Discussions around "organized retail crime" (ORC) are often confusing, partly because the term means different things to different stakeholders. In recent years, some retailers have reported rising levels of inventory shrinkage, and the industry has widely attributed this to an increase in ORC incidents. However, experts point out that law enforcement agencies and the retail industry itself do not have a consistent understanding of this particular type of crime. Even researchers who spent a year writing an ORC special report for the National Retail Federation (NRF) admit that imprecise definitions make it nearly impossible to determine the scope of the problem.

Retailers lack clear visibility into where lost inventory goes, and general theft and ORC are being blamed without sufficient evidence. Brand Elverston, who has worked in retail asset protection for over two decades, including at Walmart, says industry surveys provide little clarity because those who fill them out have vastly different perceptions of ORC. Meanwhile, multiple surveys over the years show that overall shrinkage rates have changed little.

"Since I entered the retail industry, ORC has never been fully defined; it surfaced around 2006," said Elverston, now a consultant. "The industry needs a universally accepted term, but currently there isn't one."

Organizations such as 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, borrowed the definition from Homeland Security Investigations (HSI) under U.S. Immigration and Customs Enforcement (ICE): "Two or more persons acting together to illegally obtain items from a retail establishment through theft and/or fraud, as part of a criminal enterprise."

NRF spokesperson Mary McGinty said in an email that ORC "is not a single event, a single act, or an individual crime," and related theft includes "shoplifting, cargo or supply chain theft, burglary, e-commerce and gift card fraud, return fraud, and more," noting that it involves networks of theft rings that resell stolen goods for profit. She added that 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.

Indeed, according to Mark Skertic, managing director at risk consulting firm K2 Integrity, which co-authored last year's special report with the NRF, there is no single unified definition of ORC anywhere in industry groups or elsewhere. "That's precisely one of the problems," he said over the phone. "There's no agreed-upon—'how things happen, how they're reported, what we have, what's the difference between someone shoplifting and being involved in ORC.' The difference exists, but I don't think it's always clear."

This issue extends to the special report itself, released in April 2023. The report came with a caveat that "retailers, law enforcement officials, and researchers lack consensus on the various aspects of crimes that constitute ORC."

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

The NRF has stopped estimating the financial impact of ORC and told Retail Dive that its members' reports may be understated because many members fail to identify ORC, do not realize 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 on law enforcement agencies' investigative resources for various loss channels," McGinty said.

However, Elverston said that, on the contrary, loss prevention experts at many retailers tend to overestimate the impact of general theft and ORC. The answers to NRF surveys—from which the organization infers theft and shrinkage data—are at best "educated guesses," partly due to loose definitions.

"When you see video clips of smash-and-grab incidents, that grabs everyone's attention," he said. "But what doesn't grab your attention is when two auditors find millions of dollars in accounting errors in the back of a store. When was the last time you saw someone bragging about that online?"

The text of a congressional bill aimed at combating ORC does cite the NRF's 2019 estimate of ORC's financial cost, approximately "$720,000 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 violence or the threat of violence to subdue employees and shoppers while robbing the store's most valuable and easily transferable merchandise," and elsewhere as involving "the sale of these illegally obtained goods through physical and online retail marketplaces."

The bill also states that two-thirds of retailers report "an increase in violence during retail theft." The bill would establish an Organized Retail Crime Coordination Center under the investigative arm of the U.S. Department of Homeland Security, which could help coordinate what Skertic called a lack of information. NRF's McGinty also said this aspect of the bill 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 problem,' one thing we immediately realized was that we could never fully grasp it because there's no database, nothing tells me how many thefts occurred at a specific store in a specific mall on a specific date," Skertic said. "We built our own internal ORC database—we just started tracking cases—but even then, the data quickly becomes very messy."

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—defined as theft incidents involving one or two non-store employees—remains the most common type of theft in stores. While shoplifting has rebounded from pandemic lows, much like shopping, it is on a downward trend in most major cities, the CCJ said.

In contrast, the NRF defines ORC as "the large-scale theft of retail merchandise with the intent to resell for financial gain. ORC typically involves criminal enterprises employing groups of people to steal large quantities of goods from multiple stores, as well as fencing operations that convert stolen goods into cash." Stolen merchandise is typically sold through online sites like Amazon, flea markets, and other venues, including other retailers, rather than for personal use, the NRF said. Merchandise is not necessarily stolen from stores; it can also involve cargo points such as trucks, or 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 agencies, which in some cases target the higher-ups of fencing operations rather than low-level shoplifters. In a recent CNBC special report on ORC this month, reporters worked with law enforcement to describe theft rings that bring in millions of dollars for their bosses. According to the report, ORC crimes typically do not involve the high-profile smash-and-grab incidents commonly associated with ORC; most thefts witnessed by reporters involved lower-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, research using state data from Southern Methodist University found. These researchers also found that Black and Hispanic arrestees were charged with more serious crimes more often than white arrestees.

In Arizona, lawmakers are considering harsher penalties for ORC, which is already on the books. State Representative Analise Ortiz described the existing law's description of ORC—involving "the intent to resell or trade merchandise for money or other value"—as "extremely broad." "This could mean a mother in desperate need, stealing for survival necessities like baby formula or diapers with the intent to trade, could be prosecuted for 'organized retail theft,' and she is far from a sophisticated co-conspirator," she said in an email. "Second, [the provision defining ORC offenders] 'using trickery... or other items' is also too vague. I've heard of prosecutors calling a pair of jeans a 'trick' to facilitate shoplifting because someone put something in their pocket."

"Moreover, increasing criminal penalties will not have a deterrent effect because the root causes driving someone to steal remain unaddressed," she added.

According to Trevor Wagener, director of research and chief economist at the Computer & Communications Industry Association (CCIA), the lack of a unified definition complicates distinguishing shoplifting from ORC. He studies these issues and notes that the evolution of terminology has added to the confusion. Law enforcement agencies once preferred the term "organized retail theft" to distinguish it from "organized crime" as committed by groups like the Mafia, but increasingly, along with the industry, they call it "organized retail crime." This is equally inconsistent.

"I would say that over the past decade, law enforcement and the retail industry have trended toward more consensus, with more agencies increasingly viewing ORC as organized criminal activity, or at least related to organized crime," he said in an email. "But there are huge differences across individual agencies/departments/jurisdictions."

Theft and shrinkage

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

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

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

Elverston expects that as shrinkage rates improve at Target and elsewhere, efforts to find the true causes of shrinkage will correspondingly ease, though he believes these causes are best identified through the widespread use of effective risk mitigation strategies, including RFID. "Shrinkage is cyclical. It's like a roller coaster," he said. "It always improves because when it gets bad enough, we focus—and guess what, no surprise, it does get better. Then we ease off the brakes and focus on other things. It's almost like whack-a-mole. We need shrinkage visibility. RFID provides intelligence we don't have today, like, how much merchandise goes 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 don't have answers to these questions right now."