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Loss Prevention

Both Guns Blazing

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F or retailers looking to combat organized retail crime (ORC), it’s a good idea to get organized yourself, suggests Brad Dykes, director of asset protection at Cabela’s, the Sidney, Neb.-based purveyor of hunting, fishing, camping and related outdoor merchandise.

Cabela’s generates annual revenues of $2.8 billion, with just over 60 percent in sales rung up in its stores and the remaining in direct marketing via catalog, Internet, mail order and telephone.

The outfitter has created a team of asset protection professionals with twin focuses: combating ORC in its 34 stores across the United States and in Canada and organized e-commerce crime (OECC) in its considerable online business. The ORC team investigates criminals and criminal activity that reach beyond the scope of the company’s basic asset protection staff, which focuses on stores and facilities.

“For the past couple of years, Cabela’s has been looking at organized retail crime, identifying trends and patterns” at store level, says Dykes, who joined the company in fall 2011. “Now, we’ve decided to target the demand side. We have to get to the fence level.”

What takes Cabela’s effort out of the realm of routine loss prevention is its focus on the criminal infrastructure network. “The ORC team is not necessarily targeting the thief, but who’s supporting him, who’s buying from the thief,” Dykes notes. “We’ve done some analytical work, looking back on ... the windows of opportunities for thefts that have occurred. We’re looking at everything, store theft trends as well as statistical analyses and loss trends.

“We look at a series of individual thefts with the notion that they maybe were more than unrelated incidents,” he says. “Maybe there’s a group working behind them.”

Different tendencies, different teams
The dual-focus specialization within the team — store-based crime and e-commerce fraud — was driven by the different tendencies in each business, with direct marketing crime involving more “transactional” incidents and in-store activity trending towards more “opportunistic” crimes. Dykes does acknowledge a good deal of overlap in certain types of crime, such as fraudulent use of credit cards and bogus checks offered in payment.

Much research and legwork was required before the ORC team members were recruited. This included discussions with “multiple retailers” about how their asset protection, LP and security operations worked, as well as attendance at a number of trade association and industry conferences on the subject.

“We really didn’t use anybody as a model or anybody else’s blueprint,” Dykes says. “We have a unique mix between retail and e-commerce and our merchandise mix is unusual, if not unique, so we didn’t have an exact model.”

The homework was completed early enough last year that expenses to cover the ORC team could be included in this year’s budget, as could the cost of replacement personnel (the ORC team was made up of members selected from the retailer’s existing asset protection staff). “We knew last year when we were planning this that we absolutely had to have this, so we built it into our budget for 2012,” Dykes says.

In addition, support from senior management for this effort was solicited. As Dykes puts it, “If there’s not a clear business case for this among senior management, then I’m not doing my job.” He says it is basic that “you have to demonstrate how ORC is hurting business.” In quantifying this issue, he estimates that between 30 and 40 percent of losses from theft and fraud result from operatives with ties to ORC.

Elements of organization
As a retailer with an outdoors and hunting orientation, Cabela’s offers a broad range of rifles, shotguns, other firearms and ammunition, but these are not a particular lure for either organized criminals or casual thieves because of the intense security already in place, Dykes says. The ORC concerns “are driven by other areas of merchandise.

“We have several brands that are highly popular in clothing and footwear, for example. These are very marketable and easy to re-sell,” he says. “Then there are trail cams and things like that, but there are also more expensive items like marine sonar that can go for a couple of thousand dollars. Optics are also attractive to thieves.”

Although reluctant to draw any conclusions at this point in the group’s efforts, Dykes says there is evidence that both store crime and e-commerce fraud show elements of organization. “The ORC thieves are as organized as the e-commerce thieves,” he says, adding that identity fraud can be used in both areas of operation. One difference, perhaps, is that in shoplifting, there are more incidents of individuals succumbing to temptation or relative amateurs committing a crime of opportunity.

Following leads
In investigating ORC, Cabela’s will “follow leads wherever they may go,” says Dykes. If the trail leads to particular areas of illegal business practices, underworld organizations or even off-shore, Cabela’s will work with whatever law enforcement agency is tasked with dealing with those crimes. This includes federal agencies like the Secret Service, a division of the U.S. Department of Homeland Security.

The Secret Service has, as part of its operational mandate, responsibility for investigating both domestic and international incidents involving false identification fraud, bank fraud, check fraud, electronic funds transfer and a number of other crimes involving misuse or misrepresentation of personal identification and methods of payment.

Whether or not it involves federal crimes, expanding the effort against ORC beyond store-level was a logical step to avoid spinning wheels in pursuit of individual crooks, says Dykes.

“For every one of those you apprehend, there are potentially five or six more willing to come in and do the same thing,” he says. “So what we’re really looking at is trying to get to the demand side of the equation so we get to the person sending those folks in and ultimately cut the head off the snake, so to speak, so that in the long run we stop the bad behavior.”