By John Dunham & Associates

The Retail Industry Leaders Association (RILA) is the US trade association for retailers that have earned leadership status by virtue of their sales volume, innovation, or aspiration. The Buy Safe America Coalition (BSA) represents a diverse group of responsible retailers, consumer groups, manufacturers, intellectual property advocates and law enforcement officials who support efforts at all levels of government to protect consumers and communities from the sale of counterfeit and stolen goods. One important issue facing US retailers is the growth in the availability and sales of illicit products, both from counterfeit imports and from products stolen from legitimate retailers. These products are increasingly sold online through third-party marketplaces. RILA and BSA asked John Dunham & Associates (JDA) to examine the data around these illicit sales to determine how they impact the US economy, federal tax revenues, and criminal activity. This is the second in a series of papers examining the issue of organized retail crime (ORC), and its effect on the United States economy. This analysis will focus on product theft from brick-and- mortar retailers and the rise of organized theft operations that fence illegally obtained goods to consumers, increasingly online. While this paper focuses solely on those goods stolen from retail locations, there is a growing problem with consumer goods being stolen from containers and trucks as the supply chain has backed up in recent months. For the purpose of this analysis, cargo theft was not included. According to the analysis: • As much as $68.9 billion worth of products were stolen from retailers in 2019. This represents about 1.5 percent of total retail sales. • Law enforcement and retail asset protection officials have found that the availability of anonymous online marketplaces has provided an easy way to sell stolen goods, and that the growth of these marketplaces coincides with a recent surge in organized retail crime that puts both employees and customers in harm’s way. • Academic research has suggested that most retail theft represent crimes of opportunity. In other words, people steal when it is easy to do so. Other causes include poor economic conditions, and dissatisfaction among workers. However, professionals in the field identify the availability of anonymous on-line marketplaces as ways to easily fence goods, and prosecutorial changes as being major factors contributing to the growth in ORC. • The growth in on-line marketplaces is highly correlated (61 percent) to the number of shoplifting events reported each year. • In addition, those retail categories most subject to shoplifting activities are also the ones most sought after through on-line marketplaces. • Nearly 67 percent of asset protection managers at leading retailers surveyed report a moderate to considerable increase in organized retail crime, while 80 percent believe it will only get worse in the future.  The economic impact of retail crime is profound. Retailers face increased costs for lost product, security, and labor, which lead to higher prices for consumers and ultimately, lower sales. Lower sales translate to fewer jobs throughout the economy. The result is $125.7 billion in lost economic activity and 658,375 fewer jobs, paying almost $39.3 billion in wages and benefits to workers. • Retail theft is not a problem just in major metropolitan areas, it is pervasive across America. In fact, one factor that is associated with lower levels of retail theft is the density of retail locations. • The impact of theft is felt through higher prices, and this impact is more acutely felt by low- and middle-income families. • It is estimated that retail theft costs federal and state governments nearly $15 billion in personal and business tax revenues, not including the lost sales taxes.

Washington DC: Retail Industry Leaders Association (RILA) ;  Washington, DC:  Buy Safe American Coalition, 75p.

By John Dunham & Associate

  The Buy Safe America Coalition represents a diverse group of responsible retailers, consumer groups, manufacturers, intellectual property advocates and law enforcement officials who support efforts at all levels of government to protect consumers and communities from the sale of counterfeit and stolen goods. One important issue facing US businesses is the massive growth in the availability and sales of illicit products, both from counterfeit imports — increasingly from China — and from products stolen from legitimate retailers and sold through online marketplaces, where the anonymity of a screenname has made it easier and more profitable to fence counterfeit and stolen goods. The Coalition asked John Dunham & Associates (JDA) to examine the data around these illicit sales to determine how they impact the US economy, federal tax revenues, and criminal activity. This is the first of a series of papers examining the issue of counterfeit and stolen goods and its effect on the United States economy. This analysis will focus on the importation of illicit products, notably counterfeits that violate producers’ intellectual property rights. Future analysis will examine the effects of domestic smuggling, the resale of stolen goods, and the effects of contraband on overall criminal activity. According to the analysis: • A large share of contraband items are delivered to US consumers by mail or by express consignment. These transactions account for over 60.8 percent of all seizures by the US customs service and over 90 percent of intellectual property rights (IPR) seizures. The growth in these types of shipments has increased along with the use of online marketplaces. Amazon, for instance, now derives more than 75 percent of their ecommerce revenue from marketplace sales. • In effect, as companies like the Chinese ecommerce marketplace Alibaba and the Amazon marketplace, have linked more consumers to more shippers, many companies producing illegitimate products have gained access to unwitting consumers in America. • The bulk of counterfeit products to the US come from China and its dependent territories, accounting for over 90.6 percent of all cargo with IPR violations. Of the $1.23 billion in total IPR violations intercepted, $1.12 billion was from China. • Examining just those data where CBP can provide an HS code, in some cases, the amount of contraband cargo is nearly equal to the entire import base. For example, imports of certain sweaters, jumpsuits and toys from China are almost 100 percent contraband, as are large amounts of handbags, jewelry and belts. • While there is substantial academic literature on the smuggling of narcotics, people and tobacco, there is very little written on counterfeit products. Using a very conservative model it is estimated that $44.3 billion in additional illicit cargo is escaping detection. • These lost sales alone mean that over 39,860 jobs in wholesaling and nearly 283,400 retail jobs are lost due to the impact of counterfeit goods skirting normal trade channels. All told, the sale of counterfeit items is expected to cost the wholesale and retail sectors of the US economy nearly 653,450 full-time equivalent jobs that pay over $33.6 billion in wages and benefits to US workers. • It is estimated that the smuggling of counterfeit goods costs the US government nearly $7.2 billion in personal and business tax revenues alone. • This analysis is based on the current level of CBP intercepts of illicit cargo. It is likely that the number of illegal imports is much larger than even estimated here.  

Washington, DC: Buy Safe America Coalition, 2021. 25p.

By Michael Townsley & Benjamin Hutchins Griffith Criminology Institute

This Study is the second overview produced by the Profit Protection Future Forum into the ANZ retail crime landscape.

The 2022 Australia and New Zealand Retail Crime Study is the second overview produced by the Profit Protection Future Forum into the ANZ retail crime landscape.

The first study (published in 2019) provided needed regionally relevant intelligence into hot products, popular offending methods, and sector-level estimates of loss types.

This second study not only continues this focus and considers changes during the intervening period. As everyone is aware, the last four years have witnessed considerable and unpredictable changes. COVID-19 disruptions, staff shortages, strained supply chains, and greater online transaction volumes have all shaped the opportunity surface for the commission of criminal activity, be it organised retail crime groups or impulsive amateurs.

Profit Protection (AUS) and Washington, DC: National Retail Federation, 2023. 35p.

By The National Retail Federation

Retail crime, violence and theft continue to impact the retail industry at unprecedented levels. The effects of these criminal acts are not isolated to large national brands or large metropolitan cities. Daily media reports show that no business is immune, and these issues touch retailers of all segments, sizes and locations across the United States. The National Retail Federation’s National Retail Security Survey, now in its 32nd year, surveys loss prevention (LP) and asset protection (AP) professionals throughout the retail industry to capture data about risks, threats and vulnerabilities from the previous fiscal year, as well their forward-looking priorities. The study also asks about retailers’ loss prevention and asset protection programs. For the second year in a row, the study was conducted in partnership with the Loss Prevention Research Council. Shrink or shrinkage is the measurement of losses calculated by a retailer during a specific period of time, categorized across various means of retail loss. This year’s study found that the average shrink rate in FY 2022 increased to 1.6%, up from 1.4% in FY 2021 and in line with shrink rates seen in 2020 and 2019. When taken as a percentage of total retail sales in 2022, that shrink represents $112.1 billion in losses, up from $93.9 billion in 2021. While retail shrink encompasses many types of loss, it is primarily driven by theft, including organized retail crime (ORC). 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. While theft has an undeniable impact on retailer margins and profitability, retailers are highly concerned about the heightened levels of violence and threat of violence associated with theft and crime. Retailers’ top priority remains providing a safe workplace for associates and a safe shopping experience for customers. Eighty-eight percent of retailers report that shoplifters (overall) are somewhat more or much more aggressive and violent compared with one year ago. And those that specifically track the number of violent shoplifting incidents reported that they saw their number of shoplifting events involving violence increase by over one-third (35%) on average.  ORC, which is one of many types of retail theft, is another area where retailers are seeing higher levels of violence. Last year, 81% of respondents reported that ORC offenders had grown more violent. Compounding that this year, more than two-thirds (67%) of respondents said that they were seeing even more violence and aggression from ORC perpetrators compared with a year ago. Of course, not all crime occurs in person; retailers also reported increases in areas such as ecommerce fraud or phone scams to solicit gift cards or cash. While less common, sizeable minorities reported increases in delivery fraud; stolen goods being sold on third-party sites; return fraud; and loyalty fraud and abuse. As a result of this increasingly alarming crime landscape, retailers continue to make investments in personnel, budgets, technology and other resources to prevent theft and fraud. They also are partnering with law enforcement at federal, state and local levels. Despite these ongoing efforts, many retailers have been forced to take more drastic action, including reducing operating hours in some locations (45%), reducing/altering the availability of products in stores (30%), or even closing some locations (28%). In 2022, NRF successfully advocated Congress to pass the bipartisan INFORM Consumers Act as part of the omnibus spending package, which was signed into law in January 2023. Now in effect, the measure will help bring transparency to online marketplaces by requiring them to verify the identities of high-volume third-party sellers. Doing so will help curb the fencing of stolen merchandise and address the sale of counterfeit goods. Market transparency alone will not stop ORC, which is why NRF strongly supports the Combating Organized Retail Crime Act (H.R. 895/S. 140). The bipartisan legislation has been introduced in both the House and Senate and continues to gain co-sponsors. In addition to efforts in Congress, NRF has worked closely with federal agencies, state lawmakers, local law enforcement and news media across the country to draw attention to ORC. The effort has been successful, with at least 34 states passing ORC laws, as NRF continues to urge additional states to update the definition of ORC and adopt sufficient criminal penalties. 

Washington, DC: National Retail Federation, 2023. 24p