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NRF: Organized Crime Takes Higher Toll on Stores

Retailers were victims of organized crime at record rates last year, and evidence suggests that the increasing appeal of the Internet as the preferred place...

Retailers were victims of organized crime at record rates last year, and evidence suggests that the increasing appeal of the Internet as the preferred place to “e-fence” stolen goods was a big reason.

This story first appeared in the June 4, 2008 issue of WWD.  Subscribe Today.

The National Retail Federation’s fourth annual Organized Retail Crime Survey, released Tuesday, revealed that 85 percent of the 114 merchants surveyed were victims of organized retail crime last year, up from 79 percent in 2006, 81 percent in 2005 and 78 percent in the survey’s first year, 2004. Although participants weren’t identified, the NRF said the majority of respondents were department stores or specialty stores that carry apparel, accessories or beauty items.

Organized crime accounts for as much as $30 billion in retail losses every year, according to the Federal Bureau of Investigation. These include crimes that “are organized in nature and investigated at the federal level” as opposed to individual acts of shoplifting, said Joseph LaRocca, vice president of loss prevention at the NRF.

“Organized retail crime is quite a bit different than most people would assume when you think about shoplifting,” LaRocca said. “These are gangs of individuals, sometimes people operating on their own, but the intent is to steal large quantities of merchandise from retail stores with the purpose of reselling it.”

Like the consumers who may unknowingly purchase stolen goods from them, many of the sellers are turning to the Internet, using auction sites and other online marketplaces the way a pickpocket or burglar might use a partner as a “fence.”

“E-fencing has become a preferred way of liquidating goods for ‘booster’ crews who operate in the field today,” LaRocca said.

In fact, the NRF estimated that as much as 40 percent of new tagged merchandise sold through online auction sites is stolen or obtained illegally.

Asked if they had identified or recovered stolen merchandise and/or gift cards that were being “e-fenced,” 68 percent of the respondents said yes, down from 71 percent a year ago. That decline may be more attributable to the difficulty of detecting e-theft as opposed to an actual drop. Sixty-eight percent of respondents said they had identified or recovered goods or cards from a fence location, up from 61 percent in 2006.

From the seller’s perspective, the Internet offers an ideal environment for transactions: broader geographic distribution, higher returns and lower risk.

“Instead of a limited population, like you might have at a swap meet, they can have national or international distribution,” LaRocca said. “The profit is greater on the Internet — 70 to 80 cents on the dollar.”

Retail thieves will sometimes brazenly return stolen merchandise to the store from which it was taken, yielding them a 100 percent return, but a far greater degree of risk, as well.