Since 2000, 40 states raised their felony thresholds and 9 states have done that twice. This is leading to an increase in ORC activity for all retailers. In fact, the National Retail Federation (NRF) National Retail Security Survey found that total shrink topped $50bn in the USA for the first time in 2018. The Federal Bureau of Investigations (FBI) estimates Organized Retail Crime is responsible for $30bn in loss per year nationally.
As we all know, prior to the COVID-19 pandemic the loss prevention (LP) industry was already in a dramatic shift due to the decriminalization of retail theft. This raises the question, what does a post COVID-19 LP industry look like and are we seeing a further acceleration of retail crime decriminalization? There is no question that COVID-19 is slowing our global economy, here are three ways the economic slowdown is impacting the fraud triangle and criminal justice policy changes.
A change in environmental factors leading to increasing crime rates
The Loss Prevention Research Council (LPRC) recently published this white paper exploring how criminals take advantage of crisis situations. The fraud triangle helps explain the key factors that need to be present for an offense to take place.
As more people are facing financial pressure, they have additional reasons to rationalize their actions, and with some stores being closed while others are packed with guests buying essentials there are more opportunities to commit a crime with less of a risk of getting caught or punished. These environmental changes for people impacted by the COVID-19 economic slowdown are leading to increasing retail crime rates, including additional online fraud, buy online pickup in store fraud, and first time offenses.
"As the pandemic has changed how people shop we have seen an increase in online fraud and store pickup fraud. Our focus now is on building fraud related cases to move forward after the pandemic is over."
National ORC Investigations Manager
A perfect storm is forming due to these three factors
In an effort to slow the spread of the virus we are seeing major criminal justice directive changes, including:
- Law enforcement agencies from Philadelphia to San Francisco are reducing or not responding at all to non-violent crimes as their focus shifts to containment efforts.
- Correctional facilities are releasing prisoners convicted of non-violent offenses in some of the hardest hit areas of the country, as an example New York and California have recently released prisoners convicted of non-violent offenses.
- Some courts are closed and district attorneys are openly sharing they won't prosecute offenders for non-violent offenses.
In the current COVID-19 environment these policies may help protect all individuals from the virus but they are just an acceleration of the retail theft decriminalization from the last 20 years.
LP industry asked to do more with less
Those same economic pressures that will drive higher crime rates and first time offenders will sadly also impact the LP industry. COVID-19 will impact revenue streams for many retailers, particularly those with store closures during the pandemic and that will force an acceleration of the “do more with less” requirements for the industry as conveyed in this article. Leaving fewer LP professionals with the challenge of trying to maximize their productivity in a new hyper-active theft environment.
All three of these create the perfect storm for retail theft. Will this become the new normal for our criminal justice system and the industry?
“Retailers and law enforcement are on the front lines in the fight against COVID-19. We understand the need to be proactive in preventing the spread of this dangerous virus. Our concern is that certain prosecutors that are exercising their discretion in this crisis, will move to make these changes permanent.”
Ben Dugan, CFI - President, National Coalition of Law Enforcement & Retail
If this temporary decriminalization becomes permanent, retailers are going to be faced with a new wave of offenders and increasing loss. So the retailers that get through the decriminalization of shoplifting the best with their bottom-line still intact will be the ones that are bold and continue to invest in technologies that enable them to identify, deter, and prevent malicious loss more effectively. They will be able to change the risk-reward trade-off from targeting their organization. Technology is now more important than ever before to help retailers and LP teams work smarter, not harder.
While there has been investment into traditional areas of loss prevention (cameras, guards, and product packaging), we believe there needs to be further technology investment into the other “zones of influence” and having a connected technology ecosystem across all zones of influence to stop crime for good. Advanced technologies like non-scan identification, video analytics, and retail crime intelligence will be some of the keys to underpin an effective loss prevention strategy.
It’s going to be critical for our industry associations (NRF, RILA, CLEAR, LPRC to name a few) to continue their efforts of lobbying our governments to prevent further decriminalization occurring. But it is also an opportunity for retailers to better cooperate with law enforcement to target ORC, which has the biggest impact on the bottom line. In this decriminalized world of shoplifting, retailers must get better at aggregating cases, enterprise-wide (and retail industry-wide) in real-time to change the risk-reward trade-off for criminal behavior. Retailers will need a platform to easily identify ORC and then collaborate with law enforcement around the country that goes above and beyond the historically established relationships of your team. It needs to be systematic. This is an industry-wide connected community approach. It’s a paradigm shift for the United States but it’s needed to address the rapidly changing retail crime environment that lies ahead.
Our thoughts are with those personally and professionally impacted by COVID-19. We also want to express our heartfelt gratitude with those on the frontline everyday working hard to protect their customers and associates during these times. It’s been incredible to watch our industry rally around each other over the past few months.