Despite investing in new technology, tightening return policies and other efforts, organized crime rings continue to plague the retail industry.
The extent of the problem is reflected in the National Retail Federation’s 14th annual ORC study, which found that 92% of companies surveyed had been a victim of organized retail crime (ORC) in the past year and 71% of such incidents were increasing. Losses averaged $777,877 per $1 billion in sales, up 7% from last year’s previous record of $726,351.
Retailers attributed the increase to the easy online sale of stolen goods, gift card fraud, shortage of staff in stores, and demand for certain brand name items or specific products. To make matters worse, a number of states have increased the threshold for a theft to be considered a felony. This means criminals can steal a larger quantity of goods while keeping the crime a misdemeanor and avoiding the risk of higher penalties that come with the commission of a felony.
While online fencing has increased over the years, retailers say 60% of recovered merchandise, on average, is found at physical locations. Some ORC activity happens before merchandise ever reaches stores, with 29% of retailers saying they had been the victim of cargo theft that occurred along their supply chains. The good news is this number continues to decline — it’s down from 40% last year, and 44% the year before.
While at least 34 states have ORC laws, 73% of retailers surveyed support the creation of a federal ORC law, noting that ORC gangs often operate across state lines.
Return fraud also continues to pose a serious threat to the retail industry. Retailers estimated that an average 11% of their annual sales will be returned this year, and that 8% of those returns are likely to be fraudulent.
An estimated 12% of returns will not include a receipt, and 21% of those are expected to be fraudulent. In addition, 38% reported in an increase in online purchases returned to a bricks-and-mortar location, and 29% cited an increase of those returns being fraudulent.
During the holiday season, retailers expect 11% of sales to be returned, on average. This is down from 13% last year, and that 10% of the returns will be fraudulent, down from 11% last year.
“Retailers continue to deal with increasing challenges and complications surrounding organized retail crime,” NRF VP of loss prevention Bob Moraca said.
“These criminals find new ways to expand their networks and manipulate the retail supply chain every day,” he added. “The retail industry is fighting this battle by upgrading technology, improving relationships with local law enforcement and taking steps such as tightening return policies, but it is a never-ending battle.”