The Hidden Costs of Organized Retail Crime And How to Prevent Them

In a recent crackdown named Operation Overload, the California Highway Patrol uncovered a staggering $50 million in stolen goods, including high-end electronics, appliances, and clothing from major retailers like CVS and Home Depot. 

It sounds like something out of a movie, but this kind of organized retail crime (ORC) is all too real, and it’s becoming increasingly problematic. 

Shoplifting and theft bring direct financial losses—that’s obvious. But beyond the direct financial losses, ORC inflicts a myriad of less visible damages that ripple through the retail industry, affecting everything from pricing strategies to customer experiences and community well-being. 

In this article, we’ll talk about what ORC is and explore some often overlooked consequences it imposes on consumers and communities. 

WHAT IS ORGANIZED RETAIL CRIME?

Organized retail crime refers to professional theft rings that systematically steal consumer goods from retailers to resell them for profit. 

Organized retail crime rings and their operations are like well-oiled machines. ORC groups use structured hierarchies, sophisticated tools, and strategic planning to execute recurrent large-scale thefts. They take advantage of online marketplaces and distribution channels to help them efficiently monetize ill-gotten inventory.

Common ORC tactics include:

• Return fraud: Stealing merchandise and “returning” it for gift cards or cash.
• Reseller networks: Shoplifting high-value goods in bulk to sell on e-commerce sites.
• Employee collaboration: Recruiting insider help to sell stolen goods or override security.
• Cargo theft: Hijacking trucks or raiding distribution centers to steal inventory.

HOW ORC HURTS CUSTOMERS AND COMMUNITIES

ORC and external theft cost U.S. retailers $41.5 billion in 2022 alone. And while over $40 billion in evaporated inventory inflicts obvious wounds, the indirect damages quietly compound. These indirect costs manifest in various ways and ultimately impose a significant "crime tax" on the entire retail ecosystem.

These indirect costs eventually trickle down to customers and communities, who often end up paying the price for these crimes.

PRICE INFLATION

As items are stolen instead of purchased, retailers offset massive shrink losses by raising prices. This cost recovery strategy means that ordinary, innocent customers end up paying more. Even small price increases, when spread across a wide range of products, can significantly affect a person’s budget. 

Price inflation can even lead to decreased consumer spending in some sectors. As people spend more on essentials, they have less disposable income for other goods and services, potentially leading to a slowdown in economic activity.

REVENUE DECLINES AND STORES CLOSE

Shrink from theft eats into tight profit margins, often leaving retailers with no choice but to close underperforming locations with extreme shoplifting rates. The closure of stores due to ORC has a domino effect. 

Residents in underserved communities face the immediate consequence of limited access to necessities, forcing them to travel longer distances. This not only adds to their time and travel expenses but also places an additional burden on household budgets that are likely already stretched thin. Furthermore, the closure of these stores results in job losses, contributing to local economic downturns. 

COMMUNITY IMPACT

A reduction in sales due to ORC can lead to lower tax revenues, which are essential for funding public services. This can result in cutbacks in essential services.

These cutbacks have far-reaching implications. They can impact the quality of education, lead to poorer infrastructure maintenance, and reduce the efficacy of local law enforcement, creating an environment where crime can flourish and community well-being is compromised.

DIMINISHED SHOPPING EXPERIENCE

To combat ORC, retailers might implement stringent security measures, which can wreak havoc on the shopping experience. Long lines for entry, extensive security checks, and limited access to merchandise are just a few examples. These measures, while necessary, can lead to customer dissatisfaction and a potential decrease in repeat visits. 

This isn’t just bad news for shoppers—a less enjoyable shopping experience drives customers to seek alternatives, further reducing retailers’ profits.

EMBOLDENED CRIMINAL NETWORKS

The profits from ORC further fund organized retail crime rings and their operations. This creates a snowball effect, where the success of one criminal endeavor fuels more crimes. As these rings grow in resources and expertise, they become capable of executing larger-scale thefts, targeting more stores, and expanding their reach. 

The growth of these criminal networks can lead to an increase in violence and crime in the community, affecting the quality of life and safety of residents.

COMBAT ORGANIZED RETAIL CRIME WITH PROACTIVE SECURITY

Studies show that a startling 68.5% of U.S. retailers lack dedicated organized retail crime prevention departments. This gap in proactive defense leaves businesses vulnerable. To safeguard your store, customers, and community, consider these strategies:

• Strategic camera placement: Place retail security cameras at key points in your store, such as entrances, exits, cash registers, and high-value item areas. This helps in monitoring and deterring theft activities.
• Invest in advanced technology: Opt for high-definition retail security cameras with features like motion sensors and low-light visibility that will deter thieves and aid in identifying and prosecuting offenders.
• Leverage data and analytics: Analyze any retail security camera recordings you have access to and identify crime patterns to predict and prevent future incidents. 
• Educate your staff: Training your staff to recognize suspicious behaviors, such as group activities or diversions, is crucial in preventing theft. Develop an emergency response plan to ensure quick and effective action if a situation does arise.
• Regular security audits: Conduct regular risk assessments to identify potential vulnerabilities in your store layout or security systems. Keep your security technology updated to counter new ORC methods and technologies.
  

Need help securing your space? LVT’s retail security cameras are second to none. Contact our team today for a demo. We’ll explain how we can help you protect your assets, property, and people.