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/