May-June 2011 Article

1. PARTNERING WITH RETAILERS by David E. George, CFI, LPC
Note from Paul Jones, LPC: At the FMI conference in March, I successful. Similarly, no retailer or wholesaler can sell merchandise
heard an interesting presentation made by David George from Harris they don’t have. Said differently, the supply of a product and the
Teeter who frames a piece of the organized retail crime equation demand for that same product must have a synchronized relationship
that has been missing from our national dialogue. David shares his in order for an enterprise to profitably function.
perspective in this month’s column. So how does supply and demand play a role in our fight against
If you’re like me, you are exhausted from hearing all ORC? If we as loss prevention professionals were asked where stolen
the bad news regarding organized retail crime (ORC). Sure, we hear merchandise was being sold, the majority of us might tend to say
about large arrests made on ORC rings, but we all know that as soon Internet sites, flea markets, and a whole host of other locations. And
as one ring is dismantled, the power vacuum sucks in the next in line why not? Every ORC ring that has ever been conquered has been
to open up shop in its place. I can’t help but think we aren’t making identified as using one or more of these
the level of progress that we have all hoped. venues. However what if we, as retailers,
Recently, an article in the April 4th Star Tribune stated, “While are unknowingly purchasing the very
retailers spend $12 billion a year to battle organized retail crime, merchandise that was stolen from our
thieves pilfer $15 billion to $30 billion annually, a huge blow to shelves just a few weeks earlier? What
businesses and, ultimately, their customers.” According to this if we are actually causing the “demand”
source, it’s official—we are losing the war against ORC. needed for the supply-and-demand
This is perplexing given that our profession has never had more principle to work?
resources available to it than it does today. We have vendor partners Consider for a moment what is
who have diligently sought to acquire, develop, and improve upon occurring right under our noses. Boosters David George is vice
technologies to help us do our jobs more efficiently. We continue president of asset
steal our merchandise and sell it to a protection for Harris Teeter
to invest in state-of-the-art equipment and technology, specialized fence. The fence cleans and organizes Supermarkets, Inc.
personnel for undercover operations, training seminars, books, the cache into two categories—pristine
meetings, and committees. We are even seeing legislation enacted all and damaged. The damaged, or marked, merchandise goes to
across the country that addresses ORC, thanks to the lobbying efforts the all-too-familiar flea markets and Internet sites, but the pristine
of LP professionals. items are sent up the chain where they eventually land in a repack
Armed with these resources, we have collectively taken up arms, operation. Once there, our stolen merchandise is packed in boxes
mounted our horses, and staged an all-out assault on criminals who labeled with the same quality names of the manufacturers with whom
use Internet sites, flea markets, cleaning houses, warehouses, and we do business.
even illegitimate brick-and-mortar storefronts to move the stolen Consumer-created
goods. All of this with one objective in mind—stopping professional demand
thieves from removing mass quantities of merchandise from our Retailer supplies Boosters steal from
the demand retailer and sell to fence
stores. With all of these deployed resources, how can we still be ORC
losing this war on ORC? Are we to
I submit to you that while we are all focused on preventing our
Wholesaler (“legitimate”
blame? Fence sells to
merchandise from leaving through the front doors of our respective broker) sells to retailer illegitimate brokers
castles of commerce, we never once considered what was coming Illegitimate broker
in through our back doors. Could it be that we have been hitting the sells to wholesaler
bullseye of the wrong target?
The stolen merchandise, now packed neatly into branded
Economics of ORC boxes, is sent to wholesalers. Some wholesalers may be aware the
Before we answer this question, let’s first consider the merchandise is suspect and others may not, but either way they have
“economics of ORC.” We all understand that boosters are part of a plausible deniability. These wholesalers accept this merchandise
complex business enterprise. But even though these are illegitimate into their inventory waiting for a buyer to place an order. If that
businesses, they still operate under the same indiscriminate economic buyer happens to be a broker representing your company, then your
principle of supply and demand. No retailer or wholesaler can stock company just created the demand for more merchandise to be stolen.
their shelves with merchandise no one wants and expect to be The chart above will help demonstrate this point.
continued on page 51

2. efforts a step further by having LPC and LPQ approved under ParTnering WiTh reTaiLerS
continued from page 40
tuition reimbursement assistance for his department. I guess he
thought it was worthwhile. What do you think?
This same vice president then expressed his strong belief
Anti-ORC Buying Program
The only way to stop ORC is to stop the demand. As loss prevention
that there shouldn’t be a question as to if LP leaders should
get certified, but rather when they should get certified. He professionals, we have a duty to build an anti-ORC buying program for
referenced the endless challenge that we have all faced with our organizations. Here are suggestions for approaching this challenge:
trying to improve the professional perception of our industry. Step 1—Meet with your executives and explain how buying stolen
His challenge to all of those listening: product creates demand for more stolen product.
“If you are a true leader and truly committed to this Step 2—Get a commitment that your company will not purchase
industry, then it should not be a question as to whether or not stolen product, which may entail revamping incentive structure
you should get certified. Rather, you should recognize that it for buyers.
is your obligation to get certified. Are you going to lead by
Step 3—Communicate expectations to suppliers by establishing
example and be a true leader? Or are you going to jump on the
procedures for violations and sending vendors detailed letters.
wagon only when you have to, and simply follow the crowd?”
Step 4—Create a “right to audit” clause in all supplier contracts
New Foundation Board Members that allows unannounced visits to supply warehouses.
The following individuals have accepted nominations and Step 5—Audit for compliance by inspecting lot numbers after you
have been approved to serve on the Foundation’s board of receive product.
directors: If retailers only purchased merchandise from legitimate suppliers,
■ Lee Bland, Director of Loss Prevention, Stage Stores then wholesalers will be forced to stop buying stolen product. If the
■ David George, CFI, LPC, Vice President of Asset Protection,
illegitimate sources lose the customers to whom they’ve been selling
Harris Teeter stolen product, then the stolen merchandise will no longer have value.
■ Jeffrey S. Levitt, Senior Manager Asset Protection, Panera
We will always be fighting the sale of stolen merchandise at flea
Bread
■ William Napier, LPC, Senior Manager Corporate Asset
markets and the like, but if we all ban together and build an effective
Protection, Cabela’s anti-ORC buying program for our respective organizations, the losses
■ Kevin R. Wolfe, Vice President of Loss Prevention, will drastically decrease to such a level that we can finally use our
Big Lots Stores progress and resources on more profitable challenges.
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LP Magazine | May – June 2011