What the Research Says about the State of Organized Retail Crime

Retail crime is receiving more attention than ever before, and most of the attention is focused on organized retail crime (ORC). The news media regularly reports on ORC, but policymakers are also interested in retail crime. In fact, the Loss Prevention Research Council (LPRC) has been receiving and responding to requests for information about ORC from legislators’ offices and staffers, trade organizations, and others like never before.

Of course, the LPRC is increasingly focused on ORC and other serious retail crimes. This focus is reflected in our 2022 research agenda, which is centered around three key themes, including the role of intelligence, technological integration, and collaboration in loss prevention. All three of these will be key for improving and modernizing loss prevention programs, but they are especially important for reducing ORC. Intelligence is the central issue, but intelligence is built by combining data, information, and knowledge from multiple sources—this requires collaboration among people and organizations, as well as technological integrations that enable retailers to combine data from multiple sources.

More specifically, at the LPRC, we are interested in how intelligence, integration, and collaboration apply to:

• Diverting individuals from initiating a life of crime,
• Deterring offenders,
• Detecting offenses,
• Disrupting offenders, and
• Documenting offenses.

We conduct research on ORC through individual projects and LPRC working groups because we know that we must understand a problem before we can effectively address it. More importantly, ORC is an industry-wide problem, and the entire industry must work together to solve it. However, our research reveals many challenges to reducing ORC. This article discusses these challenges in relation to our research on ORC, beginning with definitional issues.

Defining ORC: It’s Complicated

One of the biggest challenges for retailers and policymakers is that not all ORC is the same. In fact, retailers’ experiences with organized retail crime vary dramatically. Some retailers are victimized by highly sophisticated organized crime rings who steal incredible quantities of product and reintroduce these products into the legitimate supply chain. Other retailers are drowning in smash-and-grab or grab-and-run incidents. Still others are victimized by individuals, couples, and small groups who steal and resell online or at physical locations. There are many other forms of ORC, but the important thing is that ORC varies considerably throughout the industry.

In 2021, we worked on understanding how retailers define ORC. In a survey, we asked loss prevention practitioners to provide a short definition of ORC. One hundred sixteen practitioners responded and provided 116 different definitions, which reflected the variation in ORC throughout the industry. Next, the LPRC analyzed these definitions of ORC to identify the key themes.

One of the key findings is that retailers mean different things when they use the word “organized.” On one hand, some retailers used “organized” to indicate that the offenses were planned by one or more individuals. However, others used “organized” to mean that offenses were coordinated among a group of people. However, the most important factor throughout the definitions is that ORC involves retail crimes that are planned and/or coordinated by one or more individuals to generate individual or group financial profit.

Once we analyzed these definitions and identified key themes, we developed the following composite definition:

Organized retail crimes are (1) predatory crimes in which (2) one or more offenders (3) knowingly and intentionally (4) plan or coordinate criminal activities (5) on one or more occasions (6) with the intent of financially profiting themselves, a group, or a broader criminal enterprise with which they are associated (7) through the acquisition of cash, other financial instruments, or merchandise that can be resold, returned, exchanged, or otherwise used to generate a profit.

The difficulty with the definition is that retailers will still need to develop internal definitions based on what they are prioritizing. Therefore, it is not clear how useful this definition will be to the industry. However, it may be useful for policymakers who need guidance on what ORC is. Legislators and their staffs will need to do additional work to identify which elements of ORC they want to include in statutes.

Making “Cents” of ORC: Statistics Are Inaccurate and Likely Underestimate ORC

One of the things media outlets have homed in on is the accuracy of estimates of ORC, and several media outlets have contacted us about the validity of these estimates. On one hand, people are correct to criticize the estimates of ORC, however, as explained below, most estimates of organized retail crime are likely underestimates.

There are two major challenges when estimating the amount of ORC. First, as discussed above, there is no common definition of organized retail crime. Imagine if everyone involved in building a house (framers, plumbers, roofers, finishers) defined a foot using their shoe—all the measurements would be inconsistent because most people’s feet are not the same size. Similarly, retailers’ definitions of ORC are not the same, therefore, one retailer might classify something as ORC while another might not. Given this, a lot of ORC will likely not be included in the estimates.

A second and more fundamental problem is that, even if every retailer agreed on a definition, retailers vary in their ability to investigate ORC cases. For example, some retailers have teams of ORC investigators, while others do not. Therefore, many retailers lack the ability to detect or document ORC. Many ORC offenders are incredibly sophisticated, and the organized nature of their crimes will not be detected without an investigation. However, even if retailers are equipped to investigate ORC, they are haunted by what we like to refer to as the “specter of sophisticated offenders.” Some sophisticated offenders’ impact on retailers might show up in shrink but may never show up in incident reports and cases because of their sophistication.

Because of these two factors, using dollar figures to estimate the extent of ORC is problematic. Official crime statistics, such as those based on crimes reported to police, are another option for exploring retail crime trends. Unfortunately, official statistics are probably the most inaccurate source of retail crime data. More importantly, these estimates are most definitely an underestimate.

Criminologists know that crime statistics that are more distant from criminal events are less valid measures of crime. For example, surveying individuals about their experiences with victimization will provide a more accurate estimate of the actual amount of crime than police reports. Furthermore, statistics based on reported crime will be more accurate than data based on arrests, which will be more accurate than prosecution data. This is because offenses are “filtered” out at every stage—the number of people who are prosecuted is a subset of those who are arrested, which is a subset of reported crimes, which is a subset of all crime.

The US has a few ways of estimating the amount of crime, including the Uniform Crime Reports (UCR), the National Incident Based Reporting System (NIBRS), and the National Crime Victimization Survey (NCVS). The first two sources are based on crimes reported to police, while the third estimates crime by surveying households about residents’ recent experiences with criminal victimization. For 2019, the UCR estimated a rate of 21.31 offenses per 1,000 residents, while the NCVS estimated 33.00 offenses per 1,000 households. These two sources of data paint a very different picture of crime in America.

Unfortunately, there is no criminal victimization survey for businesses that captures the number of recorded incidents. Therefore, there is no way of knowing how many crimes are omitted from the official statistics. Furthermore, to truly track the amount of organized retail crime, we would still need retailers to adopt a common definition, commit resources to detecting and documenting ORC, and then report it to a central organization, such as the LPRC. We are currently pursuing this through the American Retail Crime, Shrink, and Security (ARCSS) project, but we need more retailers to commit to providing incident and shrink data.

Deluge and Demoralization at the Store-Level: Crime Reporting in Retail

In focus groups and interviews, we asked thirty-two retail loss prevention representatives to estimate the percentage of “known incidents” that are reported to police. Most retailers were hesitant to provide an estimate because it varies so much by jurisdiction. Furthermore, some retailers are unable or unwilling to share some of these statistics in a group forum. Nevertheless, seven senior retail loss prevention practitioners estimated that between 5 and 50 percent of known incidents are reported to police, depending on the jurisdiction. The largest group estimated that approximately 20 to 25 percent of known offenses are reported to police.

Next, we asked the practitioners why they do not report crimes to the police. Nearly all of the practitioners’ responses included a combination of internal and external factors. On one hand store-level personnel are overwhelmed by the amount of crime—as one practitioner noted “if [store-level personnel] reported every crime, they wouldn’t have time to do anything else.” Of course, retailers also noted that, because of labor shortages and turnover, store-level personnel are just overtasked and do not have time to report crimes.

However, loss prevention leaders also noted that store-level personnel are demoralized and many believe reporting property crimes is a waste of time. In many cases, retailers noted that law enforcement will not respond unless the incident meets a formal or informal threshold. For example, some noted that law enforcement will only respond if the incident involves violence, while many said that law enforcement will not respond until the incident reaches the felony level. In other cases, law enforcement agencies may use informal dollar‑amount thresholds that exceed felony-level thresholds when deciding whether to respond or investigate an incident. Finally, many retailers believe that, even if there is a response, it will not be productive. For example, there will be no investigation, and, in many cases, if there is an arrest, the suspect will be offending again soon.

To be clear, loss prevention practitioners understand that a lot of these issues are due to the challenges law enforcement agencies face. Many expressed their sympathies for law enforcement, who like their own organizations, are faced with too much crime and too little time and resources to address all of it. Nevertheless, as long as these challenges remain, store-level demoralization may continue to play a role in under-reporting crimes.

Unfortunately, other retailers noted that some local law enforcement agencies have threatened their organizations with public nuisance penalties because they were “over‑reporting” crimes. Public nuisance statutes are often used against organizations that are contributing to local problems because the nature of the business, such as establishments serving alcohol.

However, department stores and general merchandise retailers are simply trying to sell products to the public—they are being victimized, and they are reporting crimes at a greater rate than agencies believe they should. In this case, over‑reporting may not be due to greater crime, but simply because a retailer is encouraging their stores to report crime, while others are not making crime reporting a priority. In other words, retailers could be punished by attempting to report as many incidents as possible. In this case, retailers’ best strategy may be to work together to ensure that all organizations in an area are making similar efforts to report crimes. This may have the additional benefit of drawing greater attention to retail crime in communities.

These findings suggest that we should be suspicious of any retail crime research that relies solely on official crime statistics from the UCR or NIBRS, especially research that examines the effects of criminal justice reforms on retail crime.

For example, if reforms reduce sanctions for property theft, or reduce the likelihood that law enforcement will respond to crime, then retailers may be less likely to report it to the police in the first place. In this case, it is theoretically possible that actual retail crime could be increasing while rates of crime according to official statistics are decreasing, simply because of the demoralization of retailers.

Simply speaking, unless we establish a better way of tracking retail crimes using incident-level data from retailers, we will not be able to understand trends in crime, nor will we be able to understand how the actual amount of retail crime is related to official crime statistics. Once again, this is why it is important for retailers to participate in the LPRC’s ARCSS project.

Hot Products in ORC

In 2021, we wanted to understand the top drivers of shrink, as well as the top products involved in organized retail crime. We asked participating retailers to list their top ten products in terms of

• Units lost overall,
• Dollars lost overall,
• Dollars lost to ORC, and
• Units lost to ORC.

Approximately 25 percent of our members (16) submitted data, but many could not provide ORC‑specific data, and many others contacted us to let us know that they could not participate because of internal policies.

Nevertheless, we wanted to understand whether the items that showed up on the “overall” lists corresponded to the items on the ORC lists. Across the lists, there was considerable overlap regarding dollars lost generally and dollars lost to ORC cases. On average across retail sectors, 78 percent of the items on the ORC lists were on the overall shrink lists, according to dollars lost. However, on the lists according to units lost, only 60 percent of the items on the ORC lists were on the overall shrink lists.

Initially, this suggested that ORC might be a major driver of product loss. However, there is another possible explanation. Retailers focus their investigations on high-loss items, and especially those that affect the bottom line the most. If this is the case, then the highest loss items would show up in investigations because that is where ORC teams are placing their focus. This would be the reasonable thing for retailers to do and is probably the best explanation for the overlap.

In many cases, retailers only included product categories, which reduced our ability to report the findings at the item‑level. Nevertheless, the results for general merchandise retailers; grocers; health, beauty, and chain drug stores; and home improvement retailers are provided in the table shown at the bottom of page 45. These product categories are ranked according to the number of retailers who included the products on the lists they submitted.

Retailers in other sectors also participated, but there was not enough participation to create a list primarily because they did not track ORC data. Nevertheless, apparel and accessories retailers reported that women’s and girls’ apparel—especially activewear—are problematic, while automotive retailers reported that batteries and bulbs were high-theft items. For the most part, the items on these lists follow what we would expect according to the CRAVED model that suggests that concealable, removable, available, valuable, enjoyable, and/or disposable items are more likely to be targets of theft.

Product Protection and Deterrence in ORC

Unfortunately, in high-theft areas, retailers are often forced to either lock up products using restrictive devices, such as locking cases, locking peg hooks, keeper boxes, and pull tags, or accept losses as a cost of doing business. There are some innovative approaches, such as self-service locking cases that are accessed by trading personally identifiable information for access to products, but many solutions increase retail friction for both customers and ORC offenders. In 2021, the LPRC conducted research on locked merchandise and found that, in many cases, customers are driven to purchase locked items online or at other retailers.

Many solutions have a role in deterring offenders, but many solutions are irrelevant to aggressive and brazen ORC offenders who believe there is little risk of criminal justice consequences. Of course, there are also sophisticated offenders who can defeat many product protection solutions. Unfortunately, research suggests that many offenders will just target other retailers who do not use these technologies. Therefore, investigations, law enforcement, prosecutions, and industry-wide efforts are incredibly important for combating ORC.

Without robust, coordinated, and collaborative industry-wide approaches, retailers will continue to increase spending on product protection solutions. Unfortunately, retailers are engaged in two arms races. On one hand, retailers are engaged in an arms race with other retailers—meaning retailers are trying to find the most effective solutions and keep up with the industry. On the other hand, retailers are in an arms race with offenders where they introduce a solution but often see offenders developing new ways of defeating them.

Retailers need a new paradigm that continues to rely on the principles of situational crime prevention to deter offenders by increasing the effort to commit crimes, such as continuing to harden targets, while also focusing on increasing the risk of consequences for offenders. This must involve building and using intelligence to investigate and prosecute offenders, as well as disrupt illicit markets. Fortunately, many innovative programs are focused on simultaneously improving their product protection programs and their intelligence and investigative capabilities.

Intelligence-Led Loss Prevention

As mentioned at the outset, the role of intelligence in loss prevention is a key focus at the LPRC. Intelligence-led loss prevention revolutionized policing throughout the Western world, just as business intelligence has revolutionized retail. The principles of business intelligence, continuous improvement processes, and intelligence-led crime prevention could easily be applied to loss prevention. Unfortunately, research with retailers suggests that business intelligence practices in loss prevention are often limited and inefficient.

At the most fundamental level, intelligence-led loss prevention would involve the collection and analysis of loss event data. In other words, retailers need to know what was stolen by whom, as well as when, where, and how products were stolen. Next, this information must be analyzed. On one hand, retailers need to be able to identify which products and places are most problematic, which will enable them to appropriately focus their resources and continuously improve their loss prevention program. On the other hand, investigators need this information to link incidents and build cases.

In our interviews with loss prevention professionals, we find that many organizations lack the ability to efficiently collect incident information in a standardized manner. Efficiency and standardization of incident reporting are key for a few reasons. First, because of labor shortages and turnover, store-level managers and associates need to be able to quickly report the key characteristics of incidents. Second, if incident reporting is not standardized within an organization, it will be more difficult for investigators to link incidents and build cases. Finally, without standardization, the quality of incidents will vary more than it already does, and, in some cases, incident reports may not have usable information at all.

Furthermore, when incident reporting is weak, retailers must rely on cycle counts to know when product has been stolen. Cycle counts are often labor-intensive and vary in frequency and quality throughout an organization. In fact, some retailers suggest that COVID-19, labor shortages, and turnover has led to declines in the reliability and frequency of cycle counts.

Nevertheless, relying on cycle counts means that investigators must do additional work. Investigators often say that the amount of time it takes to review CCTV footage is one of their greatest inefficiencies. Retailers reduce these inefficiencies by using video analytics and relying on data from other sensors, such as EAS alarms, but, in some cases they simply do not have the technological capability. Other than cycle counts, most retailers lack the ability to track which items (and how many) leave their store without a sale. Some retailers are using RFID to do this, but these retailers are currently few and far between.

In our interviews and discussions with ORC investigators, getting law enforcement and prosecutors to pay attention to and prioritize their cases is the name of the game. Retailers must continuously improve their ability to build cases and present them to law enforcement and prosecutors. Intelligence-led loss prevention will require “smarter” product protection solutions that generate more data about loss events, and that can be integrated with other technologies to build intelligence. Fortunately, for the most part, investigators are committed to collaboration because collaboration is necessary for building cases.

Other ORC Research Efforts

The LPRC continues to conduct additional research. For example, we are in the process of conducting an industry-wide ORC survey in partnership with LP Magazine, the Loss Prevention Foundation, and Sensormatic to understand how ORC is affecting retailers at the store-level. To be clear, this survey is substantially different from the National Retail Federation’s ORC study because it focuses on store-level issues like:

• Criminal justice system response to ORC,
• Fear of crime,
• Local investments in loss prevention,
• Local changes in product access and product availability, and
• Other local issues.

The LPRC encourages all loss prevention practitioners to complete the survey when it is made available.

However, in-store losses are not the only problem. With the expansion of e-commerce, retailers are increasingly concerned with ORC in their e-commerce channel. The LPRC is currently working to understand which factors are associated with successful investigations and prosecutions by conducting interviews with prosecutors, law enforcement, and retailers. Simply speaking, this will continue to be a key focus for retailers and retail offenders alike, and we need to establish what some have called a “playbook” for investigating and prosecuting these offenses.

Even though organized retail crime is receiving increasing attention from the media, store-level associates, the public, and policymakers, they do not have a sufficient understanding of ORC or related issues. Therefore, we are working to understand ways to increase awareness at the store‑level without promoting imitation by store employees.

The LPRC is also working to better understand issues that are commonly cited as barriers to reducing ORC, such as the “hands off” approach that some retailers have taken. Preliminary results from interviews with retailers indicate that, for the most part, they are incredibly concerned about the well-being of their associates and do not want them to intervene because of the potential for violence.

Finally, the role of intelligence, technological integration, and collaboration will continue to play a major role in LPRC research on organized retail crime. Everything described throughout this article points to the need for increased intelligence-gathering capabilities throughout retail. Business intelligence has been a buzzword throughout the industry for years, but, unfortunately, loss prevention still lacks the ability to collect a lot of the information that is necessary to continuously improve their programs, as well as detect and investigate ORC offenses.

The LPRC will continue to support the industry by conducting research on ORC. There are many challenges, including defining ORC, preventing it, reporting incidents, and investigating cases. Intelligence will be key to both continuously improving loss prevention process and building ORC cases, which is why the LPRC continues to prioritize technological integration and collaboration. We invite all retailers and solution providers to join us as we continue to move the industry toward a more intelligent and evidence‑based future.

This story is a part of LPM‘s Special ORC Issue. Download the full issue for free here.