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<H1>Organized Crime Gangs Stifle Retail Profits</H1>
<P class=author>By Jennifer Booton</P>
<P class=dateline>Published June 08, 2011 | FOXBusiness</P>
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<P>Sophisticated technologies and higher demand for bargains have led to an
increase in organized crime against retailers, according to the <A class=r_lapi
href="http://www.foxbusiness.com/topics/business/national-retail-federation.htm">National
Retail Federation</A>’s Organized Retail Crime survey.</P>
<P>Of the 129 retail companies surveyed, from restaurants and grocery stores to
department and specialty retail stores, nearly all said they had been a victim
of organized retail crime in the past 12 months, an increase of 6% from last
year and one of the worst results in the survey’s seven-year history.</P>
<P>The true scope of the problem has been difficult to measure given the
secretive nature of the crimes, though industry experts have estimated that
organized retail crime losses total an estimated $15 billion to $30 billion
annually.</P>
<P>The devastating blow to the retail industry is detrimental at any time, but
particularly when higher costs of raw materials and still soft demand have
forced weaker profits from retailers such as <A class=r_lapi
href="http://www.foxbusiness.com/topics/business/companies/cbrl-group.htm">Cracker
Barrel</A> (NASDAQ:CBRL), <A class=r_lapi
href="http://www.foxbusiness.com/topics/business/companies/cvs.htm">CVS</A>
(NYSE:CVS) and Pinnacle West (NYSE:PNW). </P>
<P><B>The Modern Heist </B></P>
<P>Despite Hollywood’s perpetual portrayal of four masked bandits waving a gun
during an in-store heist or swiftly swooping from the ceiling at night,
retailers say the crime often starts before the merchandise even hits the
shelves.</P>
<P>Some 49.6% of retailers said they had been a victim of cargo theft over the
last year, with most affected from when products are en route from the
distribution center to the store, with others reporting cases between the
manufacturer and the distribution center, at the distribution center, and as
merchandise moves from one store to another.</P>
<P>“Cargo theft is a rewarding, profitable enterprise, and criminals are
increasingly finding ways to infiltrate the supply chain,” said NRF senior asset
protection advisor Joe LaRocca. “As thieves target shipping containers,
retailers and law enforcement are fighting back with new initiatives and
operations to directly address cargo theft.”</P>
<P>Organized crime rings generally consist of "boosters," who methodically steal
merchandise from stores or trailers, and "fence operators," who convert the
product to cash or drugs as part of a criminal enterprise. The members all have
designated roles, according to the NRF, from the driver and lookout to the
packer and supervisor.</P>
<P>Some criminals use foil-line shopping bags, boxes and signal jammers to
defeat inventory control tags, while others use computers to replicate fake
receipts for the purpose of making cash returns. Still other boosters use stolen
or fake credit cards to make an expensive purchase, or partner with
employees.</P>
<P>Many retailers in the survey said that on average 12% of organized crime
cases involved both internal and external participants, shedding light on the
substantial role corrupt employees play in the crime ring.</P>
<P>The gangs, which target both consumer and other valuable goods such as
over-the-counter medicines and designer jeans, often try to hide and sell the
products at pawn shops, flea markets or warehouses, according to the NRF.</P>
<P><B>Retailers Taking Stand</B></P>
<P>As a still-downtrodden economy forces retail executives to pay closer
attention to every line item on their budgets, loss prevention experts say
senior leadership is more likely to understand how organized retail crime
impacts profits.</P>
<P>More than half of survey respondents believe their top management understands
organized retail crime, up 16% from last year, and many have started allocating
additional resources, such as more personnel and greater investments in
technology, to tackle the problem.</P>
<P>“As criminals become more brazen, retailers are working fervently to cut down
on organized retail crime activity in order to ensure the safety of their
associates and shoppers,” LaRocca said.</P>
<P>But it’s not just an issue of narrowed profits, the NRF says these criminals
are becoming more violent, and are often engaged in other illegal activities,
such as drugs, weapons and gang activity.</P>
<P>Luckily, retailers have not been left on their own to defend against the
rising threats.</P>
<P>The <A class=r_lapi
href="http://www.foxbusiness.com/topics/politics/federal-bureau-of-investigation.htm">FBI</A>,
Immigration Customs and Enforcement of the <A class=r_lapi
href="http://www.foxbusiness.com/topics/politics/national-security.htm">Homeland
Security</A> Investigations Agency (ICE-HSI) and the Department of Homeland
Security have all been very active in monitoring and apprehending criminal
enterprises known for their organized retail crime activities.</P>
<P>Earlier this year, ICE-HSI expanded its Organized Retail Crime Pilot Program
into an ongoing nationwide initiative that will be known as the Seizing Earnings
and Assets from Retail Crime Heists, or SEARCH, initiative.</P>
<P>In 2009 the NRF and other industry associations inked a deal with <A
class=r_lapi
href="http://www.foxbusiness.com/topics/business/companies/ebay.htm">eBay</A>
(NASDAQ:EBAY) to tackle organized retail crime together by identifying and
stopping criminals that resell stolen good online.</P>
<P>“Increasing partnerships between retailers and law enforcement agencies
demonstrate the severity of the issue for retailers of all sizes and formats,”
the NRF said in the annual report. “Organized retail crime gangs can wreak havoc
on a company’s entire operating system as well as potentially causing serious
harm to store employees and shoppers should a thief get violent.”</P>
<P>The top 10 areas in the U.S. for organized retail crime are Atlanta, Chicago,
Dallas, Houston, Las Vegas, Los Angeles, Miami, New York and Northern New
Jersey, Philadelphia and Phoenix.</P>
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