Organized Retail Crime: A Primer and 2023 Update

As law enforcement in the 2020’s focuses on the rise in drug trafficking and other offenses, criminal organizations have increasingly turned to retail crime to generate illicit profits by using internet-based tools to steal merchandise, sell stolen goods, and move money. Simply stated, organized retail crime and the related losses have reached epidemic proportions for American retailers.

 What Is Organized Retail Crime: A Primer

Organized retail crime (ORC) occurs when criminals exploit the retail sector to commit large-scale theft. These criminals typically target high-value items, such as electronics or designer clothing, to resell them for profit.

This type of crime typically occurs in two phases: the initial theft and the subsequent reselling of stolen goods. During the initial theft stage, a group of criminals will make a coordinated effort to steal items from a particular store or chain. This theft can occur through a variety of methods, ranging from standard shoplifting to flash mobs. ORC typically focus on stealing high-value items that can be easily sold for a profit. Electronics such as tablets, smartphones, and laptops are particularly popular targets. Clothing, luxury items (such as watches or handbags), cosmetics, food, and alcohol are also common targets of organized retail crime.

After the merchandise is stolen, the second stage of ORC typically occurs. In this stage, the stolen items are sold to buyers either directly or through other intermediaries. These intermediaries are typically pawn shops or online marketplaces, such as Amazon and eBay. Online marketplaces have become an increasingly attractive destination for criminals looking to move stolen merchandise quickly and anonymously.

ORC poses a serious threat to businesses in the United States, costing them billions of dollars annually. This criminal activity can have a major impact on a business’ bottom line and its ability to remain competitive in the marketplace. In some cases, the losses can be so great that some businesses must close their doors, leading to job loss and economic hardship in the communities affected.

Not only does ORC result in lost sales for retailers, but it also drives down prices for legitimate products sold on online marketplaces due to the influx of counterfeit and stolen goods being sold at heavily discounted prices. To further complicate matters, consumers might not even realize they are buying stolen merchandise; as a result, they may unknowingly contribute to the success of ORC.

 What Is the Status of Organized Retail Crime in 2023

Organized retail crime continues to be a growing problem in the United States, contributing to greater losses for businesses every year. According to the National Retail Federation’s 2022 National Retail Security Survey, retailers saw an average 26.5% increase in organized retail crime (ORC) incidents compared to the previous year. It is estimated that organized retail crime costs U.S. retailers $720,000 for every $1 billion in sales – up 50% since 2015. This inevitably translates into tens of billions of dollars lost by retailers.

In addition to lost merchandise and revenue, retailers have also seen increasing amounts of violence and aggression associated with ORC. Retail crime groups have been reported using threats and acts of violence, sometimes escalating to the use of weapons. In 2021, 8 in 10 retailers noted an increase in violence against employees by customers.

While progress has been made in recent years to mitigate the damage of ORC on businesses, cybercrime and other 21st Century threats have made controlling ORC immensely complicated. New technological developments have made it easier for criminals to target multiple stores at once and take advantage of unsuspecting customers. Due to the increasingly complex and clandestine nature of ORC, prosecutors have experienced many difficulties in securing convictions against these criminals.

Where Are Retailers Falling Down When It Comes to Organized Retail Crime

Many businesses have struggled to adapt to the ever-evolving nature of ORC, leaving them susceptible to major revenue and product losses. While it is hard to pinpoint one specific cause for a business’ increased vulnerability to ORC, there are several factors that can put companies at a higher risk of experiencing this type of crime. These factors typically include:

1. Outdated Security Systems: Many retailers still have outdated security systems, which makes it easier for criminals to perpetrate organized retail crime due to new technological developments.
2. Understaffing: Retailers often suffer from understaffing, resulting in fewer employees who can properly monitor and prevent shoplifters.
3. Lack of Training: Without proper training, store employees may not be able to recognize the signs of criminal activities or know how to respond appropriately when these activities are being committed.
4. Online Theft: With the rise of e-commerce, online theft has become a major issue for retailers. Cybercriminals can easily access customer data and steal from companies.
5. Difficult to Prosecute: Due to the complexity and clandestine nature of organized retail crime, it is often difficult for prosecutors to secure convictions. This makes it difficult for retailers to seek legal retribution and may result in more losses.

Many retail criminals are committing theft using the same techniques that have been used for decades but have modified them to adapt to more sophisticated markets. Thus, utilizing loss-prevention strategies currently in place by adapting them to these increasingly advanced retail threats are crucial for businesses to succeed in the fight against ORC. By staying up to date on data and analytics related to ORC, businesses can identify the areas in which they are the most vulnerable to experiencing retail crime.

 Where Are Retailers Improving

To combat organized retail crime, some retailers have turned to more sophisticated technologies. These technologies include anti-theft systems such as RFID tagging and enhanced video surveillance that includes facial recognition software. Additionally, retailers have begun using tracking technologies and analytics to monitor inventory movement to assist in detecting suspicious activities. Other technologies such as electronic article surveillance and artificial intelligence-based analytics have also been utilized to detect potential shoplifters. Furthermore, many retailers have updated their software systems to alert store personnel of unauthorized access or attempted theft.

Many businesses have gone beyond utilizing advanced technology and have adopted new hands-on approaches to dealing with ORC. More comprehensive employee training methods have been implemented in companies across the United States to specifically target the growing complexity of ORC. This ensures that employees are better equipped to manage retail crimes and prevent losses before they occur.

Given the severity of this problem, law enforcement agencies across the country have joined retailers in taking steps to combat ORC. They have implemented measures such as increased surveillance, data sharing between retailers and police, and more aggressive prosecution of these types of crimes. These efforts have led to positive changes that have provided better protection for businesses against retail crimes.

Online marketplaces have also increased their focus on monitoring suspicious activity and have implemented new policies to prevent stolen items from being listed on their sites. These measures not only protect retailers from losing profit from stolen goods, but they have also protected consumers from contributing to the growth of ORC by safeguarding them from unknowingly purchasing stolen goods. These efforts have been effective in reducing the amount of stolen merchandise being resold online.

Helpful links illustrating where retailers are improving in their efforts to curb ORC:

https://www.genetec.com/blog/industry/how-can-retailers-combat-organized-retail-crime

https://nrf.com/blog/retailers-increase-efforts-fight-organized-retail-crime

https://www.futureofbusinessandtech.com/retail-technology/the-future-of-retail-loss-prevention-technology/

What Lawmakers Are Doing 

Recognizing the adverse impact organized retail crime is having on retailers, Congress has been working to implement legislation to address ORC. Coordinating efforts between retailers and Congress has been crucial in efforts to deter retail criminals and in efforts to assist prosecutors in convicting these crimes.

Senator Chuck Grassley (R-Iowa), a senior member of the Senate Judiciary Committee, and Senator Catherine Cortez Masto (D-Nev.) have partnered together to craft legislation that targets the rise in flash mob robberies and intricate retail theft schemes hampering retailers. The Combating Organized Retail Crime Act of 2023 establishes a coordinated multi-agency response and creates new tools to tackle evolving trends in organized retail theft.

This new legislation facilitates a unified government and industry collaboration to address this trend. As well, this bill establishes a Center to Combat Organized Retail Crime at Homeland Security Investigations that combines expertise from state and local law enforcement agencies as well as retail industry representatives. It also creates new tools to assist in both the federal investigation and prosecution of organized retail crime while assisting retailers in recovering lost goods and revenue.

The Combating Organized Retail Crime Act is supported by the National Retail Federation, the Retail Industry Leaders Association, the U.S. Chamber of Commerce, ICSC, the Peace Officers Research Association of California, the Federal Law Enforcement Officers Association, Sergeants Benevolent Association NYPD and the PASS (Protect America’s Small Sellers) Coalition.

A copy of the legislation can be found here.

A summary of the legislation can be found here.

Conclusion

Additional helpful resources regarding Organized Retail Crime:

“Organized Retail Crime,” National Retail Federation: https://nrf.com/advocacy/policy-issues/organized-retail-crime

“Why It’s Hard to Buy Deodorant in Manhattan,” The Economist, November 24, 2022: https://www.economist.com/united-states/2022/11/24/why-its-hard-to-buy-deodorant-in-manhattan

“Rite Aid Bosses Blame Out-Of-Control NYC Shoplifting for $5M Revenue Hit,” New York Post, September 30, 2022: https://nypost.com/2022/09/30/rite-aid-executives-bemoan-out-of-control-nyc-shoplifting-at-stores/

Christian Stegmaier is chair of Collins & Lacy’s Retail & Hospitality Practice Group in Columbia, South Carolina. With nearly 25 years in practice, Christian maintains a state and national practice representing the leaders in retail, hospitality, live music and entertainment promotion and presentation, amusement and specialty attractions, and private clubs. He is a member of the American Board of Trial Advocates, as well as DRI Retail & Hospitality (past chair), Academy of Hospitality Industry Attorneys, International Amusement & Leisure Defense Association, and CLM. Christian is also an active appellate advocate, having made over 45 appearances before the South Carolina Supreme Court, South Carolina Court of Appeals, and Fourth Circuit in Richmond. Christian can be reached at cstegmaier@collinsandlacy.com or 803-255-0454 (direct) or 803-467-9699 (cell).

 Special thanks to McKenna Bright, undergraduate intern at Collins & Lacy, for her helpful contributions to this article.