Organized retail crime has become a multi-billion-dollar blight on retailers, and it’s only spreading further. According to the National Retail Federation’s annual National Retail Security Survey, instances of organized retail theft saw the average shrink rate increase from 1.4% to 1.6% in 2022, a percentage increase that represents $112.1 billion in losses.
Despite this looming threat, there is little legislation to combat it. The NRF, alongside other retail executives, previously supported the INFORM Consumers Act, which Congress passed in 2022 to require online marketplaces to verify the identities of sellers with large amounts of goods.
While an important step in the fight against selling high quantities of illicit goods online, the Federation’s representative, David Johnston, calls for more action to be taken: “Curbing the resale of stolen merchandise is just one aspect of organized retail crime, and more must be done to protect our people, stores, and communities.”
To remedy this, the Federation declared support for the implementation and passing of bipartisan legislation that targets organized retail crime with a more dedicated focus.
The U.S. House Committee on Homeland Security Subcommittee on Counterterrorism, Law Enforcement, and Intelligence Subcommittee recently held a hearing about addressing organized retail crime, attended by Johnston; Michael J. Krol, Special Agent in Charge Homeland Security Investigations; Jason D. Kane, Special Agent in Charge U.S. Secret Service; Summer Stephan, District Attorney, San Diego County, California; Scott Glen, Vice President Asset Protection, The Home Depot; Jose A. Perez, Deputy Assistant Director Criminal Investigative Division, FBI; and Abby Jagoda, Vice President Public Policy, ICSC.
A Legislative Change
The NRF defines organized retail crime (ORC) as “theft or fraud activities conducted with the intent to convert obtained merchandise, cargo, cash, or cash equivalents into personal financial gain.”
An incident can only be categorized as ORC, the Federation says, if it involves theft or fraud of multiple quantities by more than one individual and will often occur across multiple locations.
The recent surge in ORC is the driving motivator behind the NRF’s urging that Congress “prioritize legislation that will support and enhance the ongoing efforts of federal, state, and local law enforcement to blunt the rise in organized retail crime.”
Johnston believes that Congress should include the reporting of ORC as part of the national Uniform Crime Reporting system maintained by the FBI and local law enforcement. Because this isn’t currently the case, data on ORC at a national level is not available.
Many ORC cases are recorded instead as shoplifting or smash-and-grab theft and therefore remain inaccurately unreported, Johnston says.
Additionally, an inadequate legal framework for prosecuting these crimes, he adds, “gives little incentive for criminals involved in ORC to renounce their ways, and the lack of coordination between law enforcement and retailers means cases that are prosecuted may make little headway.”
The Combating Organized Retail Crime Act (H.R. 895), reintroduced in February 2023 by U.S. representatives Ken Buck (CO), Dina Titus (NV), David Joyce (OH), and Susie Lee (NV), would create an Organized Retail Crime Center (ORCC) within Homeland Security Investigations (HSI), which would be open to participation by other federal law enforcement agencies.
The Organized Retail Crime Center would focus primarily on the gathering and sharing of national-level ORC intelligence across agencies, as well as making alterations to existing criminal codes to provide investigators and prosecutors additional means to combat ORC.
A Fearful Climate
Johnston notes that in the years after the pandemic, the frequency of incidents, risk of violence and damages caused by ORC have increased significantly.
A survey of 232 retail asset production professionals conducted in June 2023 at the NRF’s annual conference, NRF PROTECT, found that 90% of them believed ORC was more of a risk to retail than it was 3 years ago. As incident numbers ramped up, risk of violent altercation and increased retail shrinkage rose with them.
The economic climate, coupled with the ease of access to drugs like fentanyl, also resulted in an increased recruitment drive for ORC organizations from vulnerable populations who need fast and easy cash, Johnston says.
Criminal actors in these circumstances are more likely to become aggressive and escalate to violence when confronted. Respondents who participated in the 2023 National Retail Security Survey noted this increase as well, with 67% answering that “ORC remains a significant concern due to heightened levels of violence”.
As physically violent and sometimes even fatal theft incidents occur on store property, employees and consumers become less likely to work or shop in high crime areas, making it difficult to retain workers in an industry that is already seeing a significant shortage, Johnston says.
In an effort to keep employees and merchandise safe from these escalations, Johnston notes, retailers often increase their security budgets to allot for more sophisticated security systems, guard services, and employee training, placing additional strain on already thin profit margins.
Though retailers have increased their security budgets in response to this rising tide, ORC continues to chew larger holes in retailer profits.
While already in the billions, the loss in profit from retail shrinkage only continues to climb. Findings from the 2023 National Retail Security Survey show that, in 2022, $112.1 billion in losses were recorded, up from $93.9 billion in 2021.
Johnston noted that this loss in profit isn’t relegated to retailers alone. Many of those billions were sales tax dollars that could have funded their local communities. If not community services, he asks, what are these enormous profits being used to fund?
International Retail Crime
In the absence of national data on ORC, the NRF, in partnership with K2 Integrity, launched the “Organized Retail Crime: An Assessment of a Persistent and Growing Threat” report in April 2023.
This assessment provided the NRF with valuable data regarding ORC enterprises, their patterns and their techniques. But it also revealed the connections these enterprises have with other types of organized criminal activity.
“Some of the most profitable organized retail crime groups that were stopped by law enforcement have shown ties to international criminal networks involved in identity theft, fraud, drug trafficking, and human trafficking,” Johnston says.
According to a research report produced by ACAMS and HIS, the profit made by fencing a large quantity of stolen merchandise is often used to finance these groups overseas, as well as launder money and conceal other illicit financial gains.
Sending large amounts of currency overseas has become trivial with the advent of cryptocurrency, he says, lending to the number of foreign ORC organizations.
Transnational criminal organizations (TCOs) and, especially, Chinese Money Laundering Organizations (CMLOs), South American Theft Groups (SATGs) and Romanian Organized Threat Groups (ROTGs) have become increasingly prevalent players in ORC.
In his statement, Krol noted that the CMLOs laundering products online are the same ones laundering proceeds from narcotics by drug cartels based in Mexico.
A Call to Action
The impact that ORC has outside of the retail industry alone makes it a national issue, posits the NRF.
“If this criminal activity was solely a retail industry issue, retailers would have solved it by now,” Johnston concluded. “These crimes affect every single one of us.”
While retailers will continue to pour billions of dollars into safeguarding their employees, consumers, and products, Johnston says, it’s unsustainable to continue dealing with ORC incidents at a local level.
Congressional support for ORC-combative proposals, he says, would be a boon for employees, consumers, and communities across the U.S.
Click here to watch a video of the testimony or read the full written testimony.
