After weeks of pandemic fear, unfathomable sickness and death, social distancing, government-mandated isolation, societal shutdowns, and economic meltdowns, America and the rest of the world is reopening. People all over the world are anxious to get back to normal – whatever that might be remains to be seen – which means they will be returning to stores, barbershops, salons, offices, restaurants and bars, and more. While that’s good news for businesses that have been closed, consider that people who rely on retail theft, fraud and burglary are also chomping at the bit to get back to “business.”
The National Retail Federation’s 2019 Organized Retail Crime (ORC) Survey shows its costs the industry $703,320 out of every $1 billion in sales and two out of three respondents saying they saw an increase during the year. Organized retail crime is shoplifting, cargo theft, retail fraud, cybercrime and other coordinated efforts occurring in retail environments.
Lately, the crimes include what loss prevention professionals call door hits, which are essentially criminal flash mobs where several individuals grab as much as they can from store racks or shelves and sprint for the exits. These groups are part of larger organizations that move from store to store and city to city. The merchandise is resold or, in some cases, returned to stores for “refunds” adding another layer of crime.
As the world works toward regaining its footing after the health and economic crisis, the American economy won’t break out of the gates like an Olympic sprinter. Instead, both federal and state governments developed plans for staged reopenings that limit which businesses can resume operations and how they could serve their patrons. Limits include how many people are allowed inside a business at one time and require social distancing requirements, as well.
At the same time, many businesses that had to lay off or furlough staff will most likely open with reduced hours and employees. Fewer employees to monitor shoppers, many of whom will be wearing protective masks, creates a retail environment that merchants have never seen before. Representatives of the International Association of Financial Crime Investigators expect a significant increase in organized retail crime targeting big-ticket items, more door hits, return fraud, and counterfeit money purchases. This is because just like retailers, ORC syndicates have been out of work since stores closed their doors.
While reporting on the societal shutdown has focused on the economic impacts, law enforcement, prosecution and incarceration has also been affected. COVID-19 has changed the way crimes are reported and investigated. Because the courts are closed, law enforcement agencies are more selective when they make arrests to prevent clogging up an already backlogged prosecution process. Add to that, many states are releasing nonviolent offenders to reduce their growing jail and prison populations. Ben Dugan, president of the Coalition of Law Enforcement and Retail (CLEAR) and senior manager of ORC and corporate investigations at CVS Health, said in a recent Loss Prevention Magazine webinar that with a 75% criminal recidivism rate there will be thousands of offenders back on the streets and with the socially accepted practice of wearing masks while “shopping.”
The expected increase in crime isn’t catching us unaware. Caroline Kochman, executive director of the National Association of Shoplifting Prevention (NASP), says there is a historical precedent for a surge in retail theft during the COVID-19 shutdown and afterward when retail stores begin to reopen. Following 9/11 there was a 16% increase in retail theft and there was a 34% increase during the Great Recession (2008). Kochman says surveys of shoplifting offenders showed the economic turmoil of the times led to much of the crime: 31% of offenders said they didn’t have money to purchase the items they stole. She also says many of these individuals don’t act alone.
- Approximately 38% of juvenile and 25% of adult offenders were approached by somebody to steal items for them.
- And 20% of juveniles and 12% of adults were paid to shoplift.
Not all retail crime is perpetrated by strangers. A huge percentage is employee theft, says Nathan Looman, president and founder of Watcher Total Protection.
- 43.7% of retail theft comes from employees
- $16.2 billion is lost annually due to employee theft
- 18.7% collusion between internal and external actors
These numbers are likely to rise, too, due to the incredibly high numbers of retail employees who were either furloughed or laid off during the retail shutdown. The Bureau of Labor Statistics showed that 2.1 million retail jobs were lost in April alone. The most common form of employee retail theft today is return fraud. Looman says the typical theft starts when a customer makes a purchase and doesn’t take the receipt. An employee can use that receipt to make a fraudulent return and take that amount of money out of the till.
“A single employee doing these types of transactions on a daily basis can add up to $70,000 a year,” Looman explains, adding that the COVID-19 retail restrictions have made those transactions easier, too. “We’re starting to change how we do business. These transactions – there’s a lot more opportunity to do these transactions with fewer eyes in the stores.”
During the retail shutdown, many businesses have taken steps to reduce customer contact in the aisles and at the checkout counter to make their stores more attractive and safer to shoppers. One of the methods to speed checkout has been to increase the purchase amount requiring a customer signature at the point of sale. Looman says doing that increases the likelihood of employee theft and suggests video surveillance such as the integration between Watcher and Paladin Data Corporation’s point of sale to prevent such instances. The integration provides an overlay of real-time point of sale data onto video surveillance recordings. This lets businesses review questionable transactions and provides several ways to recall transaction data. He also suggests requiring any merchandise return of more than $20 to require a manager’s authorization.
PREPARING FOR THE RETURN
As societies take steps toward resuming business as usual, retailers should be ready for more unusual times. Just like pent up demand from good customers can get a business going, a similar surge in retail theft can ruin a reopening. There are plenty of ways for businesses to protect themselves.
- Added physical security and video surveillance and video analytics software will protect a store and its inventory are the most effective.
- Increased customer service helps. Greet shoppers at the door and encourage store associates to continually offer them assistance. Too much attention may be a slight annoyance to some shoppers, but it’s a deterrent to shoplifters.
- Arrange aisles and displays to increase visibility and eliminate blind spots.
- Signage alerting would-be shoplifters that they’re being watched is a proven deterrent.
- Train employees to look for suspicious behaviors and tools of the trade. ORC and well-practiced shoplifters use large handbags, backpacks, merchandise bags from other stores, and even baby strollers to lift merchandise.
- And in this age of COVID-19 protective masks, train employees look beyond the facial coverings and pay attention to customer behavior when protecting your store and its inventory.
To steal from Benjamin Franklin’s age-old wisdom – An ounce of loss prevention can help cure a ton of store shrinkage.