In episode 2 of our Loss Prevention Podcast Series, National Retail Federation’s Vice President of Loss Prevention, Bob Moraca, speaks about his take on organized retail crime, loss prevention strategies and how retailers can prepare themselves for the chaos and potential hazards of the upcoming Black Friday shopping mania.
Benjamin: Hello, everyone. My name is Benjamin Hunting, and welcome to the American Alarm podcast. Today, I’m speaking with Robert Moraca, Vice President, Loss Prevention, from the National Retail Federation, and we’re gonna speak about his take on organized retail crime, loss prevention strategies, and how retailers can prepare themselves for the chaos and potential hazards of the upcoming Black Friday shopping mania. Bob, thank you very much for joining us today.
Robert: Thank you, Ben, and I appreciate the opportunity to chat.
Benjamin: So the results from the 2016 Organized Retail Crime survey are out, and I’m really curious to hear what you think are the key takeaways from the survey this year and why you think they’re particularly significant.
Robert: Well, I tell you, there’s interesting findings this year, and a couple of things even surprised me, which is unusual as I think I kind of have my hands on the post here of organized retail crime. And just as a reminder, organized retail crime creates a $30 billion a year loss to the retail industry. It’s pretty staggering in numbers, and we’re seeing the issue get worse over the years, and I can explain that to you. We do this survey every year, we’ve done it for just over 12 years so it’s been a dozen years now. Upon asking our retailers how are they doing in combating the crime, basically, 83% of them said this year, merchants surveyed reporting an increase over the past year. That’s the highest number we’ve ever had.
And what was really astounding is when retailers were asked if they’ve been victimized over the last 12 months by organized retail crime, this year, for the first time, 100% of them said yes, that they had been victimized. You know, that number, over the last five years, was 87% to 93%, 97%, 96%. It wobbles a little bit every year. But let’s face it, you do one of these surveys and you can’t get individuals to agree what color blue is or red is, 100%. So when I saw the 100%, that really took me back. So we had a perception that that had been increasing, and sure enough, the survey kind of bares it out.
What was really interesting, too, was the average loss this year was over $700,000, and that’s per billion dollars in sales, so it’s kind of a number that floats with the volume of sales that you do each year. And that’s a pretty significant increase from about half a million dollars a year per billion in sales. So it’s not only becoming more prevalent, the losses are becoming bigger. You know, obviously, it’s a growing problem.
Let me put something in perspective, too, and I don’t wanna confuse your listeners, however, we also do a survey called the National Retail Security survey, and that looks at shrink in the retail industry. Those are losses that take place. Although the shrink numbers are pretty much in control, when we were surveying retailers on what were the causes of shrink, and we’ve done that survey for over 20 years, normally, it’s the internal threat. In other words, an internal employee who knows your operations and misappropriates funds or merchandise, somehow, so that he beats you internally because he knows your control systems. So that’s been always the number one shrink problem.
The last two years, organized retail crime has overtaken that as the major problem. So two things are happening. Retailers are probably getting better at controlling the internal theft to internal controls and other good loss prevention techniques and security countermeasures. However, on the other side, that organized retail crime is just growing. And the biggest reason is it’s an extremely lucrative business to retail criminals.
Benjamin: Well, these are startling facts, and what are some of the strategies that these business owners can implement to try and minimize this type of loss? It seems almost from what you’ve said that most of the focus has been on internal controls. Is it time to kind of redirect the focus outward and adopt new strategies for dealing with a threat that until now seems to have not been ignored, but perhaps, not dealt with as effectively?
Robert: Yeah. That’s a great way to put it, Ben. It’s a great question because it’s that you’re not ignoring it. The criminals who commit these crimes are very savvy. And keep in mind, these aren’t just gangs that get together and decide to go steal from a retailer, these are organized, almost business-like criminals. A lot of them are gang members already and so they’ve got other vices that are going on. They might do narcotics. They might do gambling, prostitution, all the other vices that organized crime gangs get into.
Now, they’ve found kind of their day jobs. They go in and they send in teams of boosters, 9, 8, 10 at a time into a store. Say, a high-end handbag store, they storm the store and, in literally under a minute, walk away with $40,000 of merchandise, they run in, they hit it real fast and get out. But then they cross state lines, they cross jurisdictions, and they hit very specific retailers that they know they have an outlet. In other words, they have the goods, and these are the goods that they can fence. They can put out on the market and place it through the Internet or small bodega stores, or I guess the old fashion is a flea market and things of that nature. So it’s very organized. Sometimes, they have their own warehouses. They have their own supply chain. So it’s almost like a small business.
And then sometimes they come in and they’ll also steal or try to return items. So that high handbag that’s worth $800, they’ll bring it back, and they can’t get the money but they get a gift card. Now to an e-criminal or a retail criminal, that card is just as good because they can take it to an exchange, either online or in some other areas, and they can convert that into cash, maybe anywhere between 85, 90 cents on the dollar.
Benjamin: And at that point, it’s almost untraceable. It’s as though the theft and the laundering process are hand in hand.
Robert: Yes, you’re absolutely right. Society, in general, is making it easier. I don’t wanna pick on one company but there’s this company, it’s very convenient, they’re called Coinstar, I believe, is the name. You go into a grocery store, you could put your coins and get money or a voucher and then go buy groceries at that store. A lot of these kiosks now have a little port where if you have a gift card, you can slide it in the slot and then it’ll give you, “Hey, it’s a $100 card for, say, a home improvement center, we’ll give you 85 cents on the dollar.” And you hit the button and, literally, get your $85 in cash.
Now, this is a legitimate business because if Bob Moraca or Ben gets a gift card they’re not gonna use, they can take it there and convert it to cash and then go get what they want with it. But you’ve really created this shadow opportunity for any criminal to never have to look at a person. They can go right to these machines…and like I say, they’re becoming more savvy, more sophisticated every time.
And then when you’re trying to prosecute these things…and you asked a good question, what can retailers do? We orchestrate the effort when we partner with our friends in the law enforcement. There’s over 50 organized retail crime associations across the country. They’re geographic. There’s the LA ORCA, the San Diego ORCA, the New York Metro, Philadelphia, the Midwest. There’s one right out of Washington, D.C. here down the street, and where retailers and law enforcement detectives, special agents and such work on these crimes because they cross jurisdictions, sometimes, state lines. And like I said, it’s a complicated specialty crime.
And if you have one more moment, I’ll add one other item. We’ve been successful, the National Retail Federation, in working with our state retail associations in getting organized retail crime legislation passed now in over 34 states. A few years back, you know, it was 5, 8, 10, and we had half the country a few years back. So we’re up to 34 now. So we’re pushing those last 17 states to put very specific organized retail crime legislation in place. That’s what we’re doing to fight the crime.
Now, at the store level, there’s some technology we can use, things like make sure every retailer now has a very sophisticated, high-end, digital recording system. And you can overlay that with something called video analytics where the system can automatically look for anomalies in how people are moving or walking through a store. If they stand in one place for a very long time, the system can hone in on that. And maybe they disappear behind a rack or something, and they can actually recognize an anomaly like that and send a video clip to a loss prevention detective who may be working in the store itself. So the issues like that can be real-time.
Thirdly, if you have a theft, you can go back and look at the video, usually, remotely so you don’t have to get in the car and drive anywhere. And then the nice thing is you can grab that clip electronically and send it right to the police department. Most law enforcement agencies have computers right in their cars or right with them. The technology exists. So you can really move information on these criminal acts real-time to try to thwart the knuckleheads.
Benjamin: And it’s interesting that this technology is working both ways. We have the ease of use of the gift card system as an example aiding the criminals, and then we have the surveillance technology on the other hand that’s kind of fighting back. But with these trends, the trend of absolutely 100% victimization of retail crime, and Black Friday just round the corner, the biggest shopping day of the year, what can retailers expect to face on Black Friday? And is there anything specific that they can do to prepare for this type of event where it’s a very crowded store, it can get heated, there’s a lot going on? Are there strategies that work for that type of situation?
Robert: Yeah, there is. And you’re right, it’s a perfect storm, sometimes, for these retail criminals because it’s a hectic time anyway. You’ve got a lot of seasonal employees who may not be as trained or as nuanced or had longevity as an associate, so they’re relatively new. So these criminals can take advantage of that, too. So you really have to make sure you’re training your workforce to look at things and be able to report things, simple things like SAR reporting or suspicious activity reporting.
You know, if you see something unusual on the store, just like we ask our consumers or the public, “If you see something, say something.” Teach our employees if they see something suspicious or unusual or a group, they don’t have to take action. Most retailers don’t want anyone except the trained asset protection, loss prevention folks engaging with someone who you think might be involved in this activity, but report it, let us know, so they can observe and see. If someone is trying to return something and it doesn’t look right, get the supervisor involved with the transaction, those kinds of things.
Now, to cut back on the Black Friday problems like the crowd control issue, the NRF has guidelines that we give out to retailers. We do it every year and we update it – it’s things like this. We recommend to a lot of our members, try not even to use words like “doorbuster sales” because it brings the premise of literally taking down the door. And unfortunately, we’ve had individuals maimed and actually be overrun and killed during those mob rushes into a store.
So there’s a lot of really great techniques we recommend for crowd control. Number one is, when people start showing up at 3 in the morning because they wanna be the first one to get this flat screen for a very insignificant price, have a golden ticket system. “Hey, you’re first one in line, you’re number one. You’re number two. You’re number three.” Now, they can go wait in their car and they can reconvene at the front door at a certain time so you can control the entry so you don’t have just a mob.
In other words, at the door, as soon someone unlocks it, they push in to get to the floor. If you only have a limited number of items, you can give out tickets in that way too, so people understand, “Okay, the first 40 people who got in line here, you’re all gonna get your specialty item,” whatever it would be. So you’re eliminating that mad rush, if that makes any sense to you, Ben.
Benjamin: Oh, that makes total sense. I can really see how a lot of the strategies involved, controlling the chaos and creating order out of disorder, and just letting people know that there’s a system in place. They don’t have to panic, they don’t have to get angry or upset, and that everyone is gonna be treated fairly. And I think that that’s something that gets lost. And, you know, you mentioned how Black Friday is advertised with “doorbusters” and what not. I think that’s something that gets lost in the shuffle and the hype surrounding this particular event.
Robert: Yeah, it does. And then the other thing we recommend to retailers for sure is make sure you’re working with your first responders like the law enforcement folks. Sometimes, it’s good for retailers to even hire some off-duty law enforcement professionals to be there in uniform, with the police car, because that’s just a deterrent for folks, you know, who may want to get overly aggressive in those situations, so that they know when the situations are gonna take place.
There’s some malls that will even have some kind of entertainment there, you know, so people can kind of get to a place, relax, enjoy something, have maybe even some refreshments for them. And if you’re affiliated with a mall, make sure you let the mall know what’s going on. Perhaps you use an indoor entry and very specific for the opening that day. A lot of good techniques, you can work with the mall operators, the retailer, local first responders, and the community personnel because everyone wants everyone to have a joyful holiday season, as well as positive shopping experience so that they come back, and we want them to enjoy that whole process.
Benjamin: Well, Bob, thank you very much for taking the time to speak with us today and giving us your insight and opinions on this very important retail topic.
Robert: Ben, thank you for the opportunity, and have a great holiday season.
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