition Of The World Superstate has made its case to U.S. federal law makers, saying "we want new Federal laws enacted to help us justify and substize our organization's corporate criminal members' dwindling profit margins and stock values in this collapsing global economy, damn it!"

But the headlines read "Federal Law Makers Want New Laws!" And you should want new laws too, considering, that they are being made to protect your Corporate Gods! This is a perfect example of how corporate conglomerates set the agenda of congressional law makers, as well as the agenda of the corporate mass-media... Blah, Blah, Blah...

Watch This News Clip: Lawmakers Want Organized Retail Crime as Federal Offense. It should give you a chuckle if your mind and sense of humer are still relatively in tact.

Coalition Against Organized Retail Crime

Coalition Members?

Abbott Laboratories, Ahold USA, Inc., American Council on Regulatory Compliance, Consumer Healthcare Products Association, Cosmetic, Toiletry, and Fragrance Association, CVS/pharmacy, Duane Reade, Eastman Kodak Company, Food Lion, LLC, Food Marketing Institute, Giant Food LLC, GlaxoSmithKline, Grocery Manufacturers/Food Products Association, The Home Depot, International Formula Council, The King Rogers Group, The Kroger Co., Macy’s, National Association of Chain Drug Stores, National Association of Convenience Stores, National Community Pharmacists Association, National Insurance Crime Bureau, National Retail Federation, Nestle, Personal Care Products Council, Publix Super Markets, Inc., Retail Industry Leaders Association, Rite Aid Corporation, Safeway Inc., Security Industry Association
The Stop & Shop Supermarket Company, Supervalu, Target Corporation, Tops Markets, LLC, Universal Surveillance Systems, Wal-Mart Stores, Inc, Walgreen Co.

Economy Drives More Organized Retail Crime: NRF

Economy Drives More Organized Retail Crime: NRF
Jun 11, 2009 6:00 AM
The Super Market News

Nine out of ten retailers (92%) report that their companies were victims of organized retail crime during the past year, up 8% from 2008, according to the fifth annual Organized Retail Crime survey conducted by the National Retail Federation here.

An Ebay exec responding to the article says: "The National Retail Federation's recent report on organized retail crime is filled with best guesses vs. facts and hard numbers," he said. "It simply doesn't make sense to blame online marketplaces for a problem that has existed since well before the Internet was invented."

The article makes no mention of what they considered to be a retailer. If by "retailer" they mean every storefront shop, the statistic is obviously rediculous. If they mean national chain stores, the number is still misleading, as it would have us believe that 9 out of 10 of their stores have been hit by "organized retail crime" in the past year", a statistic which it provides no impirical data to back up.

It seems to me that a major campaign is underway to make Organized Retail Crime into a household word. Look for it in a news story soon.

NRF Organized Retail Crime Survey Finds Criminals View Global Recession as Opportunity to Abuse Retailers and Consumers

NRF Organized Retail Crime Survey Finds Criminals View Global Recession as Opportunity to Abuse Retailers and Consumers


View or download NRF's 2009 Organized Retail Crime survey report
For Immediate Release
Kathy Grannis (202)783-7971
grannisk@nrf.com

NRF Organized Retail Crime Survey Finds Criminals View Global Recession as Opportunity to Abuse Retailers and Consumers
--Organized Retail Crime Activity Jumps by 8%, According to NRF Survey--

Washington, June 10, 2009 – As another illustration of the wide effect of the down economy, retailers and consumers are increasingly being victimized by organized retail crime groups. According to NRF’s fifth annual Organized Retail Crime survey, nine out of ten retailers (92%) report that their companies were victims of organized retail crime during the past year, up eight percent from 2008. Nearly three-fourths (73%) of retailers also reported the level of organized retail crime activity has increased over the past 12 months, an increase of 11 percent from 2008. Loss prevention executives from 115 companies, including department, discount, drug, grocery, restaurant and specialty retailers, completed the survey last month.

“The unfortunate economic events of the past year have played an intricate role in how criminals continue to rip off the retail industry,” said Joe LaRocca, NRF Senior Asset Protection Advisor. “Organized retail crime rings have realized that tough economic times present new business opportunities by stealing valuable items from retailers and turning around to sell the merchandise to consumers looking for bargains.”

Even with the economy forcing retailers to cut staff and do more with less, 42 percent of retailers say their company is allocating additional resources to address organized retail crime. According to the survey, the average retailer spends approximately $215,000 annually just on labor costs to fight organized retail crime. Some retailers surveyed spend far more, with six percent of respondents spending more than $1 million dollars a year to employ loss prevention executives devoted to organized retail crime.

The fight against organized retail crime would be futile without the support of top management. According to the survey, nearly half (49%) of respondents believe senior management in their company understands the seriousness of the issue. For the first time in the survey’s history, NRF also asked loss prevention executives whether they felt law enforcement had a firm grasp on the issue; 38 percent agreed that police officers, detectives and federal law enforcement understood the complexity and severity of organized retail crime.

Thanks to the new partnerships formed with Federal and local law enforcement officials, retailers have had some success identifying stolen merchandise or gift cards at physical fence locations such as pawn shops and temporary stores (60%) and through online e-fencing operations (60%), where stolen merchandise is sold through online auction sites.

Organized retail crime is not only an isolated problem in a handful of areas across the country. According to the survey, a staggering 72 percent of retailers have identified organized retail crime syndicates who are exporting goods outside of the U.S. or across state lines. Additionally, 28 percent found that criminal groups under current investigation have connections to street gangs with international connections.

When asked how they would rank organized retail crime as a threat to their company, nearly one-third (29%) of retailers gave organized retail crime a “four” or “five” rating, identifying the problem as severe or significant. On average, retailers gave organized retail crime a rating of 2.87 on a five-point scale.

NRF will address organized retail crime and many other loss prevention issues such as return fraud and counterfeiting at its annual Loss Prevention Conference and EXPO at the Los Angeles Convention Center, June 15-17. Law enforcement officials and retailers are eligible for complimentary EXPO Hall passes. Visit NRF’s LP Conference website for more information.

The National Retail Federation is the world's largest retail trade association, with membership that comprises all retail formats and channels of distribution including department, specialty, discount, catalog, Internet, independent stores, chain restaurants, drug stores and grocery stores as well as the industry's key trading partners of retail goods and services. NRF represents an industry with more than 1.6 million U.S. retail establishments, more than 24 million employees - about one in five American workers - and 2008 sales of $4.6 trillion. As the industry umbrella group, NRF also represents more than 100 state, national and international retail associations. www.nrf.com.

NRF is pleased to grant complimentary registration to editorial staff members of the press, as well as accredited retail analysts and bloggers. Register online for NRF’s 2009 Loss Prevention Conference and EXPO, or call Kathy Grannis at (202) 626-8189.

Link to this article at http://www.nrf.com/modules.php?name=News&op=viewlive&sp_id=737

Organized Retail Crime Jumps to 92%

Published on June 10, 2009
According to the fifth annual NRF Organized Retail Crime Survey [pdf], 92% of retail respondents were victimized by organized retail crime in the past year. This represents a 7 percentage point increase from the 85% of respondents who reported being victimized by organized retail crime in 2008.

Other survey results also indicate that as the global economic recession continues, organized retail crime keeps rising. For example, 73% of respondents reported the level of organized retail crime activity has increased during the past year, an 11 percentage point increase from the 62% of respondents reporting increased activity in 2008. As a result, close to half of respondents, 42%, say they are allocating additional resources to address organized retail crime, spending an average of $215,000 in labor costs on the issue.

According to the survey, there has been a sharp increase in the number of retailers discovering stolen merchandise being fenced, either in a physical location or online. Sixty percent of respondents say they have identified or recovered stolen merchandise at a fence location in 2009, up from 40% in 2008. The percentages of respondents who have identified or recovered stolen merchandise being “e-fenced” online were almost identical, 60% in 2009 compared to 39% in 2008.

The 49% of respondents who believe senior management understands the seriousness of the issue is a 5 percentage point decline from the 54% who held this belief in 2008. Meanwhile, only 38% of respondents believe law enforcement understands the seriousness of the issue in the first year this question was asked.

Interestingly, when asked to rate the seriousness of the organized retail crime threat to their company on a one- to five-point scale (with five being the most serious), the average rating in 2009 was 2.87, down from an average of 3.02 in 2008. This drop came despite 72% of respondents saying they have identified organized retail crime syndicates who are exporting goods outside of the U.S. or across state lines, and 28% saying that criminal groups under current investigation have ties to street gangs with international connections.

Two recent incidents support survey findings that organized retail crime remains a prevalent threat to the industry. A member of the Gambino organized crime family faces as many as 20 years in federal prison after pleading guilty to running a scam that used fake bar codes to dramatically reduce prices on goods at retailers including Lowe’s, Home Depot, Best Buy and Circuit City in New York and New Jersey. The stolen items were then resold or returned at profit. As part of the scheme, an associate of the scam operation got a cashier’s job at a Lowe’s store in an effort to steal customer identities and credit card information, although there is no indication any information was stolen.

In addition, the May 2009 arrest of four New York state residents in Merrimack, NH for shoplifting at a Rite Aid store turned up evidence of a sophisticated theft ring specializing in stealing hair care products from pharmacies. The men, who were all charged with felony theft and felony receiving stolen property, allegedly had thousands of dollars worth of hair care products in their van, as well as maps detailing the locations of drugstores in several states along the East Coast.

A recent Datamonitor report indicates that retail shrink from theft, crime, and waste is having a damaging impact on retailers’ profit margins, with over half the losses attributable to point of sale (POS) shrink—loss incurred through cashier error, theft, and fraudulent transactions. The report predicts that global retail shrinkage will climb to almost $115 billion by the end of 2009.

Auto parts retailer AutoZone provides an example of how shrink can damage the bottom line. AutoZone attributed a 0.2% decrease in Q2 2009 gross margin to increased shrink expenses, although the retailer did not specify exactly how the shrink occurred.

Loss prevention executives from 115 retail companies across a variety of verticals completed the NRF Organized Retail Crime survey in May 2009.

http://www.retailerdaily.com/entry/41799/organized-retail-crime-jumps/

» NRF Survey shows Organized Retail Crime activity is growing! - Blogger News Network

Posted on June 11th, 2008 by Ed Dickson in All News, Blogosphere News, Breaking News, Business News, Technology NewsRead 1,559 times.According to FBI estimates, Organized Retail Crime (ORC) is a $30 billion a year business. The National Retail Federation’s 2008 Organized Crime Survey shows another alarming trend, which is that the amount of e-fencing to sell stolen merchandise on auction sites like eBay and Craigslist has grown 6 percent.

Also mentioned in the survey are shady e-commerce sites being put up on the Internet to fence the proceeeds of ORC.

In case you’ve never heard the term, Organized Retail Crime, here is a good description of the activity:

Organized retail crime (ORC) refers to groups, gangs and sometimes individuals who are engaged in illegally obtaining retail merchandise through both theft and fraud in substantial quantities as part of a commercial enterprise. These crime rings generally consist of “boosters” who methodically steal merchandise from retail stores and fence operators who convert the product to cash or drugs, as part of the criminal enterprise. Some of the more sophisticated criminals engage in changing the UPC bar codes on merchandise so they ring up differently at checkout, this is commonly called “ticket switching.” Others use stolen or cloned credit cards to obtain merchandise or produce fictitious receipts to return products back to retail outlets.

The report acknowledges that these groups are using cloned credit cards to steal merchandise and or get the necessary receipts to refund the merchandise for cash.

In the wake of the TJX data breach, where up to 94 million personal and financial records were hacked, a group was caught in Florida using data from the breach (cloned cards) to buy a reported $8 million worth of gift cards.

Please note that TJX is hardly the only retailer, or financial services institution that has had personal and financial records hacked from their systems in recent history. Attrition.org does a good job of recording the known breaches on their Data Loss Database - Open Source .

Although not addressed in the current report, I suspect the use of fraudulent checks are used to obtain merchandise and receipts, also.

This could be fueled by another organized crime activity. Portable technology has made the counterfeiting of identification documents another growing trend. Over the past two years or so, I’ve had the pleasure of being able to speak with Suad Leija and her husband about this organized criminal activity on a semi-regular basis. Suad, the step-daughter of one of the top players in this game was recruited in an intelligence operation and eventually exposed a cartel operating throughout North America to the government. Prosecution of members of the cartel is ongoing in this case and Suad is currently working on a book.

These documents, which are available throughout the United States, can be easily used to support both check and refund fraud by using names that get past the data bases designed to protect retailers from these types of fraudulent activity.

Portable technology is also being used to clone payment cards and some of it is easily found on auction, or shady e-commerce sites set up to sell these devices. As of this writing, I was easily able to find credit card encoders for sale on eBay. A site called HackersHomePage.com provides an array of devices that could be used to steal and produce payment (credit/debit) cards. They also provide tools to make counterfeit checks and even, paper for fake prescriptions. They do have a “disclaimer” stating that none of their products are to be used for illegal purposes, but it is pretty obvious someone could.

There is no doubt that there is a lot of technology that is enabling a lot of criminal activity out there!

NRF’s Vice President of Loss Prevention, Joe LaRocca, made what I consider a sage comment on this activity:

“Law enforcement and retailers alike are fed up with organized retail crime rings and are stepping up efforts to stop them in their tracks,” said NRF Vice President of Loss Prevention Joseph LaRocca. “The brazen and unethical behavior of organized retail crime suspects results in possible health risks for consumers, adds unnecessary fees to consumers’ purchases and funds criminal enterprises, including the mob and terrorist organizations around the world.”

When I stated that this activity hurts all of us, the reason is that retailers have to make up the $30 billion they are losing to this activity somewhere. This normally equates to higher prices, or in extreme circumstances (especially in tight economic times) cutting payroll. Simply stated, people might be losing their jobs because of this activity.

So far as health risks, the report sums up the obvious risks rather well:

For example, criminals may not keep stolen merchandise in a temperature-controlled environment, so merchandise like baby formula and over-the-counter medicines can easily spoil. When criminals sell these items online through third party auction sites consumers are left with no way to guarantee they are getting safe and reliable healthy and beauty products.

I decided to see if I could find baby formula on eBay. As you can see - there seems to be a lot of it for sale on the site at discounted prices. At the time I checked 26 pages of it were for sale on the site.

Actual cases in the report that support how organized this activity has become are a $60-$100 million dollar case in Florida involving health, beauty, cosmetic products and over-the-counter medicines. Another case mentioned involved a high ranking member Gambino Crime Family and a sophisticated ticket/UPC switching case and extortion. In this case, a planted employee was making up the labels and providing temporary credit cards to move the merchandise through point-of-sale systems.

Recent initiatives to combat Organized Retail Crime include launching LerpNET, which is a crime database available to both retailers and law enforcement. Also highlighted was legislation against ORC throughout the country to “reduce the rewards and increase the risk” to the groups involved in it. Several States have already passed this legislation and more are considering it.

Full 2008 ORC Survey, here.


» NRF Survey shows Organized Retail Crime activity is growing! - Blogger News Network

Study: Identity Theft, Organized Retail Crime On The Rise - Computer crime trends/Cybercrime - DarkReading

Security managers should consider doing more information sharing, nonprofit group says
Dec 12, 2008 | 05:54 PM

By Tim Wilson
DarkReading

Identity theft, organized retail crime, and the effects of terrorist attacks are among the most urgent threats facing security managers in the near future, according to a new report issued earlier this week.

The report (PDF) was conducted by the nonprofit Urban Institute's Justice Policy Center and funded by ASIS Foundation, a charitable fund managed by the ASIS International security professionals' association. It offers a broad look into security's crystal ball, including patterns in computer crime, end user behavior, and security staffing.

On the crime trends front, the report projects increases in identity theft, organized retail crime, and new terrorist attacks. "In the next five to 10 years, identity theft and fraud will continue to be the fastest growing crimes," it states. "However, the nature of identity theft is likely to shift to more organized, high-stakes, global attacks."

Organized retail crime (ORC) -- in which criminals steal merchandise from retailers and e-commerce companies via theft or fraud -- also is a key concern, the report says. "Of the crime trends on the horizon, perhaps the greatest threat to future security managers, particularly those in the retail sector, is ORC," the report says. "ORC will continue to grow and become one of the most costly crimes experienced by the security industry. Efforts should begin now to train employees on identifying behaviors associated with ORC activities."

Interestingly, the study warns of the effects of a future terrorist attack -- an event seldom mentioned by enterprise security managers. "Security professionals will be challenged to protect likely future targets, particularly soft targets such as public places, food supplies, and electrical grids," the study says. "Security managers could benefit from considering terrorism prevention in the context of crime prevention, and from implementing flexible and adaptable response management plans."

Another terrorist attack also will likely spur demand for security personnel, the report says. "This need will increase the challenges security managers already experience hiring qualified employees and obtaining sufficient security clearances," it states. "Even line-level security positions require specialized knowledge, generating greater demands for people with specific technical skills. Security professionals will likely need to resort to even more outsourcing to meet staffing needs."

The report urges security managers not to wait for new attacks, but to try to learn about them in advance. "Get ahead of the curve by attending hackers' conventions, and engage in ongoing computer network penetration exercises," the authors advise. "Security experts stressed the importance of thinking like a criminal to catch a criminal."

The report also encourages security managers to build honeypots and honeynets to collect data on attackers' methods and weapons. "This strategy can serve as an early detection systems for possible intrusions and help security professionals identify attack vectors," it says.

Above all, the report says, security managers need to do more collaborative work, sharing information about attacks and defenses, the report advises. "The single most important and overriding tactic put forth [by the authors] is that of collaboration," the report states. "Security managers stand to make the greatest gains in improving the quality of intelligence and increasing the effectiveness of their jobs through the sharing of information and resources with each other, their law enforcement counterparts, and the public."


Study: Identity Theft, Organized Retail Crime On The Rise - Computer crime trends/Cybercrime - DarkReading

Retail theft, awareness of issue on the rise - May. 30, 2007

79 percent of major retailers say they've been hit by organized retail crime; industry joins law enforcement to take action.
By Chris Zappone, CNNMoney.com staff writer
May 30 2007: 6:36 AM EDT


NEW YORK (CNNMoney.com) -- More than three-quarters of retailers, 78 percent, said their company has been a victim of organized crime within the past year, according to a survey released Wednesday.

Seventy-one percent of retailers noticed an uptick in organized retail theft in the past year, according to the National Retail Federation's third annual Organized Retail Crime survey.

Organized retail crime rings steal merchandise such as baby formula, dietary supplements, power tools, designer jeans, and Victoria Secret clothes, then sell it at flea markets or online auction sites.

"Crooks are looking at the paths of least resistance," said Joseph LaRocca NRF vice president of loss prevention. "Violent crime or drug laws and penalties are more severe." And so stealing and reselling stolen goods, or fencing, is an attractive crime, said LaRocca.

A bit of good news: Retailers are identifying or recovering slightly more of their stolen merchandise. 61 percent reported having identified or recovered stolen merchandise from fencers, up from 59 percent last year.

And the number is slightly higher for identifying or recovering online fencing operations: up to 71 percent from 67 percent the year before. The survey is based on the responses of 99 retailers.

One in ten retailers spends over $1 million each year to fight and prevent organized retail crime, the release said.

Retailers, FBI coordinate policing efforts
In April, the NRF in conjunction with The Retail Industry Leaders Association, a trade group made up of the largest and fastest growing companies in the retail industry, and the Federal Bureau of Investigation launched a Law Enforcement Retail Partnership Network or (LERPNet), to allow retailers to track and identify organized retail theft via a secure web portal.

So far, 44 retailers, with 67,329 stores have joined LERPNet, LaRocca said. The database, which is housed and operated by the private sector, also gives access to law enforcement to track incidents.

LaRocca said the majority of the crimes have already been filed with police departments, although the incidents "might even get into our systems quicker because retailers can add data directly."

In time, the system will allow users to learn more about what states, stores, and merchandise are most at risk. "Aside from analytics, users will be able to use the system as alert network," LaRocca.

The LERPNet is an outgrowth of legislation passed in January 2006 requiring the Attorney General and FBI, in coordination with the retail community, to create a task force to fight organized retail crime.

The task force, staffed by the DOJ and FBI, "worked closely" with the NRF and RILA to create LERPnet.

The results of the National Retail Federation survey are based on responses of 99 retailers in all sectors of the industry.



Retail theft, awareness of issue on the rise - May. 30, 2007

Organized Retail Crime: Scope, Solutions

$30 billion is a staggering number. It's close to what consumers spent on electronics during the holiday season and about what the U.S. government lent, the second time, to AIG. This is also the estimated amount retailers lose to organized retail crime every year.

When NRF surveyed loss prevention executives about the impact organized theft has on their companies, a large majority agreed the problem has been growing, both in the number of incidents as well as in the severity. Organized retail crime leads to increased prices, threatens the safety of retail employees and the health of customers, and, of course, cuts into the sales of businesses whose margins are already razor-thin.

The Definition Of Organized Retail Crime
As a definition, organized retail crime refers to groups of people engaged in illegally obtaining merchandise in substantial quantities through both theft and fraud for the purpose of reselling. These crime rings generally consist of "boosters," who methodically steal merchandise from retail stores, and fence operators, who convert the product to cash or drugs.

In addition to being sold in flea markets or unauthorized local shops, some products stolen by these groups end up for sale on online auction sites, which is called e-fencing. The problem is so widespread that nearly 70% of retailers say they have identified stolen merchandise or gift cards at both physical fence locations and online auction sites.

Organized crime rings operate as well-oiled machines that travel all over the country, sometimes hitting as many as four states in one day. What they steal and resell, how they sell it, and how much they stand to profit from the sale of these stolen items are all methodically determined before the operation begins. While technology, law enforcement, and store security all play an intricate role in uncovering crime rings, these criminals are smart and sophisticated.

Even in these dire times, many large retailers are spending upwards of $1 million a year per store to combat organized retail crime. Companies have hired and trained teams of experts to focus specifically on organized theft and are working diligently to create partnerships with local and federal law enforcement to create a case against many of these groups.

Merchandise That Poses Rewards Poses Risk
In addition to boosting popular apparel and accessories, electronics, and even home goods, many criminals focus on consumable food and personal care items, which can pose health risks for consumers. Popular targets of organized retail crime rings include Crest Whitestrips, Rogaine, Similac baby formula, razor blades, and pregnancy tests. Having not been stored or managed properly, these items can pose serious health risks for innocent shoppers looking for a good bargain. And, because most of these items are sold "new in box," well-meaning consumers are unaware that what they purchased may be spoiled or expired — and stolen.

From Kansas City to California, retailers are beginning to make headway against organized retail crime groups. One of the most prominent busts involves a couple in Polk County, FL, who is accused of stealing approximately $100 million worth of health and personal care items such as baby formula, over-the-counter medicines, and cosmetics. The case began with an alert loss prevention manager at Publix Supermarkets and ended with the arrest of 18 people after a seven-month investigation. Polk County law enforcement was also responsible for a bust in March, which resulted in the arrest of 13 individuals who stole approximately $18 million worth of baby formula over a seven-year period.

While some leaders in organized crime seek to line their own pockets, others have more sinister motives. Many crime rings support larger criminal organizations involved in considerable criminal activity, including terrorism and drug cartels. Last year, the FBI and other law enforcement officials announced indictments against one of the Gambino crime family's highest-ranking members and 22 other members with crimes ranging from extortion to ticket switching at retail establishments. One suspect obtained employment at the retailer to defraud the company by creating and using false bar code labels and fraudulently issuing credit cards.

In addition to putting employees and shoppers at risk and affecting retailers' bottom lines, organized retail crime has another victim: government. When retail merchandise is stolen rather than sold, sales tax is not collected. State and local governments consequently lose millions of dollars in sales tax revenue each year, with estimates of nationwide losses ranging into the billions. With local and state services facing dramatically tightened and even decreased budgets, the sales tax losses attributed to organized retail crime are hurtful to communities, starving cities and towns of funds necessary for schools, public safety, and infrastructure. Ironically, this also directly reduces the budgets of the law enforcement agencies retailers count on to investigate ORC and other crime.

The NRF Supports New ORC Legislation
Given the magnitude of ORC, retailers have turned to Capitol Hill to get the help they need to fight these professional criminals.

In February, major legislation was introduced in Congress to help law enforcement fight organized retail crime. Introduction of the three bills — the Combating Organized Retail Crime Act of 2009, the Organized Retail Crime Act of 2009, and the E-fencing Enforcement Act of 2009 — shows that Congress is ready to stop treating these perpetrators like petty shoplifters and recognize them for the professional criminals they really are.

While the bills offer different approaches to combating this crime, taken together they would offer a legal definition of organized retail crime and make it a federal crime for the first time, making it easier for federal law enforcement agencies such as the FBI to step in. The legislation would toughen federal sentencing guidelines for criminals convicted of organized retail crime, require operators of online auction sites to cooperate with retailers and law enforcement officials in their investigations, and hold auction sites responsible for the sale of stolen merchandise that could have been prevented.

Federal law with teeth would fight the problem of organized retail crime, protect innocent consumers, and cut criminals off from their unlimited and anonymous access to unsuspecting buyers. If this legislation is enacted, it would give law enforcement greater authority to pursue criminals, make it more difficult to resell stolen goods on the Internet, and prevent criminals from reaping a huge profit from their crimes to fund other criminal enterprises.

Industry Initiatives Proven Effective
While federal laws on organized retail crime would be a major step forward, retailers haven't been sitting still while they wait for Congress to act. In April of 2007, NRF and the FBI launched the Law Enforcement Retail Partnership Network (LERPnet), which is designed to bring local, state, and federal law enforcement agencies together with retailers through its unique information-sharing and crime-tracking capability. Currently, 54 retail companies enter incidents into LERPnet, which helps retailers and law enforcement identify, combat, and prevent organized retail crime.

Additionally, NRF has been working with states to address the issue. NRF developed a package of model legislation on organized retail crime in 2007, and legislatures in at least a dozen states have passed their own laws, with more on the way. State retail associations continue to partner with NRF in their fight against organized retail crime as well.

After NRF releases its annual Organized Retail Crime survey in May, thousands of retailers, service providers, and law enforcement agencies from around the country will gather June 15-17 at NRF's annual Loss Prevention Conference and EXPO in Los Angeles to hear from retailers, as well as federal agents from the Department of Homeland Security, on the latest updates in organized retail crime.

In the face of the hardest economic climate on record, it's safe to say all retailers would welcome the opportunity to get their hands on the $30 billion they lose every year to retail crime. Hopefully, with the support of our federal government, they now stand a chance.


Organized Retail Crime: Scope, Solutions

Physical Security and Loss Prevention in the Retail World | Facebook

Physical Security and Loss Prevention in the Retail World Facebook

‘Retail Shrink’ Could Lose Retailers $115B in 2009 - Retailer Daily

Now mounting to over $100 billion* worldwide, retail shrink from theft, crime, and waste is having a damaging impact on retailers’ profit margins, with over half the losses attributable to point of sale (POS) shrink—loss incurred through cashier error, theft, and fraudulent transactions.

A new report from Datamonitor, “Using Business Intelligence and CCTV to Reduce Shrink in Retail (Strategic Focus),” predicts that global retail shrinkage will climb to almost $115 billion by the end of 2009.
With global retail sales growth expected to be small or even negative, technology such as data mining used in conjunction with CCTV is one of the key solutions being tipped to combat shrink and improve the bottom line; moreover, they have a use beyond loss prevention—marketing and merchandising—according to the report.

“Retailers need to be efficient in dealing with shrink. Loss prevention will be a high priority in the coming years because of the hard business climate, so there will be growing pressure on retailers to invest,” said Christine Bardwell, retail technology analyst at Datamonitor and the report’s author.
“Using technology to uncover internal fraud quickly will enable them to discipline or retrain the staff responsible without further damage to the bottom line.”

Below, a summary of the report, as provided by Datamonitor.

Process Error, ‘Sweethearting’ Biggest Causes of Loss
The three biggest causes of loss at POS are cash theft, fraud, and process error.
“Sweethearting,” a form of theft involving collusion between an employee and customer, (usually a friend or family member), falls under all three categories, because it can involve cash theft and fraud and is very difficult to distinguish from process error.

Retailers agree that process error and sweethearting, combined, form the biggest part of loss incurred at the POS.

‘Retail Shrink’ Could Lose Retailers $115B in 2009 - Retailer Daily

Friends of Ours: Organized Retail Crime

Increase In Shoplifting Rings
Organized retail theft continues as a rising trend, and Megan Boehnke from The Arizona Republic reports on the problem in the Grand Canyon State:
In Arizona and across the nation, police have noticed a sharp rise in organized retail theft. Merchant associations say shoplifting rings account for the majority of the billions of dollars in losses posted by retailers. "It's been a huge problem for a number of years, but it's a lot more organized now," said Michelle Ahlmer, president of the Arizona Retailers Association, who started hearing about the shoplifting rings about a decade ago. * * * Consumers ultimately pay, as product prices rise to cover the retailers' expenses for stolen merchandise as well as the security measures needed, said Ahlmer. Making matters worse for the public is the loss of sales-tax dollars that help pay government services.

Friends of Ours: Organized Retail Crime

Security Industry News: Retailers and FBI Join to Fight Organized Retail Crime

Retailers and FBI Join to Fight Organized Retail Crime
As found on the web: http://www.nrf.com/modules.php?name=News&op=viewlive&sp_id=264NRF: Kathy Grannis, (202) 783-7971 or grannisk@nrf.com RILA: Hannah Abney, (703) 600-2021 or hannah.abney@retail-leaders.org FBI: National Press Office, (202) 324-3691 or npo@ic.fbi.gov Retailers and FBI Join to Fight Organized Retail Crime Washington, April 5, 2007 – In response to an alarming rise in organized retail crime, the National Retail Federation and the Retail Industry Leaders Association, in collaboration with the Federal Bureau of Investigation, have teamed up to launch the Law Enforcement Retail Partnership Network (LERPnet), a secure national database that will allow retailers to share information through its unique web-based design. With LERPnet, retailers and law enforcement will be able to fight back against illegal activity including organized retail crime, burglaries, robberies, counterfeiting, and online auction fraud. The database will launch on April 9, 2007. “Organized theft rings steal billions of dollars of merchandise every year, which victimizes retailers, endangers the safety of retail employees, and raises the price of consumer goods,” said Joseph LaRocca, NRF vice president of loss prevention. “With this system, retailers are banding together with law enforcement to send a clear message to criminals: We will not tolerate your behavior and we will stop you.” LERPnet is expected to become the national standard for sharing retail crime information in a secure and confidential manner, giving companies and law enforcement the ability to collaborate like never before. For more than two years, an extraordinary group of retailers, law enforcement, data privacy specialists and technology experts have combined resources and talent to create the technology platform. “LEPRnet allows retailers and the Law Enforcement community to create a true public/private partnership to address significant criminal activity that not only costs consumers and retailer’s billons of dollars, but causes a significant life safety issue,” said Tim O’Connor, RILA vice president of asset protection. “LERPnet is a proactive and an analytical tool that allows retailers to collaborate with each other as well as law enforcement officials; we can better protect our stores, our brands, our employees and most importantly, our customers.”According to NRF’s 2006 Organized Retail Crime survey, 81 percent of retailers said they have been a victim of organized retail crime. Nearly half (48%) of those polled also had seen an increase in organized retail crime activity in their stores. How LERPnet works Hypothetical scenario: Retailer A is burglarized of 40 laptops. Later that afternoon, the same criminals enter a neighboring state along the same highway corridor and steal dozens of notebook computers from Retailer B. Retailer C, along the same highway but in a different county, is victimized that evening. Under the current system, the incidents are reported separately to local police officers. Law enforcement in different counties and states often does not know about similar nearby incidents since the crime did not occur in their jurisdiction. If a pattern is ever recognized, it is often too late: the thieves have sold the items to a fence operator or have sold them on an online auction site. With LERPnet, retailers will be able to communicate with other companies and law enforcement about crimes occurring in their stores. Companies can report the theft and include information about suspects, getaway vehicles, and identification numbers of stolen products. In their report, retailers can also include photos and video footage to assist in the detention of and prosecution of criminals. Immediately, retailers and law enforcement should be able to connect the dots and suspect that these incidents were related. Because LERPnet allows retailers to share information with law enforcement agencies nationwide, detectives will have the opportunity of researching crimes in neighboring cities, counties and states. FBI Supervisory Special Agent Brian Nadeau, program manager for the FBI’s Organized Retail Theft program, calls LERPnet “a vision of the retail community that will help solve a $30 billion a year problem.” “LERPnet should make it easier for the law enforcement community to track organized retail crime groups and their string of criminal conduct,” said Nadeau. “This database will create a stronger partnership between retailers and law enforcement to tackle a growing problem and disrupt criminal organizations.” The system, programmed by ABC Virtual of West Des Moines, Iowa, uses a secure web interface for data entry, viewing and queries of incidents. Data can be imported from virtually any database and LERPnet already links to case management software programs such as LPSoftware of Palos Hills, Illinois. Additionally, the system allows retailers to set email alerts to be notified of retail crimes in their area, search through reported incidents or flag and monitor the sale of merchandise available on online auction sites. Availability To date, dozens of well known retailers ranging from coffee shops to major department stores are currently using LERPnet to track criminal activities with dozens more waiting to be trained on the system. This summer, law enforcement personnel can access LERPnet through Law Enforcement Online (www.LEO.gov). More information is available at www.lerpnet.com. The National Retail Federation is the world's largest retail trade association, with membership that comprises all retail formats and channels of distribution including department, specialty, discount, catalog, Internet, independent stores, chain restaurants, drug stores and grocery stores as well as the industry's key trading partners of retail goods and services. NRF represents an industry with more than 1.6 million U.S. retail establishments, more than 24 million employees - about one in five American workers - and 2006 sales of $4.7 trillion. As the industry umbrella group, NRF also represents more than 100 state, national and international retail associations. www.nrf.com.
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Security Industry News: Retailers and FBI Join to Fight Organized Retail Crime

CAP Index, Inc. - CAP Index Partners with LP Innovations on National Shrink Database

SAN DIEGO, CA – June 11, 2007 – LP Innovations, a nationwide provider of retail loss prevention solutions, and CAP Index, Inc., the world leader in crime forecasting and loss mitigation analytics, have joined forces to create the National Shrink Database – the retail industry’s first Web-based user interface to provide actual and accurate industry shrinkage information.

Previewed for the first time at the NRF Loss Prevention Conference & Expo (June 11–13, San Diego Convention Center), the National Shrink Database is the first tool of its kind to offer location-specific shrinkage data. Users simply enter an address, mall/plaza name, and ZIP code to benchmark their individual retail locations against those of similar retail segments within the same mall, shopping center, or other geographic location. The database uses actual and timely statistics from the collective membership, and results can be compared at the local, state, and national level. In addition to shrinkage information, users can also research the usage of security measures at the local, state, or national level by retail type.

These new metrics provide retailers with tangible information to enable more accurate budgeting, resource allocation, real estate planning, and overall loss prevention assessments of a retail location.

“For years, the retail industry has relied on databases and reports that provide only general shrink averages on a national scale,” said Steven May, president and CEO of LP Innovations. “The National Shrink Database better serves retailers by providing actual location-specific shrinkage and security information. The ability to use this information as a reference far exceeds any current shrinkage projections in the industry today.”

“The National Shrink Database allows a faster means of determining what successful retailers are utilizing to protect their locations from loss and security-related incidents,” said Jon Groussman, president and COO of CAP Index, Inc. “With better information, retailers can make better decisions, and can secure the future of their businesses.”

LP Innovations and CAP Index expect the National Shrink Database to be formally released to the retail industry by fall 2007. Preview demos are available at LP Innovations’ booth, #507, and CAP Index’s booth, #615, at the NRF LP Conference & Expo. Editors interested in a show or post-show briefing with Steven May and Jon Groussman can contact Megan Maguire Kelly at 610-269-2100, ext. 225, or Emily DiTomo at 610-649-9292.



CAP Index, Inc. - CAP Index Partners with LP Innovations on National Shrink Database

Expert: Retail Security Products - Sales/Marketing Expert & ROI Analyses Expert & Litigation Support Expert Consultant, Expert Witness

Expert: Retail Security Products - Sales/Marketing Expert & ROI Analyses Expert & Litigation Support Expert Consultant, Expert Witness

Measuring the value of CCTV, EAS and data mining tools - Hi-Tech Security Solutions

Measuring the value of CCTV, EAS and data mining tools - Hi-Tech Security Solutions

Essentials of Retail Loss Prevention - Maintaining Hard Earned Profit — University of Louisville

Essentials of Retail Loss Prevention - Maintaining Hard Earned Profit — University of Louisville

David Gorman and Associates

David Gorman and Associates

Loss Prevention Software Solutions | Epicor

Loss Prevention Software Solutions Epicor

PCG Solutions - Providing Solutions Focused on Retail Loss Prevention - Lexington, Kentucky

PCG Solutions - Providing Solutions Focused on Retail Loss Prevention - Lexington, Kentucky

Loss Prevention Associate - Von Maur - Iowa City, IA | Indeed.com

Loss Prevention Associate - Von Maur - Iowa City, IA Indeed.com

Loss Prevention, Auditing & Safety

Loss Prevention, Auditing & Safety

Loss Prevention: What Do the Mob, eBay and Winona Ryder Have in Common? - CSO Online - Security and Risk

Loss Prevention: What Do the Mob, eBay and Winona Ryder Have in Common? - CSO Online - Security and Risk

P & L Solutions - Long Term Business Solutions for More Profitable Companies

P & L Solutions - Long Term Business Solutions for More Profitable Companies

5th Cargo Claims and Loss Prevention Conference

5th Cargo Claims and Loss Prevention Conference

Retail Loss Prevention and Analytics Software

Retail Loss Prevention and Analytics Software

Michigan Private Investigator, PI, Michigan Security Consultant, and private investigator & security negligence expert witness at Loss Prevention Concepts, Ltd.

Michigan Private Investigator, PI, Michigan Security Consultant, and private investigator & security negligence expert witness at Loss Prevention Concepts, Ltd.

Journal of Loss Prevention in the Process Industries - Elsevier

Journal of Loss Prevention in the Process Industries - Elsevier

Home

Home

Retail Loss Prevention, Employee Theft, Shoplifting, Arrest, security consultant, Chris McGoey, retail loss prevention expert

Retail Loss Prevention, Employee Theft, Shoplifting, Arrest, security consultant, Chris McGoey, retail loss prevention expert

The Loss Prevention Foundation

The Loss Prevention Foundation

Coalition Against Organized Retail Crime

Coalition Against Organized Retail Crime

National Retail Federation - NRF 2009 Organized Retail Crime Survey

National Retail Federation - NRF 2009 Organized Retail Crime Survey

Tech and the fight against organized retail crime - CNET News

Tech and the fight against organized retail crime - CNET News

New Bills Aim to Reduce Organized Retail Crime

New Bills Aim to Reduce Organized Retail Crime

Retail losses rise as shoplifters go high tech

Retail losses rise as shoplifters go high tech

S. 470: Combating Organized Retail Crime Act of 2009 (GovTrack.us)

S. 470: Combating Organized Retail Crime Act of 2009 (GovTrack.us)

Organized Retail Crime a Burden for All - Walmart Community Action Network

Organized Retail Crime (ORC) is a major issue for Walmart and a growing problem for the nation. ORC involves sophisticated crime rings, who will dispatch thieves to several stores a day to steal specific items and then take those items and sell them, usually on the Internet. They also endanger our associates in a number of ways, from dangerous diversions to outright threats.

Current legislation introduced by Congressman Brad Ellsworth (D-IN), Congressman Bobby Scott (D-VA), and Senator Richard Durbin (D-IL) that will focus on this crime, specifically related to greater accountability among online Internet auction sites. Walmart is a founding member of a broad coalition of retailers — including Target, Safeway and Home Depot — that is focused on tackling this problem. The Coalition Against Retail Crime will bring attention to this growing challenge and will work with policy makers in crafting and passing legislation that will help stop this criminal activity.
Please visit www.stopretailcrime.com and learn more about this important issue and the efforts in Congress to address the problem.

Organized Retail Crime a Burden for All - Walmart Community Action Network

Last-Ditch Effort to Scuttle RIAA File Sharing Verdict | Threat Level | Wired.com

Last-Ditch Effort to Scuttle RIAA File Sharing Verdict
By David Kravets August 31, 2009 | 4:05 pm | Categories: RIAA Litigation, The Courts, intellectual property

Jammie Thomas-Rasset
Much of Jammie Thomas-Rasset’s legal arguments following this summer’s $1.92 million Recording Industry Association of America file sharing jury verdict against her don’t have much weight or precedent.

Clearly, that a jury in June ordered her to pay $80,000 for each of the 24 music tracks she infringed on Kazaa is outrageous and shocks the conscience – and there’s no rational relationship between the amount of harm suffered by the recording industry and the award granted.

Thomas-Rasset wass the nation’s first sharing defendant to go before a jury. The RIAA has filed more than 30,000 lawsuits targeting individuals, and most have settled out of court.

That said, in their latest court papers, (.pdf) Thomas-Rasset’s legal team again is sticking to the argument that the whopping jury award is a due process violation – all in a bid perhaps to secure a third trial. (The first ended in a $222,000 judgment against the Minnesota woman, but a mistrial was declared after the judge conceded he gave faulty jury instructions)

Still, it is true that the U.S. Supreme Court and the lower courts have repeatedly reduced lofty jury awards based on so-called due process breached. But those were punitive damages awards, not statutory damages awards.

Those punitive damage reductions, including the Exxon Valdez oil spill disaster, do not apply to Thomas-Rasset’s case – although Thomas-Rasset’s defense team suggests there’s always a first.

Punitive damages are the amount a jury awards to punish conduct of an offender. Up until recently, there generally has been no limit. But the Supreme Court has suggested that punitive damages should be limited to about no more than 10 times the amount of actual damages a jury awards.

Higher ratios, the courts have said, are due process breaches because defendants have no notice ahead of time about the lofty financial consequences of their actions.

But the law is crystal clear when it comes to the Copyright Act, the law under which the RIAA sued Thomas-Rasset. Juries can award up to $150,000 per violation. Punitive damages do not fall under the Copyright Act.

One of the only points in Thomas-Rasset’s brief that makes a compelling argument is that the Copyright Act, when amended in 1999, didn’t conceive of non-commercial cases the RIAA has been bringing the past six years.

“The notion that Congress decided that the award of statutory damages in this case was somehow appropriate or tailored to ensure deterrence is a fiction that the plaintiffs would have this court adopt. The Congress that enacted the statutory-damages provision of the Copyright Act could not have had the kinds of illegal but non-commercial music downloading here at issue in mind,” defense attorney K.A.D. Camara argues in recent briefs.

It’s true: There’s no doubt that a $1.92 judgment over $24 worth of music provides the clearest example yet of the abuses made possible by the 1976 Copyright Act, which Congress modified in 1999, at the behest of Hollywood and the recording industry, to carry a maximum penalty for a single infringement of up to $150,000.

That statutory penalty was intended to bankrupt large-scale commercial pirating operations, like organized DVD and CD bootleggers — not to put individuals like Thomas-Rasset in debt for the rest of their lives.

Still, the RIAA is crying foul.

After Thomas-Rasset refused to settle out of court, the industry is now demanding that Thomas-Rasset pay up. The RIAA is also seeking U.S. District Judge Michael Davis to issue an injunction barring her from future file sharing.

“Plaintiffs’ evidence showed that defendant knew what she was doing was wrong, that she did it anyway, and then lied about it for years. Through two trials, defendant still shows no remorse whatsoever for her actions and has made it clear that she has no intention of ever satisfying any portion of the judgment against her,” Timothy Reynolds, the RIAA’s attorney, wrote (.pdf) Davis.

Judge Davis of Minnesota could rule on the retrial and injunction issue any time.

Last-Ditch Effort to Scuttle RIAA File Sharing Verdict | Threat Level | Wired.com

How antishoplifting tag is made - Background, Raw materials, The manufacturing process

Antishoplifting Tag
Background
Ronald Assas' frustration with shoplifters came to a head the day he watched a man slip two bottles of wine under his shirt and run out of an Akron, Ohio, supermarket. Assas, the store manager, sprinted out the door in pursuit of the thief. Unable to catch the man and unsure what he would have done if he had caught him, Assas returned to the store. He commented that anyone who could figure out a way to deter such thieves would make a fortune. One of those who heard his remark was his cousin, Jack Welch. Welch was already working on electronic tagging of products, and he took up Assas' challenge. Several weeks later, Welch returned to the store with a 2 ft (61 cm) square of cardboard with a large foil tag taped to it, along with some bulky boxes filled with electronic components he had assembled in his garage. He showed Assas how an alarm would sound if someone tried to carry the tag out the door between the boxes. A couple of years later, Assas founded Sensormatic Electronics Corporation, which still holds a 65% share of the worldwide electronic security market.

Since they were first marketed in 1966, antishoplifting tags have become so popular that a billion dollars worth of them were manufactured last year to combat thefts that cost retailers 10 billion dollars a year. Using the tags is one of the most effective deterrents available to store owners. Some tags are hard tags or buttons that are attached to merchandise with pins that can be removed only with a special tool; these tags can be reused repeatedly by the merchant. Other tags look like thick, plastic labels; these are not removed from the merchandise during purchase, but they are electronically deactivated so the product can be taken from the store without activating the alarm. Tags of this type are disposable, although they can be reactivated if the purchased item is returned to the store for exchange or refund.

Within the retail industry, the devices are generally known as security tags or Electronic Article Surveillance (EAS) tags. The technology favored for modern tags involves a set of gates that transmits pulses of a low-range radio frequency. Inside each security tag is a resonator, a device that picks up the transmitted signal and repeats it. The set of gates also contains a receiver that is progranmned to recognize whether it is detecting the target signal during the time gaps between the pulses being broadcast by the gates. Sensing a signal during these intervals indicates the presence of a signal being resonated (rebroadcast) by a security tag in the detection zone. When this occurs, the gates sound an alarm; in some systems, the alarm sound is accompanied by a flashing light.

For the first 20 years of their history, security tags used swept radio frequency (swept-RF) technology, which relied on a semiconductor diode to retransmit a high-frequency radio signal from the detection gates. Although the tags worked reasonably well, they had certain limitations. For instance, the older devices could be defeated by placing tagged merchandise in foil-lined pouches that could block the microwave signals, and they were not very reliable when used to tag metal or foil-wrapped products. Furthermore, widely spaced antenna gates (more than 4.5 ft[l.4 m]) were not effective, and false alarms could result when the deactivation process failed.

In the mid-1980s, acousto-magnetic technology was developed to overcome certain limitations of the swept-RF devices. These systems operate with low frequency radio waves that are not blocked by metal foil wrappings. Tags contain coils of an appropriate magnetic metal that resonates in response to the interrogation signal. Although these types of systems are somewhat more costly than those using the older technology, they work more reliably over wider detection zones.

Hard tags that are commonly attached to clothing items are difficult to remove without damaging the product. Several innovations have been introduced over the years to make security tags more effective. For example, ink tags, which were developed in the early 1980s, contain small vials of dye that break if the tag is forcibly removed from the garment. The resulting spillage not only spoils the tagged apparel, but it stains the thief s hands for easy identification. Another design causes a tag to sound a loud alarm if it is tampered with.

Disposable, label-style security tags are becoming increasingly popular, particularly when the tags are inserted inside the product or its packaging by the manufacturer. This "source tagging" makes the devices less accessible for tampering or premature removal, as well as eliminating the time spent by retail clerks to attach and remove tags.

Raw Materials
Hard tags are formed from durable plastic, and the pin used to attach the tag to the product is made of nickel-plated steel. Disposable tags are formed from more flexible plastic, such as polypropylene. Conductive and non-conductive components of the resonator units include such materials as copper, aluminum, cellulose acetate, acrylic, and polyester.

The Manufacturing
Process
The following description applies generically to reusable hard tags; details may vary among manufacturers. Disposable security tags are manufactured in a similar manner, except that the resonator is sealed inside a flexible plastic envelope, which may be backed with adhesive.

The case
1 The plastic casing for the tag is vacuum formed or injection molded. In the former process, plastic that has been softened by heat is drawn into a mold by creation of a vacuum. In the latter, semi-molten plastic is squirted under pressure into a cooled mold, where it hardens quickly.
The resonator
2 There are several ways a resonator can be made. One technique involves laminating copper or aluminum coils onto a web of nonconductive material. This is done by passing the adhesive-coated base web between rollers that apply a spiral-shaped mask of non-sticky material, after which the web passes through a dryer to set the mask. A thin, flat strip of metal is then laminated to the uncoated (sticky) portion of the base web. The laminated strip subsequently passes between a backup roller and a cutting roller, which cuts through the metal but not the base web, disconnecting the individual metal coils from one another. This masking and laminating process is repeated, adding a layer of web with metal spirals atop the first layer so that the two layers of spirals are face to face, separated by a layer of dielectric (nonconductive) material. Finally, the laminated strip is cut into individual resonators that can be inserted into security tags.

Another type of resonator is made by winding insulated (encased in plastic) copper wire into a flat spiral of about a dozen loops, with the ends of the wire connected through a diode. One company makes a button-shaped tag that can operate with a very small-diameter coil because the wire is spiraled into a cone shape.

The lock
3 After the resonator is inserted into the security tag's plastic casing, the locking mechanism is installed. This usually consists of a clutch that will accept and lock a metal pin that can be inserted through a... ->> Continue Reading Full Article Here

How Anti-shoplifting Devices Work - Acousto-magnetic System

Acousto-magnetic System

The newer acousto-magnetic system, which has the ability to protect wide exits and allows for high-speed label application, uses a transmitter to create a surveillance area where tags and labels are detected. The transmitter sends a radio frequency signal (of about 58 kHz) in pulses, which energize a tag in the surveillance zone. When the pulse ends, the tag responds, emitting a single frequency signal like a tuning fork. While the transmitter is off between pulses, the tag signal is detected by a receiver. A microcomputer checks the tag signal detected by the receiver to ensure it is at the right frequency, is time-synchronized to the transmitter, at the proper level and at the correct repetition rate. If all these criteria are met, the alarm occurs.


HowStuffWorks "Acousto-magnetic System"

09/01/97 SENSORMATIC: THE ALARMS ARE STILL GOING OFF

BusinessWeek, 9/01/1997

SENSORMATIC: THE ALARMS ARE STILL GOING OFF
Faced with fraud charges, the security company began an overhaul 18 months ago. Yet profits keep plunging
In 1994, Sensormatic Electronics Corp. was on top of the world. The Boca Raton (Fla.) maker of retail and commercial security systems boasted annual revenue growth of 20% or more for 30 consecutive quarters as its stock soared to 37 5/8. Sales, then $487 million, reached $1 billion this year.

Yet insecurity might better describe the company these days. Its stock has slumped below 13. Sensormatic is embroiled in a Securities & Exchange Commission investigation and a shareholder class action stemming from questionable accounting practices that surfaced two years ago. The California Public Employees' Retirement System in February placed Sensormatic on its list of the 10 worst-performing companies and said, ''its success is uncertain.''

NEW SHOCK. Now, 18 months into a major overhaul, the bad news keeps getting worse. A new management team, led by Chief Executive Robert A. Vanourek, has faltered in delivering earnings growth and restoring credibility. The latest shock came on Aug. 14, when Sensormatic suspended dividends, announced a $65 million after-tax charge to revamp its troubled European division, and cut 1,200 jobs, 19% of its workforce. Including the charge, the company reported a $21.4 million loss in fiscal 1997 ended June 30, after posting a $97.7 million loss in 1996, including a $118 million restructuring charge. More troubling: Excluding the write-off, net income plummeted to $13.2 million in 1997 from $20.5 million in 1996. Revenues rose only 3.1%, to $1.02 billion.

Vanourek attributes the poor results to investments in infrastructure and training and legal expenses rather than pricing pressures in the dogfight it faces with its chief competitor, Checkpoint Systems Inc. in Thoroughfare, N.J. ''We could have had higher earnings if we had not gone with the reinvestment program,'' says Vanourek, who joined Sensormatic in October, 1995, as president and became CEO last August. He concedes past problems, especially Sensormatic's structural shortcomings: poor or nonexistent financial and management controls, aging computer systems, and runaway expenses. ''The job is certainly more challenging than anyone anticipated in 1995,'' he says. But he insists the company can achieve 15% annual growth by 2000.

''BLACK HOLE'' IN BRITAIN. Vanourek must also cope with fallout from the tenure of Ronald G. Assaf, Sensormatic's founder and former CEO, who remains board chairman. After the accounting irregularities surfaced in 1995, an Ernst & Young report said that company officials, including Assaf, knew that ''out-of-period'' revenue--recorded after the reporting deadline--was being recorded improperly, requiring a restatement of 1995 third-quarter results. Computer clocks had been reset to make it appear revenues had been recorded on time. And shipments to warehouses were counted as sales. Assaf says amounts involved were ''immaterial.''

Internal probes revealed other accounting and reporting problems, especially in Britain, which an internal memo termed a ''multimillion pound black hole.'' Such actions as counting revenue twice for products shipped through two warehouses overstated profits by at least $7.2 million included in 1996 writedowns. The class action, filed in 1995, contends that accounting irregularities enabled Sensormatic to maintain its growth while Assaf, other senior executives, and some board members profited by selling shares. While conceding the out-of-period shipments, the company and individual defendants, including Assaf, have denied any fraud.

While much of the shareholder suit is sealed, some public documents raise questions about how far knowledge of the improper accounting extended. Former Chief Financial Officer Michael E. Pardue, who resigned in March, 1995, months before the accounting problems became public, testified in an SEC deposition he had mentioned the out-of-period shipments to longtime board members James E. Lineberger and Jerome M. LeWine. Both Lineberger and LeWine, through company counsel, dispute Pardue's testimony and deny any prior knowledge. The two remain directors. Pardue could not be reached for comment, but in replying to the suit he denied wrongdoing.

Vanourek and new CFO Garrett Pierce are reorganizing financial systems and striving to clean up Sensormatic's image. They recruited two new directors with solid reputations: former Time Inc. CEO J. Richard Munro and Wayland R. Hicks, former CEO of Nextel Communications Inc., who joined in June.

Some of Sensormatic's harshest critics give the new team some credit. ''To a decent degree, they've cleaned up the accounting,'' says analyst Howard A. Rosencrans of HD Brous & Co. He is a skeptic on the company's long-term viability, given the competition from Checkpoint. Checkpoint has recently ratcheted up pressure with retail store tags that undercut Sensormatic's price--under 2 cents vs. less than 1 cents for Checkpoint.

Vanourek acknowledges the Aug. 14 moves hurt. But he is unperturbed. He has been through worse, he recalls, as CEO at Dallas-based Recognition Inc. That company was the target of a Justice Dept. probe as a former CEO faced charges, later dismissed, of influencing a postal service contract. Although the company was nearly out of cash, he turned it around. ''I've been through high growth, no growth, federal issues, lawsuits--they have kind of prepared me for what we have today--this is now showtime.'' Given Sensormatic's travails, it should attract a big audience.

By Gail DeGeorge in Boca Raton, Fla.

09/01/97 SENSORMATIC: THE ALARMS ARE STILL GOING OFF