ORGANIZED RETAIL CRIME, RETURN FRAUD ON THE RISE

Organized retail crime (ORC) is continuing to grow, with 67 percent of retailers surveyed reporting an increase in the past year, according to the 13th annual ORC study released by the National Retail Federation on Friday.

The survey of retail loss prevention employees found that 96 percent of responding companies had experienced ORC in the past year. Losses averaged $726,351 per $1 billion in sales, an increase from $700,259 last year.

“Organized retail crime continues to be one of the biggest challenges to retailers of all sizes,” said Bob Moraca, vice president of loss prevention at NRF. “These crimes happen across the country every day, with criminals getting smarter, more brazen, more aggressive and sometimes even attacking store employees and shoppers. Fighting ORC is a full-time job, and retailers must learn how to stay a step ahead of these thieves.”

The survey found six in 10 retailers had recovered merchandise from physical fencing locations including pawn shops, flea markets kiosks and temporary “pop-up” stores, about the same as last year. Criminals often turn to the internet for the anonymity it offers in fencing, but only 56 percent of retailers had found stolen goods online, down from 75 percent. And 28 percent had found their stolen merchandise exported illegally outside the United States.

ORC criminals look for items that can be stolen and quickly resold. Some of the top items this year include designer clothes, denim pants, razors and designer handbags.

With the help of state retail associations, 34 states now have ORC laws in place — but with criminal operations often crossing state lines, 69 percent of retailers support passage of a federal ORC law.

The survey found that 40 percent of retailers were victims of cargo theft — merchandise stolen on its way from distribution centers to stores or elsewhere along the supply chain — down from 44 percent last year.

Los Angeles continued to be the hardest-hit area for ORC in the nation, a position it has held since 2012. Following in order were New York City, Houston, Miami, Atlanta, Chicago, Orlando, San Francisco/Oakland, Orange County, Calif., and Northern New Jersey.

Additionally, return fraud continues to pose a serious challenge for the retail industry. Retailers expect 11 percent of purchases to be returned this year, and that 11 percent of those returns are likely to be fraudulent. The return rate for items purchased online but returned to a store is the same, but with a lower fraud rate of 9 percent. Of items returned without a receipt, 17 percent are believed to be fraudulent. During the holiday season, 13 percent of purchases are expected to be returned, with 11 percent believed to be fraudulent.

Of retailers that have experienced return fraud, the most common method is the return of stolen merchandise (68 percent), followed by employee return fraud (65 percent), returns of merchandise purchased on fraudulent or stolen tender (57 percent), returns made by ORC groups (54 percent), wardrobing (40 percent), returns using counterfeit receipts (29 percent) and returns using e-receipts (19 percent).

The survey of 63 loss prevention retailers representing department, big-box, discount, drug, grocery and specialty retailers was conducted September 11-October 18.