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325 7th Street, NW
Suite 1100
2013 Organized Retail Crime Survey
www.lpinformation.com/organizedretailcrime
NRF 2013 Organized Retail Crime Survey
2
About the Survey
The National Retail Federation’s Organized Retail Crime survey serves as a tool
to bring awareness to a pervasive crime occurring in cities across the country.
The survey serves to educate all levels of retail, law enforcement, public policy
makers and the media. Completed by 77 retail loss prevention executives
representing department/big box stores, discount, drug, grocery, restaurant and
specialty retailers, this is NRF's ninth annual survey and was conducted from
May 6-21, 2013. www.lpinformation.com/organized-retail-crime
About the National Retail Federation
As the world’s largest retail trade association and the voice of retail worldwide,
NRF represents retailers of all types and sizes, including chain restaurants and
industry partners, from the United States and more than 45 countries abroad.
Retailers operate more than 3.6 million U.S. establishments that support one in
four U.S. jobs – 42 million working Americans. Contributing $2.5 trillion to
annual GDP, retail is a daily barometer for the nation’s economy. NRF’s This is
Retail campaign highlights the industry’s opportunities for life-long careers, how
retailers strengthen communities at home and abroad, and the critical role that
retail plays in driving innovation. www.nrf.com
Media and General Inquiries:
Kathy Grannis Lpinformation.com
Sr. Director, Media Relations, NRF [email protected]
202-626-8189, [email protected]
www.lpinformation.com/organized-retail-crime 3
About the Survey/NRF 2
Summary of findings 4-5
Definition: ORC 6
Methods of operation 6-7
Gift card/store credit merchandise fraud 8
Top cities for ORC activity 9
Impact of cargo theft 10
Law enforcement awareness 10
Highly targeted items 11
Violence growing among apprehended criminals 12
Advocacy and state ORC laws 13
Conclusion 14
Contents
NRF 2013 Organized Retail Crime Survey
4
Summary of Findings
Concerns over store merchandise credit and gift card
fraud schemes are growing. This year’s report will focus
on a troubling new problem involving gift card and store
merchandise credit fraud.
Criminals continue to show aggression and resort to
violence when apprehended, endangering staff and
customers. Retailers surveyed this year report that nearly
two in five (18.3%) apprehensions lead to some level of
violence, such as verbal or physical assault. This is a
significant increase from the 13 percent reported last
year.
Nine in 10 retailers still being victimized by organized retail crime gangs. Almost 10 years
since the start of NRF’s first survey, 94 percent of retailers still say they have been a victim of
ORC in the past year. Though trends over the past nine years show fluctuations in activity
levels, it’s clear retailers are still very affected by organized retail crime. Additionally, 81.3
percent of those surveyed say that in general ORC activity is increasing in the U.S.
Law enforcement awareness of ORC is on the rise, highest ever. Nearly half of those who took
part in this year’s survey say they believe law enforcement understands the problems associated
with ORC. This is important for retailers and communities as the industry continues to try to
combat this troubling issue and protect innocent consumers who could end up in harms way.
Cargo theft activity is growing. Almost half of survey respondents said they have been a victim
of cargo theft in the past year. Cargo theft impacts every moving part of the supply chain and
costs retailers billions of dollars.
Seven in 10 retailers
report that they have
experienced boosters
stealing merchandise
and returning it for
store credit, who then in
-turn use second party
groups to get cash for
the merchandise credit.
www.lpinformation.com/organized-retail-crime 5
Organized retail crime incidents increasingly linked to “gateway crimes.” According to the
survey, retailers say on average 45 percent of those apprehended are involved in these other
crimes, including the use or sale of drugs, illegal weapons and more.
Advocating for Change. NRF has been educating retailers, law enforcement, media outlets and
policy makers on organized retail crime since early 2005. Utilizing a model legislation package
NRF published in 2006, numerous states have engaged on the issue through state legislation, but
some states continue to face hurdles when advocating for state-wide legislation. Retailers and
the National Retail Federation continue to lobby Congress to coordinate law enforcement
partners, enhance existing legislation, and crack down on criminal enterprises through more
effective prosecution and tougher sentencing guidelines.
Working with law enforcement, growing partnerships. Retailers continue to work tirelessly to
grow unique and supportive partnerships with law enforcement agencies across the country.
Developing a comprehensive approach to building partnerships with law enforcement is a major
component of fighting organized retail crime. There is currently technology allowing retailers to
share incidents, which is more important than ever as criminals mobilize, crossing jurisdictions
daily to commit multiple thefts from multiple retailers.
Top cities for organized retail crime similar to last year. Chicago, Los Angeles, New York,
Miami and a few others still rank in the top 10 cities for organized retail crime activity.
Sophisticated criminals are using federal highways to transport stolen goods, which merits the
involvement of federal agencies who track and monitor this problem while partnering with
retailers to apprehend criminal gangs.
Online anonymity pushes e-fencing as a preferred method for organized retail crime gangs.
Six in 10 retailers surveyed this year say they have seen an increase in e-fencing activity in the
past year, up significantly from 49 percent last year. Online auction sites and other third party
selling sites have given criminals the anonymity that fencing locations often don't offer.
NRF 2013 Organized Retail Crime Survey
6
Definition: Organized Retail Crime
Organized retail crime is defined as theft/fraudulent activity conducted with the intent to convert
illegally obtained merchandise, cargo, cash, or cash equivalent into financial gain (no personal
use), typically through online or offline sales. Organized retail crime typically involves a
criminal enterprise that organizes large-scale thefts from a number of retail stores and employs a
fencing operation to sell the illegally-obtained goods for financial gain. It should be
distinguished from “shoplifting,” which is typically a theft by a single individual of a small
number of goods for personal use.
Methods of Operation
Groups, gangs and sometimes individuals are engaged in illegally obtaining retail merchandise
of substantial quantities through both theft and fraud as part of a criminal enterprise. These
crime rings generally consist of “boosters” – who methodically steal merchandise from retail
stores or trailers (cargo theft) – and fence operators who convert the merchandise to cash or
drugs as part of the criminal enterprise. Sophisticated criminals have even found ways to switch
UPC bar codes on merchandise so they ring up at lower prices during checkout as a new way of
“ticket switching.” Others use stolen or cloned credit cards to obtain merchandise, tamper with
retail equipment such as pin-pads or produce fictitious receipts to return stolen products back to
retail stores.
Organized retail crime rings are clever, using designated roles such as driver, lookout, picker,
packers and supervisor. They use hand signals, cell phones, GPS devices, online information to
develop and transmit merchandise target “lists,” and have “tools of the trade,” which include foil
-lined shopping bags, purses, boxes and signal jammers to defeat inventory control tags. Some
use computers to replicate fake receipts for the purpose of making cash returns, while others will
use fake and/or fraudulent credit cards or checks to purchase gift cards and other expensive
goods. In some cases, employees are recruited to look the other way or provide details about
camera or security systems.
On average, retailers say 11 percent of apprehended shoplifters are found with foil-lined bags,
commonly called “booster bags,” used to defeat electronic article surveillance tags.
www.lpinformation.com/organized-retail-crime 7
Nearly all retailers say they are victims of organized retail
crime
Nine in 10 (93.5%) retailers this year reported they had been victims of ORC in the past year,
down slightly from 96.0 percent last year, though for three years in a row more than 90 percent
of retailers have said they’ve been victims of crime gangs. One reason for this could be that
criminals have begun to broaden their tactics to be less obvious than removing armfuls of items
from a store, to simply finding parties to buy the store merchandise credit received from
returning stolen merchandise.
Organized Retail Crime Criminals Often Engaged in Other, or “Gateway Crimes”
Many in the industry and even law enforcement emphasize that organized retail crime in recent
years has become increasingly a “gateway crime.”
Gateway crimes are crimes that prelude bigger crimes. Members of ORC gangs are frequently
found to be linked to street gangs, engaged in the sale of illegal substances, drugs, or weapons, as
well as involved in illegal immigration issues, money laundering, and even terrorist financing. On
average, retailers believe that 44.8 percent of organized retail criminals that are apprehended are
involved in gateway crimes and 46.2 percent of offenders are engaged in drug activity, either
through personal use, dealing or trafficking.
eFencing Activity Increases
Physical fence operations - locations that criminals use to sell
their stolen merchandise, such as flea markets, pawn shops,
fictitious and temporary store locations, and eFencing
operations—the process of selling stolen goods online
anonymously, continue to pose threats to many retailers.
According to the survey, more than two-thirds (69.4%) of
retailers say they have identified stolen merchandise or gift
cards at physical fence locations. Additionally, seven in 10
(72.2%) say they have identified stolen items for sale online.
.
61.1%
Percent of retailers who
have seen an increase
in eFencing activity in
past year, up from
49.2% last year.
NRF 2013 Organized Retail Crime Survey
8
Stolen Goods Lead to Store Credit Scams
For the first time, NRF asked loss prevention executives about their level of knowledge or
experience with boosters who return stolen merchandise to receive store credit, only to sell the
credit/gift cards for cash. The news is troubling: 77.8 percent of companies replied they have
experienced gift card or store merchandise credit fraud. This is a prime example of
sophisticated criminals in action. Boosters steal merchandise or take items from the shelf, then
return it to customer service for merchandise credit. Once they receive that credit, they sell their
store merchandise gift card for cash to secondary markets, such as pawn shops, check cashing
locations and online sites, as well as kiosks.
This issue not only puts retailers at a loss, but potentially involves unknowing and innocent
consumers when they unintentionally purchase gift cards or store merchandise credit cards from
websites for a
discounted
value of the
value of the
card. Some of
those cards
were never
purchased to
begin with -
they were
obtained
through illegal
activity.
www.lpinformation.com/organized-retail-crime 9
Cities Most Affected by Organized Retail Crime
For the fourth year, retailers were asked which cities rank the highest for organized retail crime
activity. Six of the metropolitan areas have appeared on this list for four consecutive years:
Chicago, Dallas, Houston, Los Angeles, Miami and New York.
While these top
10 cities/
metropolitan
areas are widely
known as being
heavily affected
by organized
retail crime, new
cities have been
known to emerge
in the past few years. As a multi-state enterprise,
organized retail crime groups rely on large, national
roadways to target retailers in various states and to
transport their stolen goods.
Top 10 Cities for
ORC Activity
Los Angeles
New York
Chicago
Miami
Atlanta
Dallas
Northern New Jersey
Houston
San Francisco/Oakland
Baltimore
NRF 2013 Organized Retail Crime Survey
10
Impact of Cargo Theft
Cargo theft is another troubling component of organized retail crime. Nearly half of those who
responded this year (47.9%) say they have been a victim of cargo theft in the past year. More
than half of those who have been victimized by cargo theft say it occurred en route from the
manufacturer to distribution center (57.1%) and en route from distribution center to store
(57.1%), though some companies say it even happens between stores when moving products
through other local supply lines (22.9%). Two in 10 (20.0%) report that they notice cargo theft
incidents at the distribution center; slightly less than 10 percent (8.6%) of retailers say theft
happens at the store.
The shift in where the losses occur is fairly significant this year. Theft that occurs between the
manufacturer and distribution center jumped 13.6 percentage points, and jumped 15.7
percentage points in the store-to-store loss reports.
For the average person, these statistics should serve as a reminder that retail crime affects them,
too. These crimes not only affect a retailer’s bottom line, but also affects what consumers end up
seeing on the shelves at the store and the amount of inventory available at any given time.
Law Enforcement Awareness At All-Time High
Eight in 10 retailers this year said that they believe ORC activity has increased in some fashion
in the past three years. As such, law enforcement’s understanding of organized retail crime
continues to be a crucial component in the fight against ORC. In recent years, retailers have
worked tirelessly to educate federal, state and local law enforcement agencies about the severity
of this issue. Nearly half (48.1%) of retailers this year say that law enforcement has an improved
understanding of the issue, up from 40.0 percent last year.
Survey respondents noted that their senior management has a good grasp of the issue, which is
important for securing budgets and allocating resources needed to fight fraud and organized
crime in their stores. While many retailers have specific teams designated to fight this issue,
other retailers must rely on their trained loss prevention staff and senior LP executives to keep
their keen eye on national trends and incident patterns.
www.lpinformation.com/organized-retail-crime 11
Highly Targeted Items
The most popular items targeted by these groups
are goods in high demand that criminals can sell
for near-retail price. In general, groups target
department and specialty stores specifically for
items like designer clothing, handbags, lingerie
and accessories. Those targeting grocery and drug
stores quickly grab infant formula, over-the-
counter medication, razor blades and other high-
end health and beauty products. At electronics and
general merchandise locations, criminals target
everything from batteries to the latest gadgets, like
smartphones, tablets, cameras and audio devices.
Impact on Consumers
One of the biggest problems with organized retail
crime and the gangs that operate throughout the
country actually exists beneath the surface: the
impact on innocent consumers. When budget-
seeking consumers shop for discounted items
online through auction sites or other third party
sites, they sometimes unknowingly buy stolen
merchandise. This also happens at some physical
store locations like pawn shops and flea markets.
From infant formula to pain relievers, razors and
even energy drinks, the internet is often a direct
source for consumers looking to save a few bucks
on typically expensive items. Unfortunately,
shoppers can unknowingly put themselves and
their families at serious risk of ingesting and using spoiled, expired and unsafe merchandise, as
criminals disregard health codes or safety warnings related to proper storage of certain items.
Most Commonly Sought After Retail
Items by ORC Gangs
Grocery
Cigarettes Energy drinks High-end liquor
Infant formula
Over-the-counter medicine
Allergy medicine Diabetic testing strips Pain relievers Weight loss pills Home High-end vacuums High-end appliances, mixers Laundry detergent Children’s electronic toys Health and beauty Teeth whitening strips Pregnancy tests Razors Clothing Denim pants Designer clothing/handbags Electronics GPS devices Laptops/tablets Cameras/recorders Cell phones
NRF 2013 Organized Retail Crime Survey
12
Violence Growing During Apprehensions
With a full two-thirds
(66.2%) of retailers
saying they’ve seen an
increase in organized
retail crime over the
past year, stopping
these criminals in their
tracks has become more
of a concerted effort
than ever before.
Sophisticated
technology,
partnerships with law
enforcement and
training for loss
prevention
professionals have
contributed to the awareness of the growing problem, but unfortunately criminals are still
breaking through the system.
Also noteworthy is that more companies this year replied that the level of violence has grown in
the past three years, both on the intimidation of sales associates and those who attempt to
apprehend boosters. According to the survey, approximately two in 10 (18.3%) apprehensions
now lead to some level of violence, such as verbal or physical assault and/or battery, up from
15.2 percent last year and 13.0 percent the year prior. With employee and customer safety of
utmost importance, retailers are training store associates and on-site personnel to handle ORC
suspicions in a very different way.
www.lpinformation.com/organized-retail-crime 13
Partnerships & Advocacy
For years, retailers and other vested parties have worked together to tackle organized retail crime
both with industry partnerships and through state legislation as well as pending Federal
legislation. As of today, 28 states have passed and/or enacted organized retail crime or ORC-
related legislation.
Lobbying for Federal legislation. NRF
strongly believes that organized retail crime
must be addressed through Federal
legislation. By amending the Federal
Criminal Code to effectively address the
organized and serious nature of this issue,
and be properly defined as a Federal crime
with appropriate sentencing guidelines,
retailers believe we could see a tremendous
dent in the criminal activity in the U.S.
Since 2005, NRF and its various
committees have been on the forefront of
educating retailers, law enforcement,
legislators, the business community and
consumers on the vast impact of organized
retail crime. As evidenced by the top 10
metropolitan areas most affected, there is
still reason to believe the issue is a national
problem for retailers and law enforcement
agencies.
Current States With ORC or
ORC-related Legislation
Arizona
Colorado
Connecticut
Delaware
Georgia
Illinois
Kentucky
Louisiana
Maryland
Michigan
Minnesota
Nebraska
New Hampshire
Nevada
New Jersey
Ohio
Pennsylvania
Rhode Island
Tennessee
Texas
Utah
Virginia
Washington
NRF 2013 Organized Retail Crime Survey
14
Conclusion
Retailers’ level of awareness regarding the problems that organized retail crime creates for their
business has never been higher. With reports of violent, brazen and aggressive criminal behavior
increasing each year, retailers remain on full alert.
Organized retail crime is a serious issue for large and small retailers nationwide, as evidenced in
the 93.5 percent of retailers who say they have been victimized by organized crime gangs. And,
fighting the problem takes more than a keen eye and support from law enforcement. Operational
strategies must be put in place, employee training must be consistent and local and federal law
enforcement agencies must be looped in when a pattern is determined.
And unfortunately, there is no simple solution. Securing merchandise and installing deterrent
devices can be known to reduce sales and even frustrate shoppers.
In limited cases, retailers are forced to resort to increasing prices on their merchandise to
make up for what they lose to thoughtless, selfish and unconscionable criminals.
Financial impact of ORC on
retailers and consumers:
To make up for lost revenue due to
ORC, retailers’ expenditures
against retail theft have become
part of construction budgets, mer-
chandising budgets and informa-
tion technology and staffing budg-
ets.
The monetary losses retailers suf-
fer each year to organized retail
crime could easily go to new in-
ventory, more employees, remod-
eled store fronts, sales and promo-
tions for their shoppers, new store
locations and most importantly,
more convenience and lower
prices for consumers.
www.lpinformation.com/organized-retail-crime 15
325 7th Street, NW
Suite 1100