Among the many reasons the topic of organized retail crime (ORC) is confusing, the fact that the term itself means different things to different stakeholders stands out. The retail industry has reported rising inventory shrink levels in recent years, which is widely attributed to an increase in ORC incidents, but law enforcement and the industry lack a consistent understanding of this particular type of crime. Even researchers who spent a year writing a special report on ORC for the National Retail Federation (NRF) acknowledged that imprecise definitions make it nearly impossible to determine the scope of the problem.

Brand Elverston, who has worked in retail asset protection for over two decades, including at Walmart, noted that retailers have poor visibility into where lost inventory goes, and general theft and ORC are often blamed without sufficient evidence. He told sister publication Retail Dive by phone that industry surveys don't provide much clarity because respondents have vastly different perceptions of ORC. Meanwhile, the same survey has shown for several consecutive years that overall shrink rates haven't changed significantly.

"ORC has never been fully defined since I entered the retail industry, and it started gaining attention around 2006," said Elverston, now a consultant. "The industry needs a recognized term, but currently doesn't have one."

Organizations like the NRF and the Retail Industry Leaders Association (RILA) have made efforts to define and quantify the issue with mixed results. ICSC, which represents shopping centers, has adopted a definition from Homeland Security Investigations (HSI), a division of U.S. Immigration and Customs Enforcement (ICE): "The illegal acquisition of valuable items from retail establishments by two or more individuals acting together, through theft and/or fraud, as part of a criminal enterprise."

NRF spokesperson Mary McGinty said in an email to Retail Dive that ORC "is not a single event, an isolated incident, or a crime committed by an individual," and related theft includes "shoplifting, cargo or supply chain theft, burglary, e-commerce and gift card fraud, return fraud, among others," noting that it involves networks of theft rings that acquire stolen goods for resale. She also said reporting varies, partly because sometimes what appears to be simple shoplifting is actually part of an ORC enterprise.

"These crimes may be reported or recorded differently by retailers or law enforcement, and only through in-depth and extensive investigation can it be determined whether they constitute ORC activity," she said.

Mark Skertic, managing director at K2 Integrity, the risk consulting firm that co-authored last year's special report with the NRF, confirmed that no single definition of ORC exists within industry groups or anywhere else. "That's precisely one of the problems," he said by phone. "There's no agreed-upon—'How does it happen? How do we report it? What do we have? What's the difference between someone shoplifting and being involved in ORC?' The difference does exist, but I don't think it's always clear."

This issue extends to the special report the company released in April 2023. The report includes a disclaimer: "Retailers, law enforcement officials, and researchers lack consensus on various aspects of the crimes that constitute ORC."

The lack of consensus makes measurement difficult. In December 2023, after Retail Dive discovered that the figure applied not to ORC but to overall industry shrink (inventory loss), the NRF removed a key statistic from the K2 report. Meanwhile, RILA's 2019 estimate of $70 billion applied to all types of theft, not just ORC, and has been considered unreliable by some experts.

The NRF has stopped estimating the financial impact of ORC and told Retail Dive that its members' reports may reflect undercounts because many members fail to identify ORC; are unaware that supply chain or e-commerce losses are related to it; and often do not report shoplifting, fraud, or other non-violent incidents to police.

"The ability to determine, document, and identify losses depends on the resource capabilities of individual retailers, and even law enforcement's investigative resources for various loss channels," McGinty said.

However, Elverston said that conversely, many retailers' loss prevention experts tend to overestimate the impact of general theft and ORC. He called the answers to NRF surveys—from which the organization infers theft and shrink data—"educated guesses" at best, partly due to loose definitions.

"When you see smash-and-grab video clips, it captures everyone's attention," he said. "But what doesn't capture your attention is that two auditors in the back of the store just discovered a multi-million-dollar accounting error. When was the last time you saw someone bragging about that online?"

A congressional bill aimed at combating ORC cited the NRF's 2019 estimate of ORC's financial cost, approximately "$720,000 in losses per $1 billion in sales," or less than one-tenth of a cent per dollar of sales. The bill partially defines ORC as "involving groups that specifically target retail stores, often using force or the threat of force to subdue employees and shoppers while robbing the store of its most valuable and easily transferable merchandise," and elsewhere defines it as involving "the sale of these illegally obtained goods through physical and online retail markets."

The bill also notes that two-thirds of retailers report "an increase in violence during the commission of retail theft." The bill would establish an Organized Retail Crime Coordination Center under the U.S. Department of Homeland Security's investigative division, which Skertic believes would help coordinate information currently lacking. NRF's McGinty also said this aspect of the proposal would help collect information from retailers as well as local, state, and federal law enforcement agencies to improve reporting.

"When the NRF came to us and said, 'Can you help us study this issue,' one thing we immediately realized was that we could never fully grasp it because there's no database, nothing that tells me a specific number of thefts occurred at a certain store in a certain mall on a certain date," Skertic said. "We built our own internal ORC database—we just started tracking instances—but even then, the data can get very messy very quickly."

The difference between shoplifting and organized retail crime

When asked about the definition of ORC, many loss prevention experts, prosecutors, and policymakers, like Skertic, emphasize that it differs from shoplifting. According to an updated crime report released in January by the Council on Criminal Justice (CCJ), shoplifting—incidents involving one or two thieves who are not store employees—remains the most common type of theft at stores. Although shoplifting has rebounded from pandemic lows, much like shopping, it is trending downward in most major cities.

In contrast, the NRF defines ORC as "the large-scale theft of retail merchandise with the intent to resell items for financial gain. ORC typically involves a criminal enterprise that employs a group of people to steal large quantities of goods from multiple stores and converts the stolen goods into cash through fencing operations." The NRF says the stolen goods are not for personal use but are often sold through online sites like Amazon, flea markets, and other venues, including other retailers. Merchandise is not necessarily obtained from stores; it may also involve cargo points such as trucks or the fraudulent use of credit cards, gift cards, or returns.

"Frankly, we haven't done as much on cargo theft as I would have liked because we don't have the budget or time," said Skertic of K2. "But I think cargo theft is a big part of it."

The intense focus on ORC has extended to law enforcement, which in some cases targets the higher levels of fencing operations rather than low-level shoplifters. In a special report on ORC this month, CNBC journalists, working with law enforcement, described theft rings that bring in millions of dollars for their leaders. According to their reporting, ORC crimes typically do not involve the high-profile smash-and-grab events associated with ORC; most of the theft the journalists witnessed involved low-level shoplifting.

State laws on organized retail crime

According to the Organized Retail Crime Resource Center, more than 30 states have their own ORC laws, and most, if not all, also attempt to distinguish shoplifting from ORC. In practice, however, this distinction is not always made and has led to racial disparities in at least one state. In Texas, the vagueness of the penal code has led some police to arrest minor shoplifters on ORC-related charges, according to research using state data from Southern Methodist University. These researchers also found that Black and Hispanic arrestees were more often charged with more serious crimes than white arrestees.

In Arizona, lawmakers are considering harsher penalties for ORC, a crime already on the books. State Representative Analise Ortiz described the existing law's description of ORC—involving "intent to resell or trade merchandise for money or other value"—as "extremely broad." "This could mean a desperate mother, stealing with the intent to exchange items for survival necessities like baby formula or diapers, could be prosecuted for 'organized retail theft,' and she is far from a sophisticated co-conspirator," she told Retail Dive by email. "Second, [the provision that ORC offenders] 'use trickery... or other items' is also too vague. I've heard prosecutors call a pair of jeans a 'trick' to facilitate shoplifting because someone put something in their pocket." She added: "Furthermore, increasing criminal penalties won't have a deterrent effect because the root causes driving someone to steal remain unaddressed."

Trevor Wagener, director of research and chief economist at the Computer & Communications Industry Association (CCIA), who studies these issues, said the lack of a consistent definition complicates distinguishing shoplifting from ORC. The evolution of terminology has also added to the confusion. Law enforcement has tended to use the term "organized retail theft" to distinguish it from "organized crime" perpetrated by enterprises like the Mafia, but increasingly uses "organized retail crime" alongside the industry. This also creates inconsistency. "I would say that over the past decade, law enforcement and the retail industry have moved toward more consensus, with more law enforcement agencies increasingly viewing ORC as organized criminal activity, or at least related to organized crime," he said by email. "But there are huge differences across individual law enforcement agencies/departments/jurisdictions."

Theft and shrink

Experts say that when retailers report to law enforcement or industry groups, they need not only a clearer understanding of the term "organized retail crime," but also a broader understanding of their inventory losses. For example, after expanding its use of RFID technology, Macy's recently discovered that employees, including long-tenured ones considered highly trustworthy, were leaving with unpaid merchandise far more than the department store had previously suspected.

The NRF estimates that employee theft accounts for about one-third of all shrink; according to the group's latest estimates, ORC is a subset of external theft, accounting for about one-third, but the scale of ORC is unknown. But asset protection expert Elverston said most retailers lack visibility into their inventory, leading them to overestimate not only ORC but all types of theft. "I don't believe it. Two-thirds of losses can't be isolated as theft," he said. "In a specific isolated store, maybe. But when those numbers are aggregated at the corporate level? No."

In recent years, retailers have focused on shrink and theft, partly due to tight profit margins, some analysts note. This focus seems to be waning. At Target, one of the most vocal retailers about shrink and its impact on operating margins, executives said in November 2023 that the shrink rate for that quarter was better than expected. In March 2024, executives said the retailer made progress throughout 2023 and expected the shrink rate to be roughly flat this year.

Elverston expects that as shrink rates improve at Target and elsewhere, efforts to find the true causes of shrink will correspondingly relax, and he believes these causes are best identified through the widespread use of effective risk mitigation strategies, including RFID. "Shrink is cyclical. Like a roller coaster," he said. "It always improves because when things get bad enough, we focus—and, unsurprisingly, it does get better. Then we ease off the brakes and focus on other things. It's almost like whack-a-mole. We need shrink visibility. RFID provides intelligence we don't have today, like, how much merchandise went out which door at what time? Did I receive it? Is it a supply chain issue or an in-store issue? Was it never shipped? We can't answer those questions right now."