Excerpts from GAO-11-675:  Efforts to Combat Organized Retail Crime

The Government Accountability Office report on Organized Retail Crime, Dated June 2011

In our continuation of publishing the highlights of this report that next section on ORC impact talks to the level of difficulty they had with establishing an actual dollar number that the nations retailers loss.

ORC Impact: Despite widespread recognition that ORC is a significant issue, it remains difficult to precisely estimate the financial impact for many reasons. Numerous press releases and industry reports often cite an estimate of $15 billion to $30 billion in annual financial losses attributable to ORC; however, it is unclear how these estimates were developed and neither the FBI nor industry groups were able to identify the sources for these figures.6 Even among individual retailers, it remains difficult to estimate the financial impact of ORC in their organizations. For example, retailers can often identify overall inventory losses (shrinkage), but these losses generally come from a number of different sources apart from ORC, including internal employee theft and amateur shoplifting, as well as administrative error or vendor fraud. Since there is rarely a clear audit trail for the cause of shrinkage, retailers typically develop estimates based on professional judgment and the results of prior investigations. Among 100 corporate retail chains that responded to a 2009 retail security survey, an average of 11 ORC cases were reported per $100 million in sales, with an average loss per incident of about $6,800. However, given that ORC affects each retailer differently—a furniture retailer is likely to have relatively fewer incidents of ORC than a drug store—it remains difficult to extrapolate ORC estimates to the retail industry as a whole from a limited sample of respondents. In addition to direct losses to retailers, ORC activity can also impact state tax revenues and incur additional costs to consumers. Despite the challenge of developing a reliable estimate of the full economic impact of ORC, researchers and stakeholders generally agree that ORC is a multi-billion dollar issue that affects retailers and consumers nationwide. (Source gao.gov)