Features, Strategy and Operations

Crime and Punishment Retail Style

There’s an old saying that “the more things change the more they remain the same.”

Retailing’s been through seismic changes in recent years. Unfortunately, what remains the same, or worse, is organized retail theft that’s costing the industry in the neighborhood of $30 billion annually …and likely to rise. This is a plague, not an occasional crime of opportunity, perpetrated by well-organized criminals who are often filling orders for specific goods—much like your basic supply chain but with better logistics.

This is where everyone wrings their hands and says things like “this is criminal”—no pun intended—or “we have to take steps…” or the ever popular, “the problem is under study.” But all the wails of outrage and blue-ribbon panels established to combat ORC mean very little when the industry is not as hungry, sneaky, stealthy or determined as your average booster. Or, when law enforcement—local, state and federal—is hamstrung by politically motivated budget restraints and legislation that could have been written by attorneys for the defense.

Low Risk Crimes

The annual retail crime survey by the National Retail Federation pretty much tells the tale. Over 90 percent of retailers have been victims of organized retail crime in the past year and these gangs are becoming more aggressive—which observers attribute to the fact that ORC is largely a low risk, high reward crime. Drug dealing puts you in lockup. But boost some jeans, baby formula or OTC meds and it’s a slap on the wrist.

The NRF study points out that retailers are losing approximately $726,351 for every billion in sales. Even if you keep reducing that amount based on sales you’re still talking about some serious coin—especially for smaller retailers who are already operating on a knife’s edge.

Increased Resources

Clearly, some companies are allocating more resources to the problem and trying to work more closely with law enforcement. Truthfully, and I believe some would agree, that you’ve got a better chance of getting a cab in a snowstorm at rush hour than getting a cop to your store on a misdemeanor beef. To them ORC is a crime, but a petty one that’s usually not worth the paperwork.

With all this in mind, top management is more attuned to the depth of the problem and the need for solutions rather than simply foisting it off on their understaffed and underfunded LP departments. Additionally, most people concede that combating organized retail crime means expanding the definition to include cargo—ship, trucks and trains— warehouse theft and any vulnerable point along the supply chain.

As far back as 2003, the FBI launched its Organized Retail Theft initiative, believed to be the first information sharing vehicle between law enforcement and the private sector. This initiative focuses on such things as money laundering, interstate transportation of stolen property and RICO statutes to capture and prosecute organized gangs. I tried reaching out to the FBI on the status of their ORC initiative.

Build Relationships

The best and most effective thing to do is develop closer relationships with local law enforcement and convince them that inaction simply makes them look bad. But retailers and other sources I’ve spoken with on this subject are clear on one point—be prepared! The best quote I’ve ever seen on this came from LPM Insider magazine: “Going in cold to law enforcement and asking for help is like showing up for a blind date with an engagement ring. It only makes sense if you’re desperate and you probably won’t be successful.”

Basically, a preexisting, long-term relationship on both sides is going to put property crimes a step or two up on their agenda. You can’t always hand over a case to law enforcement on a silver platter but doing some of the legwork and documentation will make their job easier. And if you want law enforcement’s attention the industry has to overcome the perception that it never prosecutes.

Geographic Tidal Wave

So where is the bulk of organized retail crime taking place? The short answer is everywhere! No region or retailer is immune to something that’s become big business. But geographically, the hardest hit areas are Atlanta, Baltimore, Washington DC, Chicago, Dallas, Houston Miami, New York and Phoenix.

However, industry observers believe that California—especially the Los Angeles to San Francisco corridor—has become the ORC capital of the U.S. and should be added to the list. The unprecedented rise in this crime was a legislative misfire called Proposition 47—a classic example of unintended consequences and a valuable life lesson for retailers who don’t scrutinize everything their legislators touch. Prop 47 was a ballot initiative that passed on 2014. It was designed to reduce some drug possessions and thefts to misdemeanors by increasing the threshold for a felony to $950 for a single incident.

Losses Mount

“Since the passage of Prop 47 we’ve seen an increase in the number of incidents and losses year to year,” said Aaron Moreno, senior director of government relations for the California Grocers Association in Sacramento.” So, you can steal $949 every day and never get any jail time, just a ticket or notice to appear in court.”

There’s little doubt that ORC will escalate if it remains a low risk, high reward infraction. In this situation even if someone boosts $500 worth of items per day—which is relatively easy to do when it comes to apparel and over-the-counter drugs—they can clear as much as $250 after selling high turn items to a fence. Even the organized gangs, many recruited from Mexico and Central America and do this for a living, can hit five to 10 stores a day by having a car and driver waiting for them and jumping on the interstate to the next roadside victim.

Amending Legislation

California retailers and some legislators say enough is enough and a new initiative to amend the law has so far collected over 200,000 signatures. About 385,000 are needed to get it on the November ballot—a level Moreno believes is possible. This new proposal does several things. First, it says that boosters get two free misdemeanors at the $950 level. The third one becomes a “wobbler” at $250, meaning it can be charged as a felony or misdemeanor based on the discretion of the prosecutor.

However, the California legislature has been hesitant to increase penalties for any crime—especially the ones involving immigrants, even legal ones—for fear of racial profiling. Even if by some quirk of fate, a case gets to court, prosecutors have the Herculean job of proving intent. In other words, did that person enter store with the intent of stealing or just a momentary lapse in judgment? It’s a huge difference to judges and another indication that current law is a toothless tiger.

In states like California, there are some places that have launched task forces to deal with retail theft. But they are still few and far between and ORC is simply not as sexy as drugs or counterfeiting and unlikely to get featured on the six o’clock news.

So what are retailers doing these days? Some just chalk up theft as a cost of doing business. This is a bad strategy that only encourages the criminal element and ends up increasing the cost of goods. Others hire in-store security but, as pointed out earlier, you run the risk of making a store look like an armed camp.

One interesting alternative is to hire security companies who pursue these cases on behalf of the retailer, handle all the paperwork and hand over a neat little prosecution packet to police or the DA’s office.

As someone once said, a paper cut won’t kill you but get enough of them and you’ll bleed to death. It’s time to stop the bleeding.

Whether it’s designer apparel, luxury handbags or razor blades, organized retail crime is getting more intense and has drawn greater attention from law enforcement agencies across the country and G-men.


Scott Campbell, supervisory special agent and program manager for major theft program within the organized crime section of the Federal Bureau of Investigation sat down with The Robin Report to discuss ORC and where the Bureau fits into the picture.


Does the Bureau have a separate task force investigating ORC? “


Not specifically targeted to ORC. But we manage and oversee major theft task forces around the country. Some focus on cargo theft and even on theft in oil field industry in Oklahoma and El Paso, Texas. But they all have the ability to work ORC cases.”


Are you working primarily with local law enforcement?


“Each task force is mostly filled with local and state law enforcement who we have deputized into the federal system and who are able to investigate violations of Title 18, which are criminal laws but excluding narcotics. Right now, there are eight task forces—New York City, Tampa, Miami, Oklahoma City, two in El Paso and Los Angeles.”


Are there any retailers involved?


“We don’t have retailers on the major theft task forces. But there are about 40 ORC alliances around the country that are grassroots efforts between law enforcement and loss prevention partners to attack ORC problems.”


Do you feel those organizations are making headway?


“That’s where it all starts. We need that partnership with state and local law enforcement and retailers around the country. Everything begins with the organized retail crime associations. They do a phenomenal job of creating the public and private partnership that focuses exclusively on ORC.”


But are the laws changing to increase penalties?


“There are a several states, and I think Maryland is one, that enacted state legislation on ORC and making a distinction between it and shoplifting.” What about prosecution at the federal level? “There’s been some discussion about a federal statute that specifically addresses ORC. But we tend to use our traditional bread and butter statutes whether it’s things like mail fraud, interstate transportation of stolen property or wire fraud. We’ve used them on criminal side for years and they work wonderfully as we prosecute ORC cases.


“The industry may have a different point of view. But (an ORC statute) could limit you from a prosecutorial standpoint. We use the statutes enacted by legislation allowed for use by the U.S. attorney’s office.”


Are other federal agencies involved?


“I know that in areas like Florida, Homeland Security or ICE investigators are certainly looking at ORC and having some success in casework. But we’re not engaged with them on this crime.” ORC is considered a low-risk, high-reward crime.


What products are generally involved?


“The National Retail Federation puts out a fantastic list in its ORC report. In our cases we see a lot of high end designer goods including clothing, handbags, high end vacuums, cell phones as well as everyday commodities like infant formula, laundry detergent, razors, energy drinks, teeth whitening items—anything easily accessible.”


What if any recommendations does the Bureau offer retailers?


“Engagement with the ORCAs is an absolute must. In places like Los Angeles, Minneapolis and D.C., they are on the forefront in terms of collaboration. I think most national retailers understand this is about partnerships in loss prevention and I highly recommend that companies, no matter their location, engage with or create their own organized retail crime association.”

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