WASHINGTON — The number of retailers victimized by organized retail crime rose 6 percent in the past year, as merchants cut back on staffing levels and online avenues trafficking the stolen merchandise continued to expand, a National Retail Federation survey said.
This story first appeared in the June 8, 2011 issue of WWD. Subscribe Today.
The top five cities targeted by criminal gangs were Los Angeles, Miami, New York, Chicago and Houston, according to Joe LaRocca, senior asset protection adviser at the NRF. The survey also noted that the current economic environment, which is “ripe with consumers looking for low prices,” contributed to the increase.
“Highly targeted items” included denim jeans, notably Levi’s brand products; North Face jackets; Victoria’s Secret “Pink” lingerie; Oil of Olay and Cover Girl cosmetics, and a broad range of pharmaceuticals and electronics.
According to the survey, 94.5 percent of retailers said they had been a victim of organized retail crime in the 12 months through May 31, up from 89.5 percent in the same period a year earlier. In the 2009 to 2010 comparable period, the survey showed a 2.7 percent decrease in activity, crediting stepped up law enforcement efforts. In addition, six out of 10 retailers, or 64.1 percent, said they had seen an increase in criminal activity during the recent 12 months, up from last year’s total of 58.9 percent.
“I hate to say it, but we weren’t surprised to see an increase of 6 percent from last year,” LaRocca said. “That falls in line with some of the early reports we heard on shrinkage in stores. It’s alarming. Organized retail crime groups are targeting stores in a significant way and this comes in a variety of tactics, including obvious merchandise theft, fraud acquisition (such as stolen debit cards) and cargo theft.”
The loss to retailers from organized retail crime ranges from $15 billion to $30 billion annually, according to Congressional testimony and industry experts.
For the first time in its surveys, the NRF asked retailers about cargo theft. Almost half, or 49.6 percent, of respondents said they were victims of cargo theft in the past year. Some 57.4 percent of merchants said the thefts occurred en route from the distribution center to the store, while 39.7 percent said they often experienced cargo theft from the manufacturer [primarily overseas] to the distribution center, 22.1 percent said it occurred at the distribution center, 17.6 percent said the criminal activity took place when the items arrived at the store and 10.3 percent said it occurred when moving from one store to another.
The findings are based on responses from 129 executives representing department and big-box stores, discounters, drug, grocery, restaurant and specialty shops.
“The number that was fascinating to us was how often the store delivery side of the business is targeted,” said LaRocca. “Almost two-thirds of the merchandise is targeted from the distribution center to the store.”
One of the criminal cases highlighted in the NRF survey involved a partnership between an unidentified national department store chain and law enforcement that uncovered a major fencing operation in Los Angeles that uncovered a “vast quantity” of stolen Levi’s jeans. Several thousand pounds of Levi’s products, valued at $30 million, were found in a Los Angeles warehouse. The Los Angeles Police Department and the FBI Interstate Theft Task Force uncovered the ring and seized about $2.5 million worth of Levi’s products in a bust late last year.
“What is significant about this case is the national nature of the groups stealing the merchandise, who were as far away as Chicago and bringing it into the L.A. area,” said LaRocca. “They cleaned out a number of major chains to acquire this product.”
To make matters worse for merchants, the crimes are turning more violent, he noted.
“We are hearing that the groups are becoming more brazen and aggressive and stealing larger quantities,” LaRocca said. “That indicates to us they have a bigger marketplace and market share, especially in a weak economy.”
One in 10 retail executives, or 13 percent, who were asked for the first time in the NRF survey about violence, said they had witnessed violent activity.