story by Kim Souza
ksouza@thecitywire.com
It’s not often discussed in quarterly earnings calls but 97% of nation’s retailers recently survey by the National Retail Federation say they have been victims of organized retail crime in the past year, up from 88.2% a year ago. These crimes have resulted in retail losses of more than $30 billion each year and often involve gangs working together to pull off the heists.
Four out of five respondents said organized retail crime (ORC) losses increased, while 48.5% experienced a “significant increase.” The financial impact of ORC is costly. The average loss per $1 billion in annual sales due to ORC was estimated at $453,940. For a company the size of Wal-Mart whose U.S. sales were $288 billion last year, the losses could be staggering.
Wal-Mart U.S. CEO Greg Foran mentioned higher levels of shrink in the retail giant’s recent earnings call some of which is related to theft or shrink. Shrink is one the “Urgent Agenda” items being addressed by Foran and his senior leadership.
“We are reviewing the end-to-end inventory management process with a special focus on shrinkage and working to close gaps. Investments are being made in training programs for store and asset protection associates as well as investments in staffing in high shrink areas of the store,” Foran explained in the recent earnings release.
He said it could take 18 months or more before the results make it to the bottom line.
“These expenses will impact us for the rest of the year,” Foran said.
The re-introduction of greeters to the front of the store is one way the retailer can help monitor theft. Roughly 8,000 department managers are being put back in supercenter stores to better control inventory and help with customer service. A complete retraining and decluttering in the retailer’s back room, particularly the supercenters, is also underway because management says that is where a great deal of shrink occurs when product is not properly marked down.
The recent NRF survey results indicate that retailers are also beginning to identify e-fence locations for stolen merchandise and gift cards. Retailers commonly view online marketplaces, auction and swap meets looking for any merchandise that may be stolen.
In this age of automation, organized retail crimes also often include merchandise credit and gift cards. In the past 12 months, 66% of retailers surveyed have experienced the theft of merchandise which is then returned for merchandise credit in the form of gift cards that are sold to secondary market buyers and sellers for cash. Among other venues, 54.5% of retailers said they have found merchandise credit and gift card on website, while 24% have found them in pawn shops.
More than one-third of the retailers (37.9%) say they have experienced cargo-related theft in the past 12 months. Bob Moraca, vice president of loss prevention for the National Retail Federation, said retailers have to battle criminal activity long before merchandise reaches the store floor – while it is still cargo in transit.
Among those who experienced cargo theft in the last year, that theft was most likely
to occur en route from the distribution center to the store, according to Moraca. About half of the retailers said it occurred en route from manufacturer to distribution center. About one-third of the retailers said they experienced cargo theft when merchandise is moved from store to store as well as within the distribution center.
The top locations for organized retail crime activity in 2015 include Los Angeles, Miami, Chicago, New York, Houston, Dallas-Fort Worth, San Francisco, Baltimore, Orange County, Calif., and northern New Jersey
The items most stolen by organized crime gangs include cigarettes, energy drinks, infant formula, teeth whitening strips, pregnancy tests, razor blade refills, allergy medication, weight loss pills, denim pants, designer clothing, handbags, high-end vacuums, laundry detergent, cell phones devices, GPS devices, laptops and tablets.