There was no dearth of data at the National Retail Federation's Loss Prevention Conference & EXPO in Los Angeles last month. Sadly, much of it confirmed what many LP executives have speculated on for months – namely, that losses linked to shoplifting, employee theft and organized retail crime are inching upward as a result of the dour economy.

Preliminary results of the National Retail Security Survey (NRSS) show an increase in the rate of retail theft for the first time in six years. Retail theft -- a catch-all term that includes shoplifting, employee theft, administrative error and vendor fraud -- averaged 1.52 percent of retail sales in 2008, which translates into losses of $36.5 billion. That's up from 1.44 percent in 2007 ($34.8 billion).

The annual collaborative effort between NRF and the University of Florida surveyed 95 retailers in the first half of 2008. It uses data from 2007, and was conducted by criminology professor Richard Hollinger with a funding grant from ADT Security Services.

"The increase in shrink levels signifies that criminals have found a way to manipulate and corrupt the retail industry," Hollinger says. "Many retailers are being forced to decrease their current expenditures because of the state of the economy and the cutback in consumer spending, which leaves new opportunities for thieves to take advantage of companies."

The data released at the conference does not reflect shoplifting and retail theft rates from the first part of 2009, when the recession was considered by many to be at its deepest.

According to the survey, incidences of shoplifting increased slightly over 2007, accounting for $12.7 billion -- roughly 35 percent of losses. Other losses included administrative error ($5.4 billion, 15 percent of shrinkage) and vendor fraud ($1.4 billion, 4 percent of shrinkage).

Employee theft represented 44 percent of the losses, amounting to $15.9 billion; the survey found that 14 percent of those cases involved collusion with outsiders.

The NRSS survey data reflects in-store organized retail crime; it does not, however, measure crimes like cargo theft or merchandise stolen in transport. NRF's fifth annual Organized Retail Crime survey provides a more comprehensive view of this growing segment of retail crime.

ORC activity increasing
The most recent ORC survey, released last month, finds nine in 10 retailers (92 percent) say they were victims of ORC during the past year – a year-over-year increase of 8 percent. Nearly three-fourths of retailers (73 percent) also reported that the level of ORC activity has increased over the past 12 months – up from 62 percent in the 2008 survey.

"Organized retail crime rings have realized that tough economic times present new business opportunities by stealing valuable items from retailers and turning around to sell the merchandise to consumers looking for bargains," says NRF senior asset protection advisor Joe La Rocca, who believes the unfortunate economic events of the last 18 months have played a principal role in the jump in ORC crimes.

The NRF study found that although the challenging economy is compelling retailers to cut staff and do more with less, 42 percent of retailers report allocating additional resources to address ORC. According to the survey, the average retailer spends approximately $215,000 annually on labor costs intended to fight ORC. Some spend far more; 6 percent of the retailers who shared data for the study report spending more than $1 million per year to employ LP executives devoted to fighting ORC.

That level of spending signifies the support of c-level executives. According to the survey, nearly half (49 percent) believe senior management in their companies understands the seriousness of the issue. For the first time in the survey's history, NRF also asked LP executives whether they felt law enforcement had a firm grasp on the issue; 38 percent agreed that police officers and federal law enforcement understood the complexity and severity of ORC.

Law enforcement cooperation
Thanks to the new partnerships formed with federal and local law enforcement officials, retailers have had some success identifying stolen merchandise or gift cards at physical fence locations like pawn shops and temporary stores (60 percent) and online e-fencing operations (60 percent), where stolen merchandise is sold via online auction sites.

According to the survey, 72 percent of retailers have identified ORC syndicates exporting goods across state lines or overseas. Additionally, 28 percent found that criminal groups under current investigation have ties to street gangs with international connections.

When asked how they would rank organized retail crime as a threat to their companies, 29 percent of retailers gave it a rating of "4" or "5," identifying the problem as severe or significant. On average, retailers gave ORC a rating of 2.87 on a five-point scale.