What is ‘Organized Retail Crime?’

Organized retail crime, or ORC, has become a hot buzzword as of late. Retailers have cited it among their reasons for shutting down stores or ramping up theft-mitigation measures that might seem extreme to the average consumer.

In a September statement from Target regarding the closures of nine stores in four states, the company said it “cannot continue operating these stores because theft and organized retail crime are threatening the safety of our team and guests, and contributing to unsustainable business performance.”

According to Forbes, Minnesota is ranked as the 10th worst state in the retail theft index, meaning it “accounts for 10% more retail crime than expected based on its share of the population.” Overall, ORC has become one of the highest priorities for retailers this year, according to the National Retail Federation (NRF). It tops other risks and threats including violence during a criminal act, homelessness concerns, and external theft that is non-ORC related.

This all comes a time when retailers are facing record levels of “shrink,” or lost inventory. NRF said that retailers faced shrink worth $112.1 billion in 2022, up from $93.9 billion in the prior year. “While retail shrink encompasses many types of loss, it is primarily driven by theft, including organized retail crime,” NRF said in its 2023 Retail Security Survey. “Theft – both internal and external – accounts for nearly two-thirds (65%) of retailers’ shrink. However, for some sectors, theft can represent more than 70% of overall shrink.”

But still, what is ORC, and how does it differ from run-of-the-mill shoplifting?

First off, what is ORC not?

Cody Johnson, president of the Minnesota Organized Retail Crime Association, said it’s important to distinguish differences between an average shoplifter and ORC. His group is a St. Paul-based nonprofit and statewide alliance between retailers, the financial sector, prosecutors and law enforcement to combat ORC.

A teenager pickpocketing some candy, someone intentionally scanning three apples instead of four at self-checkout, or anything that’s for personal use aren’t considered ORC. Even the flash mob of ten individuals that hit a store to commit mass theft – that’s still not ORC.

The key difference: There has to be an organized element to it for it to be considered ORC.

“There’s a very large organizational intelligence behind it. Not every repeat offender, not every incident that’s high dollar is ORC,” Johnson said. “They could be hitting multiple stores in a day, traveling from out of state to come into Minneapolis, or they’re selling online – there has to be other organized components.”

The NRF defines ORC as theft or fraud activity conducted with the intent to convert illegally obtained merchandise, cash, cargo, or cash equivalent into financial gain (no personal use), typically through their online or offline sales.

It typically involves a criminal enterprise that organizes large-scale thefts from several retail stores and employs a “fencing operation” to sell illegally obtained goods for financial gain. A fencing operation is essentially a middleman or receiver that purchases the goods to sell to another party. These gains then can fuel other, more dangerous, illicit activity, according to the NRF.

ORC doesn’t only involve external groups either; there can sometimes be collaboration between employees within the store and individuals on the outside.

ORC has been around for a long time, but it has become much easier to pull off with the rise of online reselling marketplaces. In the wake of Covid, too, the retail industry workforce has contracted, making it more difficult to staff stores and monitor merchandise on a regular basis.

Shoplifting, although its own separate issue, will never go away as it’s often based out of necessity, Johnson said. “We’re not worried about the average shoplifter, we’re worried about these organized crews that are coming in and very blatantly taking advantage of our retailers whether it’s through theft or fraud.”

What items do ORC groups target?

The higher the price point of the merchandise doesn’t necessarily mean the more likely ORC groups will target it. According to the NRF, targeted goods can range from high-price, high-fashion items to everyday product needs that have a fast resale capability.

The most frequently targeted items by ORC groups include:

*Data taken from NRF National Retail Security Survey 2023

Is there a solution to ORC? 

If there is one, it hasn’t been identified yet, according to Johnson. “We’re in a state of retail that we’ve never been before. We’ve never had to deal with furloughs, layoffs, pandemic store closures the way we did through Covid-19,” he said. “We’re in a whole new ballgame, so everybody’s trying to figure it out.”

As ORC continues to be a growing priority, retailers have begun investing in personnel and technology to identify those involved in ORC and prevent it.

According to the NRF’s 2023 National Retail Security Survey, which summarizes responses from 177 retail brands, 31% of respondents have a dedicated ORC team and another 31% use shared loss prevention and asset protection resources to investigate ORC events. Forty-six percent of respondents have increased their internal resources dedicated to anti-ORC efforts, and 44% have increased their use of technology, hardware, and software applications to prevent, deter, and investigate ORC.

Target, for instance, is developing custom tools that prevent and detect criminal activity to integrate them into online and in-store processes.

“You’re seeing the desperate phase of retail where [retailers] are trying to do whatever they can,” Johnson said. “Is putting people in buildings a better return on investment? Deterrence measures with physical cases and locked-up items – is that a better investment? You’re seeing a lot of different things being tried, and I don’t think the secret sauce has been identified yet.”

This also includes collaboration on the federal level and with other major retailers to mitigate ORC activity.

In June, Congress passed the Integrity, Notification, and Fairness in Online Retail Marketplaces for Consumers Act – or the INFORM Consumers Act. Under this new law, online marketplaces, such as Facebook Marketplace, where “high-volume third-party sellers” offer new or unused consumer products must collect, verify, and disclose certain information about those sellers.

Often, the identity of the seller can be unclear. The INFORM Consumers Act is designed to add more transparency to online transactions and help deter criminals from acquiring stolen, counterfeit, or unsafe items and selling them in online marketplaces.

MNORCA, along with other retailers and organizations, is advocating for task forces to be stood up at the state level to address the issue with dedicated prosecutors and state representatives.

MNORCA is also investing time into case aggregation, which means packaging the cases and presenting them to law enforcement, who might not have the time or resources to dedicate to ORC. “[MNORCA] can’t go make the arrest and we can’t draft or write search warrants or charges,” he said. “We can show the chain of events, we can identify people, we can find addresses, we can do all that – we just can’t go arrest people on our own.”

In the meantime, what can retailers do to retain consumers who might move to shopping online or in other stores for convenience? “ORC is not a new term, but it’s new to the public,” Johnson said. “We have to make it a very informed topic to our citizens and our communities, so they understand the changing nature of retail and how we’re not in the same place.”