Retail sector losses due to organized crime this year have averaged a record $777,877 per $1 billion in sales, an increase of about 7% from last year's previous record of $726,351, according to the National Retail Federation's 2018 Organized Retail Crime (ORC) survey.
About 92% of companies responding to the survey said they had been victimized by ORC in the previous year, and 71% said that ORC activity is increasing. The top locations for ORC activity include many of the nation's biggest retail markets — New York City, Los Angeles, Miami and Chicago, among others
Additionally, 29% of retailers surveyed said ORC activity occurred even before their merchandise reached their stores in the form of cargo theft at different points in their supply chains. However, ORC incidents happening in supply chains have declined sharply from 44% two years ago, the study noted.
Crime-causing losses for retailers is nothing new, but the problem continues to grow, and some of that growth may be directly connected to retailers' efforts at digital transformations. The study, which involved 66 loss professionals at different types and sizes of retailers, suggested that return fraud has continued to grow as some retailers have broadened their policies to allow items that were bought online to be returned in-store. Specifically, 38% of those surveyed said the number of online purchases returned to brick-and-mortar locations had increased, and 29% said a growing number of those returns were fraudulent.
Overall, retailers estimated that 11% of their annual sales will be returned this year and 8% of those returns are likely to be fraudulent. In an attempt to become more customer-friendly to make returns easier, more retailers are allowing consumers to return purchases without providing a receipt. The study stated that about 12% of returns this year will not include a receipt, and 21% of that type of return are expected to be fraudulent.
Other factors in growing ORC activity include the easy ability to sell stolen goods online, rising gift card fraud and a shortage of staff (although some retailer have turned to RFID technology to try to curb in-store theft). Items from top, buzzworthy brands also tend to be frequent ORC targets.
While the rise on ORC means that retailers need to make security and anti-loss strategies more of a top priority, retailers surveyed also believe laws should be tougher. The study noted that some states have changed the amount of goods that need to be stolen for a theft to qualify as a felony, so thieves may be able to steal more without risking a misdemeanor offense.