In 2023, retail theft has reached a fever pitch with businesses across the world – particularly in the U.S. – where losses suffered have been far beyond the scope of typical “leakage”.
Stolen merchandise being sold on their marketplaces and theft has always been a concern for retailers and brands, who often budget for anticipated losses to shoplifting and employee theft. This is known throughout the industry as “leakage”, “shrinkage”, or “inventory shrink”.
What is Organized Retail Crime (ORC) or ORC Theft?
The phenomenon of Organised Retail Crime (ORC) has been on the radar of retailers in the U.S. for some time now. The issue of ORC differs greatly from the age-old problem of individual thieves shoplifting items from stores for personal use. ORC involves the theft of a large number of goods for resale on the black market and through e-commerce marketplaces such as Amazon and eBay. ORC smash-and-grab operations are often part of a larger criminal enterprise, making it a far more critical issue for retailers than simple shoplifting.
Every year, the National Retail Federation (NRF) conducts a study of retail loss prevention and security. In their 2022 report, the NRF estimates $94.5 billion in leakage losses for retailers in 2021. This figure represents a staggering increase of almost $4 billion year-over-year. The report notes that ORC is the primary driver of these losses. Perhaps most alarming, is the fact that eight in 10 retailers surveyed report that the violence and aggression associated with ORC incidents increased in the past year.
What is being done about ORC and retail theft?
With businesses suffering heavy financial losses from ORC, retailers are responding with aggressive security efforts. Along with increased spending on security and loss prevention personnel, some retailers are taking anti-theft measures such as removing certain items from direct customer access.
At the Federal level in the U.S. – in response to many goods from ORC ending up on e-commerce marketplaces – major retailers with brick-and-mortar operations such as Nordstrom, Best Buy, Target, and Foot Locker have supported the INFORM Consumers Act. The proposed bill, introduced in the U.S. Congress in 2021, would require marketplace sellers to register on platforms with their real names and verified contact information, among other criteria to ensure online retailer transparency.
Thinking Outside of the Box
ORC clearly hurts the financials of retail operations. The damage ORC can have on a retailer, however, extends far beyond a business’s profit and loss statement. As noted above, many coordinated ORC operations often turn violent and pose a serious threat to both customer and employee safety. The threat of ORC can hurt brand perception and customer experience.
As reported by Business Insider, wholesale retailer Costco’s unique business and shopper experience model provides some effective safeguards against ORC, shoplifting, and other retail crimes. Unlike other retailers such as Target and Walmart, Costco stores “haven’t seen any major change in shrinkage,” according to the company’s Chief Financial Officer. This fact can likely be attributed to the retailer’s unique member-based sales model.
All Costco shoppers are required to hold a membership, which collects their data. What’s more, shoppers are also required to present a receipt upon exiting a store. These extra measures have proven to be effective anti-theft deterrents for retailers with more than 800 locations across the world.
The Bottom Line
While on the surface, the issue of ORC appears to only impact retailers in the brick-and-mortar space. However, ORC should also be on the radar of businesses operating in e-commerce. As an e-commerce brand, having your products stolen and falling outside of your carefully planned out supply chain can have severe consequences for your brand’s perception. Ultimately, protecting your brand from the growing online shadow culture of thieves and larger criminal networks is a tough task to go on alone.
The proceeds of ORC mustn’t end up in the supply chain of your e-commerce business. This is where e-commerce brand protection and monitoring tools come into play.
By performing detection, authentication and enforcement across online domains marketplaces like Amazon, eBay, and Google Shopping brand protection software can alert e-commerce business owners of exactly who’s selling their products so they can ensure that stolen merchandise is not being peddled and sold online by criminals acting as authorized 3P sellers.
Moreover, test buys and test purchasing with a brand protection platform like GreyScout would help uncover further evidence to confirm if a product sold by an infringing 3P seller is procured via ORC back channels.
