LAS VEGAS, NEV., 01/31/2024 — In the closing keynote of WSWA’s Access Live, Wine & Spirits Wholesalers of America President and CEO Francis Creighton sat down with FBI Deputy Director Paul Abbate to discuss organized retail crime (ORC) and cyber security, two topics faced by all three tiers of the beverage alcohol industry.
As Creighton pointed out, ORC isn’t simple shoplifting. Rather, it involves large-scale theft of products that are then sold either in brick-and-mortar stores or online. “Organized crime is something the FBI has a long history of combating,” responded Abbate, “and we go after those enterprises and try to take them down.” According to the Deputy Director, the agency has made headway on the issue and will continue focusing on the problem.
“Those who are involved in organized crime like that will go where the money is,” he noted. Partnering with local and state law enforcement, agents build out an intelligence picture to try to get out in front of the threat. “It’s about identifying the actors,” Abbate added, “who is doing it and who benefits.”
Moving to the topic of cyber threats such as ransomware and other malware attacks, Abbate noted the importance of prevention and training measures. “When we look at where failures have occurred,” he said, “a high percentage of the successful attacks come from a human failure.” Training is important because people tend to be the weak link. Also, companies should also have a plan laying out what they’ll do in case of an attack. “If you’re hit, reach out,” Abbate said. “There may be something we can do or intel we can share that can help.”
Organized retail crime is more than a law enforcement issue — it’s also an industry problem, and it impacts all three tiers. In an earlier panel discussion moderated by John Barrett of Pernod Ricard U.S.A., industry experts Chris Harris (Kroger Co.), David Spohr (Albertsons Co. Inc.) and Natalie Shield (Kearney) discussed the problem that’s impacting businesses nationwide.
While the current trend began in 2018, it escalated precipitously during 2020 and 2021, when widespread masking enabled thieves to hide their faces. In response, businesses (including wine and spirits retailers) spent an enormous amount of money and effort implementing measures such as anti-theft devices, armed guards, increased surveillance and locked cases. Unfortunately, the added security precautions negatively impacted sales.
According to Shield, ORC has doubled since 2018, with about a third of losses attributable to external theft. Some of the factors influencing ORC’s rise include macroeconomics and inflation, both of which create “ripe conditions for organized crime.”
“What we’re seeing globally, we’re also seeing at Kroger,” said Harris. And one of the major reasons for the growth is that “the online marketplace makes it very easy to convert stolen goods to cash.” Add to that the specter of violence — store employees have been threatened, spit on, even assaulted.
Albertsons’ David Spohr talked about balance — the need to sell product and make customers happy while still preventing losses and protect profits. He spoke about the “store within a store” concept, where frequently stolen products are put in a special area with their own cashier. Some customers find it confusing to find tequila and Tide, for example, on the same shelf. “We put it behind glass,” Spohr added, “lock it up so customers have to get someone to intervene.” And that causes friction for customers and reduces sales.
Harris noted both hardware and software deterrents. For example, some retailers are implementing RFID chipping or shopping carts that lock up and sound an alarm if a customer tries to leave without paying. Others are testing AI-enabled systems that scan for movements that may indicate theft is occurring. Shield agreed with Spohr that some anti-theft devices may cause customers frustration when they have to ask for help. “Up to 30% of consumers across all categories will abandon a purchase entirely when faced with locked-up product,” she said.