High Tech Theft Not the Only Loss Category Rising

Internet Fraud has been increasing substantially, however more old-fashioned means of theft, such as "shoplifting" seem to be on the rise, also.

A press release from ADT Security Services reports that a survey conducted by Richard Hollinger Ph.D (University of Florida) is showing increases in theft from retailers.

Here is a comment from ADT on the survey, "Rex Gillette, vice president of retail national accounts for ADT, said the survey shows retailers are spending more to combat retail theft." ADT, who sponsored the grant to conduct this study, is one the major vendors that provides technology based solutions to combat retail theft.

The survey states that although employee theft is down, it is still the number one retail theft category. Other categories mentioned in the survey include, "shoplifting, vendor fraud and administrative error -- cost the nation's retailers close to $31 billion last year."

According to the survey, the increase in shoplifting activity is due to organized gang activity. To quote the survey, "Hollinger attributed the increase to a new form of shoplifting called organized retail crime, which involves shoplifting gangs working as a team to steal large quantities of merchandise quickly."

I was involved in taking a look at this new phenomenon about ten years ago for a major retailer and organized shoplifting gangs were pretty prevalent then. If it was prevalent ten years ago, either the activity has substantially increased, or organized activity isn't as new as some might think.

The press release on the survey doesn't seem to mention losses in fraud categories, such as check and credit, nor does it seem to address mention in the e-commerce sector. The e-commerce sector is growing rapidly and many traditional retailers are becoming heavily involved in it. There is no doubt that money lost in these categories impact retailers, also.

I have been unable to view this survey. There was some mention of fraud in the last one, although it was only covered briefly. Nonetheless, the press release for this one fails to mention it at all and with the increases in crime fueled by technology, it seems logical the financial impact on retailers should be going up.

Although, I'm sure the survey is based on statistical analysis, there are difficulties in assigning dollar lost to theft (by category) in the retail industry. Most retailers conduct physical inventory once, or twice a year. It is extremely difficult six months to a year later to determine how inventory disappeared and it would be interesting to see how the survey assigned the dollar amounts to a specific loss category.

So far as measuring the amount of money lost in the fraud categories, many companies only measure known fraud (verified). The rest of the monetary amount is sometimes buried in another accounting category, which is known as "bad debt." For instance, a fraudster opens a credit account with a dead person's identification (or someone who is never reached by a collections department), charges the account to it's maximum potential and then disappears. Because the activity was unable to be verified as fraud, it is written off as bad debt. This problem can be extended to all types of financial fraud categories. The amount of fraud buried on credit reports and company accounts classified as "bad debt" cannot be accurately calculated and is probably substantial.

I have no doubt (given current theft trends) that this activity is on the rise. Retail theft, whether high, or low tech impacts us all (via higher prices) and any analysis of how to prevent it is valuable. The retail industry is taking these problems seriously and attempting to deal with them because of the negative effect it has on their overall profitability.

On a personal level, I am a advocate of a more holistic approach to fighting losses that are prevalent in the world of business. In my opinion, there is an opportunity for loss prevention, computer security and fraud experts to combine forces against organized activity in general.

In fact, I highly suspect that many of the organized gangs are involved in all of the categories mentioned and don't discriminate on types of activity. They simply go where they can steal the most money.

For the full press release, go to: Annual Retail Security Survey Shows Shoplifting on the Rise.

I have written other posts on organized criminal activity, should anyone be interested:

The Consolidation of Organized Criminal Activity
Organized Fraud Gangs
Fraud Gangs Plant Insiders