· 5 min read
Like any conference meant to put the wind in attendees’ sails (and sales!), most sessions at the National Retail Federation’s recent NYC conference aimed to be upbeat and inspiring. No fewer than 15 session titles included the word “innovation,” and nine “success” or “successful.”
But it wasn’t all rainbows and unicorns.
“Combat” and “crime” each appeared once on the agenda, and it was for the same panel: “Working together to combat organized retail crime.”
- Target CEO Brian Cornell noted in a November earnings call that in 2022 Target had $400 million of inventory shrink, which also encompasses items breaking and administrative errors, but he blamed “a significant increase in theft and organized retail crime across our business.”
- Retailers saw an average increase of 26.5% in incidents of organized retail crime (ORC) in 2021, according to a 2022 NRF study.
Getting organized: David Johnston, VP of asset protection and retail operations at NRF, led off the panel with a slide defining what ORC is—and is not.
- It is not conventional shoplifting, which NRF defines on the slide as an individual stealing for “personal need or gain.”
- With ORC, stolen goods are either sold online, sold to wholesalers to sell back to the retail channel, or shipped abroad.
“I believe the post-Covid era of retail crime has changed the landscape,” Millie Kresevich, senior director of asset protection at EssilorLuxottica—which owns brands including Ray-Ban and Oakley, as well as retailers including LensCrafters and Sunglass Hut—said. “Today’s criminals are much more brazen than they have been in the past. Gone are the days of just concealing property when they’re in the stores. Today’s criminals are…sweeping shelves.”
To catch a thief: Adam Braun, executive deputy attorney general in the Illinois attorney general’s office, which launched a statewide ORC task force in 2021, told the audience that “when our office first began investigating these crimes, we were blown away by the sophistication of the organizers.” He said thieves were aware of the threshold for when thefts become felonies and kept their hauls below that level, which is $500 in Illinois (and highest in Texas and Wisconsin, at $2,500.)
Braun added that a typical tactic of a store-theft ring would be to organize one sweep in stores in one county near Chicago on a given morning, then another in a nearby county in the afternoon, and yet another in third county in the evening—with law enforcement in the counties responding separately and not warning one another.
“The folks who are orchestrating these were really taking advantage of loopholes and blind spots,” Braun said.
- In October 2022, law enforcement from several Illinois municipal and state agencies—along with the federal Homeland Security Investigations, the principal investigative arm of the U.S. Department of Homeland Security—recovered $7.5 million of stolen goods from an alleged ORC operation. Eight were arrested and charged.
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Math problems: In some cases, the problem may be overblown. Walgreens, for example, blamed rising ORC for the closure of five stores in San Francisco in 2021. But the San Francisco Chronicle reported in the wake of the announcement that, on average, the five stores had fewer than two reports of shoplifting per month since 2018.
And in a January 5 earnings call, Walgreens CFO James Kehoe said, “Maybe we cried too much” about merchandise losses in 2022. Kehoe noted that all of Walgreens' shrink—which, along with ORC, includes all shoplifting, employee theft, fraud, scanning errors, and breakage— had dropped from 3.5% of total sales last year to 2.5% in the latest quarter.
In 2021, Rachel Michelin, president of the California Retailers Association, told the Mercury News that in San Francisco and Oakland, businesses lost an estimated $3.6 billion to ORC annually. But the Los Angeles Times reported that figure was a miscalculation since it would have represented nearly 25% of all sales in San Francisco and Oakland. The NRF, on which the California retail group told the publication it based its figure, calculates ORC costs retailers $700,000 per $1 billion in sales, or only 0.07%.
Fighting back: But even if the problem is occasionally inflated, organized shoplifting rings are on the rise, or retailers wouldn’t be going through the trouble of locking up so much inventory.
The NRF supports the federal Combating Organized Retail Crime Act, which would create a Center to Combat Organized Retail Crime within Homeland Security Investigations that would include representatives from “state and local law enforcement agencies as well as the retail industry.”
“Today’s orchestrators of these crimes—they know the commerce trade, they understand how to get the product from the store and then put it back into the system to be sold [in] large amounts,” said Kresevich. “We have to really think about how we’re going to combat that.”