Supermarkets, with their everyday, modestly priced products, would seem an unlikely target for organized crime.
Yet for more than two decades, crime rings have been sending teams of professional shoplifters, or "boosters," into supermarkets and other retail outlets. Their focus has been on baby formula, over-the-counter drugs, razor blades, batteries, DVDs and other products they can readily sell to fences, flea markets or mom-and-pop stores.
Criminals have come to learn what food retailers have always known -- grocery products may not fetch much individually but do very well in aggregate. Now retailers are turning to technology in the form of national databases to help them track incidents of organized retail theft and to facilitate law-enforcement efforts.
ORT "is clearly the most pressing security problem facing [the retail] industry," said Chris Nelson, director of asset protection, Target, Minneapolis, Minn., in March testimony before the House Judiciary Subcommittee on Crime, Terrorism and Homeland Security. Statistics on ORT vary, but still point to substantial monetary losses. According to Food Marketing Institute's "Supermarket Security and Loss Prevention 2005," released this month, shoplifting costs U.S. retailers $10.7 billion annually. Within the food retailing industry, 35% of shoplifting losses are attributed to professional shoplifters and ORT, the report said.
The National Retail Federation, Washington, in its study, "Organized Retail Theft, Raising Awareness, Offering Solutions," puts the annual loss to ORT at a far larger figure -- $15 billion in food retailing alone and upwards of $25 billion in all retail verticals.
Some large retail chains have set up organized retail crime divisions to focus exclusively on the problem. Jerry Biggs, who has worked on defeating ORT since 1994, has headed up the ORT division of Deerfield, Ill.-based Walgreen Co. for three years. As Biggs sees it, ORT is growing significantly. "But many retailers don't report it," he said.
In its upcoming 2006 National Supermarket Shrink Survey, Trax Retail Solutions, Scottsdale, Ariz., found that 75% of respondents experienced an increase in ORT over the past year, though only 27% allocated additional resources to address the problem.
A recent case Biggs investigated involved a group of 30 shoplifters that sent out teams of three or four to steal between $50,000 and $65,000 in merchandise per day. "They once hit 22 Walgreens stores within a 100-mile radius in a single day," he said. Over the past two years, Biggs estimates that law enforcement has seized $4.6 million in goods, mostly Walgreens merchandise, in cases he has participated in.
ORT has deleterious effects that extend beyond financial losses to the retail industry. For example, some of the products targeted by ORT rings -- notably infant formula and OTC drugs -- deteriorate by the time they are recycled back into the marketplace, putting consumers at risk, noted Joseph J. LaRocca, vice president, loss prevention, NRF. Another concern is the potential threat to the physical safety of employees and shoppers posed by professional shoplifters. "If there's one thing that's driving this is that we will have safer stores," said Rhett Asher, vice president, retail operations and loss prevention, the Retail Industry Leaders Association, Arlington, Va.
According to the NRF study, some ORT rings have links to terrorism. "Federal law enforcement officials have proven in a number of cases that much of the illicit proceeds earned by ORT rings have been laundered and sent to countries that support terrorist organizations," the report said.
Given these overtones, the ORT issue has attracted the attention of Congress. Two years ago, Sen. Larry Craig, R-Idaho, introduced a bill (S. 1553) called the Organized Retail Theft Act of 2003. The bill would significantly toughen penalties for ORT, treating it as a federal felony, as compared with state laws that consider it a misdemeanor. Since then, language related to ORT has been included in the Department of Justice Reauthorization Bill, "which has passed the House and is awaiting action in the Senate," said Francine Greenberg, spokeswoman for FMI, Washington.
On the state level, Texas retailers have been able to tap state agencies such as the Texas Department of Health to address the ORT problem, according to an article in the January-February issue of Loss Prevention magazine written by Karl Langhorst, director of loss prevention, Randall's/Tom Thumb Food Markets, a division of Safeway, Pleasanton, Calif.
Biggs stressed that since every ORT case involves several retailers, collaboration is necessary. "As retailers we sometimes don't work together as closely as we should," he said. "But there's no competitiveness in this. Everybody is affected." Walgreens works with such chains as Safeway, Wal-Mart Stores, Target and CVS, he said.
Walgreens is also a member of a five-year-old group called the Coalition Against Organized Retail Theft, which also includes Wal-Mart, CVS, and a number of trade associations such as FMI, NRF and RILA.
Thanks to the efforts of NRF and RILA, retailers now have an unprecedented opportunity to collaborate on fighting ORT. Both trade groups have developed Web-based national database networks through which retailers can share information about their experiences with ORT and other criminal behavior in stores, including robbery and credit card fraud.
The hope is that such sharing of information will shed light on ORT rings and help law enforcement to bring them to justice. But questions remain about whether the two databases should be merged or run separately, and how much information retailers will be willing to share.
The databases "are going to be the best way to get the information out and the point across," said William Alford, a loss prevention consultant working with FMI. By tracking specific dollar losses, retailers "will have more clout with legislators," he added.
NRF's network, called the Retail Loss Prevention Intelligence Network, was scheduled to debut by the end of this month via www.lpinformation.com. It will allow any retailer to use a Web browser to share data such as stolen items and names or pictures of suspects. It will also allow retailers to access other retailers' data, subject to limits placed on the sharing of that data. "RLPIN lets retailers interact on a real-time basis across the U.S.," LaRocca said.
Retailers will be able to withhold information such as company name, LaRocca said. They will also be able to indicate which sectors, groups or individual companies should be excluded from seeing their data, and whether it should be made available to law enforcement.
To access the network, retailers will need an ID, password and an additional security ID provided by a device that changes the ID every 60 seconds. A basic annual subscription to the service will cost $1,200, and an advanced subscription (available in late January), $4,800.
Thus far, five retail chains -- Gap, Sears, Federated Department Stores, Helzberg Diamonds and Beall's -- have publicly acknowledged testing the system. Walgreens has also worked on portions of it. Another 10 retailers have committed to using it once it's launched, and "several dozen" others have expressed interest, LaRocca said.
Food retailers, though generally not high-profile on the ORT issue, are very concerned about it, LaRocca said. "Historically, grocery and drug chains have been more aware of ORT than other retail sectors," he said. More recently, other retail sectors have gotten involved "so now grocery/drug is one of many voices talking about the issue."
Meanwhile, RILA is well into testing its InfoShare database network with 14 retailers, including Food Lion, Wal-Mart, Target, Dollar General, Family Dollar, Kmart, Big Lots, Walgreens, Office Depot, Limited, Gap, Pep Boys, Lowes and Payless Shoe Source. RILA plans to make the network available to all retailers in January, according to Asher.
Like RLPIN, InfoShare is a national database that houses retailers' ORT information and makes it available to other companies. Both analyze trends, generate reports and employ e-mail alerts. InfoShare's fees will be similar to RLPIN's, but will decrease with more participation, Asher said.
One difference is that InfoShare automatically uploads information already entered into a retailer's in-house database, Asher pointed out. NRF, however, is working with several case management companies to develop "direct feeds" into RLPIN, LaRocca said.
While some information is uploaded to InfoShare on a voluntary basis, much of it is mandatory, such as location of incidents, Asher said.
NRF and RILA have had discussions about merging the two ORT database networks, but for now each trade group is pursuing its own vision of how a national database should work. Ultimately, a single database may emerge. "We need to have one national database to really be effective," LaRocca said. "I'd like it to be RLPIN, and think it will be, but regardless we need to all work together to provide the most benefit to retailers and law enforcement."
Asher's view is that competition between the databases will ensure that "the industry gets the best product." If both are equally effective, "then at some point we should be open to how we can make them work together," he said.
Biggs sees the development of national databases as "great for law enforcement" and "a significant step forward in getting over the hurdle" to retailer collaboration on ORT. Walgreens has not made a final decision on which databases it will use, but he said the company "will definitely use NRF's in some capacity and possibly RILA's as well." Walgreens also has to decide what information "our legal department and senior management" will share with the databases, Biggs said, adding that the company will want to control who sees its information.
Still, LaRocca believes retailers' desire to tackle ORT will make them supportive of the databases. "Never before have we seen retailers so willing to drop their proprietary interests and share information."
What's the best way for retailers to keep shoplifters -- professional or amateur -- from stealing from their stores?
Certainly technology plays a role. Many retailers use electronic article surveillance and closed circuit TV to thwart thieves, though these systems must be properly used and can sometimes be defeated by professionals.
But the most effective technique may be plain old customer service, say many loss prevention experts. "Professional thieves will not shoplift when an employee asks, 'Can I help you?,"' said William Alford, a loss-prevention consultant working with the Food Marketing Institute, Washington.
"If someone is watching their activity, a booster [professional shop-lifter] will probably move on to the next store," said Joseph J. LaRocca, vice president, loss prevention, National Retail Federation, Washington.
"Thieves don't want to be seen, so make eye contact with them," said Jerry Biggs, who leads Deerfield, Ill.-based Walgreens' organized retail theft division.