On 01 November 2023, K2 Integrity and the National Retail Federation hosted a webinar on the impact of organized retail crime (ORC). Jeanne Meserve moderated the discussion with panelists Mark Skertic, Managing Director at K2 Integrity; David Johnston, Vice-President, Asset Protection and Retail Operations at the National Retail Federation; and Adam Parks, Assistant Special Agent in Charge at the Department of Homeland Security – Homeland Security Investigations (DHS-HIS). To watch a recording of the full webinar, click here.
ORC is more than just shoplifting; the crimes perpetrated through ORC are meticulously planned and complex and intricate in their scope. ORC touches all levels of retail and ranges in scope and scale, targeted product, and impact across the economy and retail industry. The larger players running these crime groups operate as a business, with structure, hierarchy, and the means to move product back into commercial channels. The retail ecosystem provides various “nodes” of theft from organized retail groups, including:
- Cargo/supply chain theft
- Delivery theft
- Shoplifting
- “Smash and grab” theft
- Burglary/break-ins
- Gift card scams
- Online triangulation funds
Drivers of ORC
The difficulty of solving for ORC is that there is no one driver and thus no one solution. Some examples of the various drivers at play include:
- Availability of high-demand items: Items commonly targeted for theft include apparel, health and beauty items, infant products, electronics, laundry products, and office supplies. Only a small percentage of ORC groups target luxury items.
- Intelligence shared online: Online forums provide information about retailer security practices and policies for prosecuting offenders, details about store layouts, and felony-theft levels in different jurisdictions.
- Access to resale channels: Stolen goods can be sold in a variety of ways: to legitimate retailers buying from disreputable suppliers; via pop-up stores, flea markets, and other open-air venues; and through online platforms, including peer-to-peer venues. The growth of e-commerce allows for a level of anonymity with the availability of electronic payment options.
- Available workforce: Young people, drug addicts, and human trafficking victims are among those used as boosters—individuals who do the actual stealing. Sophisticated operations divide responsibilities, with cleaners removing security devices and tags, fences handling the sale of stolen goods, and money launderers processing illicit proceeds.
- Involvement of Daigou: Daigou is a Chinese term for shopping on the behalf of someone. With China’s recent growth in the global economy, there has been an increased demand for luxury goods or other goods not easily acquired within China. Therefore, there is an opportunity for bad actors to meet that demand with stolen goods by listing themselves on social media platforms as American purchasing agents who can acquire goods on behalf of the customer. It’s estimated there are roughly 1 million daigou in the United States.
Types of Impact
The loss of physical goods leaving the store is often the first thing people think of when considering the impact of ORC, but its effect is actually much more broad.
- Economic costs: ORC was the primary contributor to the $112.1 billion in retail “shrink” losses reported in 2022.
- Threats of violence: Incidents that involve “smash and grab” methods or other violent tactics present a public safety concern. Threats of assault or attacks on retail workers put their well-being at risk, affect staff morale, and can lead to employee turnover.
- Public health and product safety risks: A serious health risk is present when perishable items such as infant formula and medication are improperly stored or mishandled. When “cleaning” a stolen item for repackaging and resale, expiration dates, instructions, warnings, and other critical information may be removed from boxes and bottles.
- Links to other illegal activities: ORC is a source of income for street gangs. Drug addicts are sometimes drawn into ORC groups as a way of earning money to support their habits. Trafficked persons, often from Central and South America, are drawn into ORC networks and forced to work for them as a way of repaying debts owed to human smugglers.
The impact of theft and associated violence across the retail industry has required retailers to take more aggressive actions to maintain a safe and secure shopping environment. According to the NRF National Retail Security Survey, retailers have taken specific measures to counter the cost of loss due to retail theft and violence, with 45% reducing store operating hours, 30% reducing or removing specific merchandise, and 28% closing store locations.
Solution Options
With so many different drivers and the scale of the impact, there is no one solution to the issue of ORC. Technology may offer solutions to better identify and respond to ORC. Security has evolved from cameras and security tags to using artificial intelligence for real-time tracking. An increasing number of states are passing laws increasing penalties for ORC offenses and establishing ORC task forces to foster collaboration between the state Attorney General’s office and local law enforcement. The Inform Consumers Act, passed by Congress this year, requires online marketplaces to verify and disclose the identity of high-volume third-party sellers. The Combating Organized Retail Crime Act has been introduced in Congress and has bipartisan support. It would establish a new Organized Retail Crime Coordination Center to facilitate information sharing between federal, state, and local law enforcement.
Homeland Security Investigations has elevated ORC to a national strategic priority and is taking a number of actions to combat ORC activity across its 250+ domestic field offices, 85 offices abroad, and more than 7,000 Special Agents. HSI works with private sector partners in tackling ORD; email HSI or use the QR Code below to get more information and access resources.
Only by private entities and local and federal law enforcement agencies working together, supported by federal and state laws targeting ORC, will ORC start to diminish.
Additional Resources
