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Designer Clothes, Bags Among Top Targets of Organized Retail Crime

Elevated levels of organized retail crime (ORC) showed no sign of letting up in the National Retail Federation’s 16th annual ORC study.

Three-quarters of loss prevention executives at large and mid-sized retail companies said they had seen an increase in ORC activity, up from 68 percent last year, according to the survey.

Losses averaged $719,548 per $1 billion in sales, nearly 60 percent higher than where they stood in 2015. The NRF’s 2020 report marked the fifth in a row where retail companies reported losses of more than $700,000 per $1 billion in sales.

The survey, conducted before the full economic impact of the coronavirus pandemic was seen, may not reflect any impact it may have had on ORC, the NRF cautioned.

Respondents reported lower satisfaction with all levels of law enforcement, dropping roughly 20 points from last year across the board. Sixty-four percent said they were satisfied with help received from local police (down from 84 percent last year), 55 percent with state authorities (down from 75 percent) and 50 percent with federal agents (down from 69 percent).

The percentage of respondents who said a federal ORC law is needed—Congress has not acted on ORC in a decade, according to the NRF—fell to 62 percent after three straight years where support hovered around 70 percent. Additionally, the elevated levels of ORC have occurred as many states raise the threshold of what constitutes a felony.

Retailers cited relaxed law enforcement guidelines, changes in shoplifting laws and decreased penalties for shoplifting among the causes for increased ORC, according to the NRF.

“Retailers are seeing more cases and higher losses as organized crime continues to target stores, warehouses and cargo,” NRF vice president for research development and industry analysis Mark Mathews said in a statement. “Retailers are investing millions to fight these crimes, but they need more help from law enforcement and, most of all, they need tougher laws that recognize the difference between petty shoplifting and professional crime for profit.”

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The top items stolen included designer clothing (reported by 34 percent), laundry detergent, (21 percent), razors (20 percent), designer handbags (16 percent), deodorant (15 percent) and laptops/tablets, high-end liquor, infant formula, pain killers and allergy medicine (tied at 13 percent each).

Sixty-one percent of retailers said their companies are prioritizing ORC more than they were five years ago. More than half, 52 percent, reported allocating more technology to reducing risks such as ORC-related thefts and 36 percent said they have increased loss prevention budgets.

Stolen merchandise is sometimes returned for store credit, usually in the form of gift cards that can then be sold for cash. Fifty-nine percent of retailers said they had found gift cards for sale on websites, up from 51 percent last year. To fight returns fraud, 52 percent said they had tightened or planned to shore up return policies.

Among other steps taken to fight ORC, 45 percent say they changed or planned to change point-of-sale policies, while 28 percent reported doing the same with employee screening and 27 percent with the way they handle trespassing.

In an improvement from 2019, only 58 percent of those surveyed reported cargo theft, down from 73 percent last year. Cargo theft occurred most often en route from distribution centers to stores (45 percent), at distribution centers (40 percent), at stores (38 percent) and en route between stores (35 percent). This drop in cargo theft might correlate with prolonged and widespread store shutdowns amid the pandemic this year.

Los Angeles experienced the most ORC this year, followed by Chicago, Miami, New York and San Francisco.

Retailers ramp up IT security ahead of holiday season

As e-commerce continues to boom this holiday shopping season, retailers are also preparing for a different breed of crime: online retail fraud.

Seventy-eight percent of retail businesses have taken additional IT security precautions for the holiday shopping season compared with prior years, according to a survey from security and compliance solutions provider Tripwire. Of those, 87 percent said they took these additional measures explicitly because of the potential rise in online retail fraud as more consumers shop online due to Covid-19.

Tripwire’s survey, conducted by Dimensional Research last month, evaluated the opinions of 203 security professionals working in the retail industry.

This year, 63 percent of retail organizations said their IT security teams started preparing for holiday shopping earlier than usual and 57 percent said the current surge in online shopping has made security especially difficult.

“The retail industry has certainly had to adapt to the challenges of 2020, particularly as Covid-19 has either prevented or discouraged consumers from in-store shopping,” Tim Erlin, vice president of product management and strategy at Tripwire said in a statement. “Because of this, retail organizations have had to make changes this holiday season—they’re starting earlier and expecting increased volume, along with increased risk to both consumers and retailers.”

The survey also examined the current state of cybersecurity best practices, finding improvements across the board. Well over half, 61 percent, said their ability to detect and respond to a security breach is better now than a year ago. Thirty-two percent characterized their organization’s capability for protecting consumer data as “excellent,” up from 19 percent in 2017. Configuration changes are identified more quickly, with 64 percent detecting them in minutes or hours, compared to 55 percent in 2017. Ninety-seven percent are discovering IT assets automatically, compared to 85 percent in 2017.

“While we may see increased cybersecurity risk this holiday season, the basic security controls required to protect retailers haven’t dramatically changed,” Erlin continued. “Understanding what assets you have, ensuring that they’re configured securely and finding and fixing security issues are all important steps in running a secure business.”