Organized Retail Crime: Store Owners Did Not Need This

In an April report, the National Retail Federation (NRF) said the average “shrink rate” — the amount of inventory lost for whatever reason — was 1.4 percent in 2021. Stated as dollars and cents, that’s $94.5 billion, up from $90.8 billion the previous year. That number is “primarily driven” by theft, including organized theft. Retailers on average saw a 26.5 percent annual increase in this kind of theft, and eight out of 10 retailers surveyed reported that violence and aggression related to organized thefts rose in the past year.

“What they’re dealing with is a high frequency of theft, repeat offenders, and large quantities of merchandise being stolen — really, indicative of organized groups,” David Johnston, vice president of asset protection and retail operations for the NRF, told CBS News in an interview. “When someone sweeps a shelf of Tide detergent, or looks at taking an entire shelf of white strips, that’s not for personal consumption. There’s something behind them.”

The NRF declined several times to make someone available to be interviewed by the Commercial Observer. But Johnston’s comments get at what retail tenants and their lobbyists say is an underlying cause of organized theft: Lawmakers making it inadvertently easier for lower-level offenders to participate in larger heists. 

Target CEO Brian Cornell mentioned in a quarterly earnings call in mid-May that the retailer is working with the NRF and other groups to lobby federal lawmakers to help combat organized theft. Cornell said that inventory shrink will reduce his company’s profitability this year by at least $500 million. 

Crime-fighting efforts include support of bipartisan federal legislation that would require online marketplaces to verify where high-volume, third-party sellers got their merchandise. Retailers also want law enforcement, including district attorneys, to share information to bring more cases against alleged organized theft groups. The NRF says that these groups often recruit lower-level offenders to do the dirty work. 

What’s left pending stepped-up enforcement is more security at individual retailers — and offending parties stepping up their own nefarious game.  

“Think of it like the arms race between Russia and the United States,” said Cory Lowe, research scientist with the Loss Prevention Research Council in Gainesville, Fla., who works with the NRF. “Neither party wants to disarm unilaterally because it would leave them exposed relative to the other party.”

The result, Lowe said, is an arms race between retailers paying ever more money to employ ever more sophisticated security — think the plastic gizmos put on clothing to inhibit folks from walking out with them, or the alarms that will ring if someone walks out without paying for something — and criminals seeking ways around such systems. Or sometimes, Colliers International retail leader C. Bradley Mendelson said, they’ll just not care.

“They have a car waiting outside,” Mendelson said. “They’ll just get in the car and take off.”

Lowe agreed.

“That little piece of plastic isn’t going to stop a hardened criminal who wants to come into your store and clean out your merchandise,” he said. “Most armed guards are not going to use their weapons if they’re guarding a store. It just creates too much of a scene and puts everyone’s life in danger.”

The internet has compounded the problem by creating a wider market for fencing stolen merchandise, with more sellers and a less discriminating buying public, Lowe said.

The kind of merchandise that most thieves prize, he said, were small items that command large prices. For a home improvement store, that would be power tools. Jewelry also sells big on the black market, but jewelry is usually insured by stores. It’s a myth that most retail merchandise is insured, however, Lowe said. Instead, sellers self-insure items they sell, meaning they lose their value if those items are stolen. 

The u.s. chamber of commerce reported that organized retail crime cost stores an average of $700,000 per $1 billion of sales in 2020, up more than 50 percent over five years, and that 54 percent of small business owners experienced an increase in shoplifting in 2021.

In a March letter to Congress, the Chamber said that some retailers have been forced to shutter locations in response to rampant theft. The Chamber, which calls itself the world’s largest business organization, joined the call for lawmakers to pass legislation to combat the fencing of stolen goods online and to identify such sellers to raise their profile. It also called on lawmakers to define organized retail theft as a crime and to increase penalties for engaging in it.  

The brick-and-mortar side of retail has only in general begun to emerge from COVID’s ill financial effects. Pandemic-related lockdowns and public health warnings helped fuel a wave of retail bankruptcies over the past three years that was already building due to the rise of e-commerce. Many brands and individual stores closed during COVID and simply never reopened. Yet the industry has now toddled back to some semblance of normal, and doesn’t need one more thing to worry about. 

In New York City, efforts to fight organized theft include the establishment of two programs: Second Chance and Re-Engaging Store Theft Offenders and Retail Establishments (RESTORE), which connect would-be thieves with government resources and social services to steer them away from committing offenses. For repeat offenders and participants in organized rings, retailers may submit incident reports to the New York Police Department to track offenders and help prosecutions.

In a May 17 statement, Mayor Eric Adams launched what he called a comprehensive plan to fight retail theft across all five boroughs. Adams reported a 44 percent increase in shoplifting complaints between 2021 and last year. He said 327 repeat offenders were responsible for more than 22,000 retail thefts, or about 30 percent of the crimes.

”This plan will help us invest in diversion programs and in underlying factors leading to retail theft,” the mayor said in a statement. The plan would also “train retail workers in de-escalation tactics and best security practices. Most importantly, this plan aims to reassure our store owners that we know they are essential to our city, and we have their backs.”

In an April 1 article for LossPreventionMedia.com, Lowe said that organized retail crime “has become an increasingly important priority” for retailers in recent years. Offenders can be subdivided into two broad groups.

One is organized offenders who are highly sophisticated, often nonviolent in their approach. Though they can cause “massive economic harm,” Lowe wrote, they avoid violence to avoid bringing attention to their crimes. Others are more brazen, employing violence to intimidate. “They typically operate in a much smaller, more local area, and typically (are) less sophisticated and organized in their approach,” he wrote. “These offenders tend to generate massive physical and psychological harms.”

Mendelson said that smaller stores are especially vulnerable, because they lack the sophisticated security systems you will find in a Macy’s or a Target.

“You remember David’s Cookies? They were getting robbed all the time,” he said. “And David [David Liederman, the founder of the chain] figured it out. It was the guy behind the counter, calling and telling his friend, ‘There’s no security here, come in and hit it.’ ”

David’s Cookies is now a mail-order company owned by Fairfield Gourmet Food, according to its website. 

Lowe in May painted a picture of a retail industry caught between cracking down on the thieves, or just tolerating them as the cost of doing business. Some might even put the most stealable items in the front of a store, to limit the time thieves are in the store and minimize the fuss they might make.

“At the end of the day,” he said, “retailers’ greatest concern is protecting their employees and the guests in their establishment.”