Retail Environment
Peak Malpractice
Why the Festive Season is Providing New Meaning to Giving and Receiving
Christmas is the season that continues to give for more than one reason. It is a season of giving and receiving and giving and taking. The “taking” in question, however, may refer to the spike in the “peak practice” of increased organised retail criminality in relation to the so-called “epidemic” in shoplifting.
The “receiving” on the other hand points to the expanding black-market trade in handling and re-selling stolen goods through fences transacting openly and with relative impunity through shady pubs, social media platforms, and even other retailers. It’s an all-year-round enterprise but it becomes supercharged during the second half of the annual calendar.
Having said that, retailers are perpetually in peak mode, either planning for or recovering from its excesses. It is held up as everything from an annual saviour for sluggish sales at other times of the year to a “necessary evil”—something they have to get to the other side of ahead of the New Year and January’s inevitable slump in sales and the deluge of returned or unwanted presents.
The inevitability of crime during this peak period is often seen as the price to pay for surviving it and hitting the all-important year-end target sales.
And so rolls on this festive tradition of excess and maxed-out credit cards during a cost-of-living crisis which is widely seen as a gift that continues to give for organised crime gangs because retail’s focus is firmly on sales rather than loss prevention, even to the point of welcoming in thousands of largely unvetted seasonal staff to manage additional workloads in stores and distribution centres and reducing fraud checks on online transactions to remove friction from the customer journey.
Digital Theft and the Use of AI
Armchair grinches and keyboard warriors have over the last few years become the largest emerging threat which has exponentially pushed up the cost of retail crime, with increasingly more sophisticated scams emerging each year. This has resulted in low consumer confidence around the threats of online fraud this Christmas.
In the build-up to Black Friday and Cyber Monday, the National Cyber Security Centre (NCSC) called for increased vigilance as AI-generated scams enhance the threat to this year’s festive shoppers, as it revealed over seven in 10 British people worry that AI will make it easier for criminals to commit online fraud.
Shoppers lost over £10 million to cyber criminals during last year’s festive shopping period, with the Millennial demographic of 25-to 34-year-olds being the most targeted victims. This prompted a national campaign to promote “cyber aware” behaviours to help shoppers protect themselves online.
In autumn 2024, cyber security chiefs encouraged Black Friday bargain hunters to increase their vigilance as online fraudsters were particularly likely to use AI to increase the perceived legitimacy of their scams.
The NCSC—which is a part of the UK’s intelligence agency GCHQ—warned that cyber criminals have become more sophisticated in the use of the machine-learned technology, including large language models that produce more convincing scam emails, fake adverts, and bogus websites.
While AI offers huge opportunities for society, the NCSC argues that it can also be exploited by fraudsters to help them produce accurate and professional-looking content intended to dupe victims into giving away their financial details or download malware on an increasingly large scale.
The warning came as new data from Revealing Reality/Yonder found that 72 per cent of British people are worried that new technology such as AI will make it easier for criminals to commit online fraud.
“Previously, scams could often be identified by features such as poor grammar or spelling, coming from an unusual email address, or feature imagery or design that feels “off”. But while AI might generate more polished communication in phishing attempts, many of the typical hallmarks of a scam remain the same”, the NCSC said.
Organised Physical Crime
While there is an ever-increasing threat from online, retailers are fighting fraud on other fronts, including more traditional seasonal organised shoplifting and internal theft.
Close to 80 per cent of retail losses from crime is the result of organised retail crime (ORC), committed by some 140 criminal gangs currently operating nationally, according to analysis at Lodgic, which is operated by security company Lodge Service.
The report suggests that gangs feel they can operate almost with impunity at Christmas as their activities are hidden by large crowds in busy stores and shopping centres.
Shop staff are regularly distracted and many of the temporary personnel hired for the season are too-often unvetted and poorly trained in detecting and preventing the threat from shoplifters.
But, the report argues, the distraction of peak means few retailers are aware of the scale of the problem, often because seemingly small, isolated incidents are in fact related and resulting from gangs travelling over force boundaries to commit offences.
Furthermore, under-reporting allows criminals to keep coming back to what they see as a soft target before heading off to another store, perhaps in another city, to avoid detection.
Retail’s recruitment and retention crisis means businesses face the prospect of intense staffing pressures at the busiest time of the year, as the need for seasonal workers outstrip supply, new research from Axonify suggests.
More than half of retail managers surveyed (53 per cent) said they were hiring more festive seasonal workers this year, either because they needed more support than usual or because existing staff lacked the skills to meet seasonal demand.
But nearly as many (49 per cent) said it had been harder to find them, and 57 per cent said the quality of applicants, including their skill set and previous experience, had become worse.
Sainsbury’s has geared up for the holiday season by hiring an extra twenty thousand staff to manage the expected surge in shoppers, with eighteen thousand roles at Sainsbury’s and another two thousand at Argos. The company is offering fixed-term contracts ranging from three weeks to three months, with positions available as retail associates, warehouse operatives, and delivery drivers.
Meanwhile, Marks & Spencer planned to take on eleven thousand new staff members and Tesco began its search for festive store workers, earlier than it did last year as a result of the crisis. John Lewis, meanwhile, also began its search for ten thousand Christmas casuals earlier than last year with an intake that increased on 2023’s recruitment drive.
But in today’s vibrant retail tapestry, organised crime is as likely as opportunistic theft as a result of gang members being embedded in the workplace—often the distribution centres—during the busy Christmas season, but the issue is being under-reported, according to research.
According to Thruvision and Retail Economics, research last Christmas highlighted the value of retail theft at £7.9bn and the report demonstrated a need for far more rigorous attention around the drivers of theft, including employees stealing, and more relentless enforcement to avoid theft spiralling into a widespread societal issue.
The report: The Cost of Retail Crime—Financial Impacts and Mitigation Strategies, said “the focus on retail crime had centred around consumer shoplifting. However, this overlooked a significant proportion of retail theft that’s driven by retail workers themselves. Crucially, the investigation revealed that 40 per cent of the total value of theft is attributable to employees—the proverbial “elephant in the room” that is lesser spoken of—with the main hub of criminal activity concentrated in warehouses and distribution centres (DCs)”.
While these dishonest employees constitute a small minority, importantly they tend to steal more frequently and in larger amounts than shoplifters, with average losses from a dishonest employee four times the value of that of a shoplifter.
Motivations driving employee theft were primarily linked to cost-of-living pressures and labour market dynamics associated with a more transient and detached workforce. Meanwhile, opportunities to steal had increased in recent years due to more complex retail operations, a tight labour market, and lower-paid workers being recruited into criminal gangs.
Among retailers that have seen an increase in employee theft over the past year, a high 70 per cent stated they’d seen an increase in organised crime in DCs, leaving retailers more exposed to widespread theft at scale.
These issues disproportionately impacted larger retailers with increased vulnerabilities from handling greater volumes of stock, implementing complex multi-channel operations, and relying on third party suppliers for upscaling capacity, particularly during the Christmas rush. In effect, large distribution centres were being targeted by organised criminals.
The findings discussed the changing motives behind crime, increasing opportunities for retail theft, and detection policies that are arguably not fit for purpose. The research focused on theft by employees, particularly in distribution centres, which is typically under-reported compared to shoplifting.
Internal theft, the report argues, exacerbates operating and input costs that have already stepped up in recent years, squeezing profitability and stifling re-investment.
Beyond the financial impact, retailers also face downstream problems such as inventory inaccuracies and dissatisfied shoppers. Effective retailing relies on accurate inventory levels for effective supply chain management, replenishment, and demand forecasting.
Here, shrinkage results in jolted operations and inaccurate data collection, leading to incorrect records, lost sales and out-of-stocks. Such losses are likely to be indirectly passed on to customers through price increases, exerting further pressure on already higher levels of inflation across retail.
The retail industry is particularly vulnerable to employee theft which is commonly under-reported within mainstream media. Employees steal in different ways, either in isolation, small groups, or in organised gangs and theft rings. The consequences can be significant: profit loss, low morale, a “culture of suspicion” in the workplace, and inventory inaccuracies.
The increase in seasonal staff can also serve as a double bluff, with temporary staff more likely to get the blame for any dishonesty that comes to light during Christmas, albeit it is part of longer-term culture that has been in place before the festive hiring season began.
Modes of theft can either be direct or indirect. Direct examples include handing over merchandise to friends in stores; and indirect could include the re-labelling of packages in warehouses to be delivered to “collection” addresses, or packaging up high-value, unpaid-for items into the same shipment. Theft in warehouses and DCs is a particular crime hotspot where many incidents go unreported amid perceptions that police response is often inadequate.
While employee theft is committed by a small minority, incidents are more frequent and involve larger amounts from a single retailer, compared to typical shoplifters who steal lower value items from multiple locations.
DCs represent a less risky environment for theft, particularly at Christmas in large busy environments where concealment of items is an everyday occurrence which is why—in light of post-COVID restrictions relating to employee and random searches—many larger retailers have invested in high volume body scan technology that can detect hidden items that might otherwise have been smuggled out.
Organised Christmas Crime on the Road
It is not just the DCs that prove to be the vulnerable points for theft over Christmas. The weakest links in the supply chain are often the targeting of heavily laden vehicles carrying high value Christmas stock which park up in service areas, the vast majority of which are not security accredited, according to the Home Office.
Parking up can also be part of a broader organised plan with often unvetted, third party agency drivers, who in turn may be sub-contracted to 3PLs—third party logistic providers as a result of driver shortages—being approached to turn a blind eye when they go for their breaks as part of a commonly used collusion strategy.
Haulage firms are being cautioned to stay vigilant as freight thefts double in the lead-up to the festive period by highly organised criminal gangs who are seen as the Grinches out to steal Christmas.
The surge in thefts last year influenced by inflation and the cost-of-living crisis, has prompted warnings to the wider community against acquiring goods that have illicitly “fallen off the back of a lorry” this year as it perpetuates this kind of freight crime.
Efforts launched last year by West Mercia police in Operation Yard—a collaborative initiative with partner forces to deter criminal gangs from targeting delivery lorries—involved increased police presence in hotspot areas during evenings and providing security advice to lorry drivers who are key components of this operation.
Detective Constable Dan Griffiths from the West Mercia Force Intelligence Bureau (FIB) emphasised that high-value acquisitive crimes not only affect various supply chain products but impacts everyone. Large carriers face reputational damage, customer loss, and rising insurance premiums, while retailers experience depleted stock and on-shelf availability, ultimately passing on additional costs to consumers.
West Mercia police reported a doubling of thefts targeting hauliers, encompassing items like toys, food, white goods, and perfumes. With 140 such crimes in the force area, a notable increase from 2022’s eighty-three offences, the impact on hauliers is substantial.
Incidents—such as the theft of a £50,000 trailer of cheeses from Strensham services on the M5 and household goods from the Hartlebury Trading estate—contributed to an estimated loss value of £1.35 million in cargo from service stations in the area—part of the so-called “golden logistics triangle”—over the past few years.
Detective Sergeant Andrew Farmer of the Field Intelligence team in South Worcestershire said: “The majority of these thefts are linked to an organised crime gang in West Yorkshire that has been operating for decades as well as ones in the West Midlands and Merseyside who see it as a “low-risk, high-reward” enterprise”.
“We recognise there is an increased demand for black market goods, perhaps because of inflation rises and the cost-of-living crisis but items that have literally “fallen off the back of a lorry” are of course illegal and acquiring them this way simply fuels more freight crime”.
“We continue to work collaboratively with partner forces to tackle these crimes as part of Operation Yard, which sees officers deter criminal gangs from targeting delivery lorries by ensuring police are present in hotspot areas, especially during the evenings, and issuing security advice to lorry drivers”.
“Park your lorry where you can see it. Park with the loading doors close to another vehicle or wall. When returning to your lorry, check for signs of any interference”, said Detective Constable Dan Griffiths of the West Mercia Force Intelligence Bureau (FIB).
He added: “These high-value acquisitive crimes relate to all products that go into the supply chain, be they white goods, groceries, retail items or raw materials, so their theft ultimately affects all of us”.
“There’s a reputational impact on large carriers too if their lorries are getting raided as they will lose custom, as well as insurance premiums go up and stock missing from our supermarket shelves, so any additional costs in the chain will eventually get passed on to the customer”.
“I would encourage people to be vigilant about “freight crime”. If you are at a motorway service station for example, and you think you see something suspicious, please report it to us via our online portal so we can investigate it”.
“To road hauliers we advise that before starting your journey, decide where you are going to park overnight and use a secure overnight lorry park with the “Park Mark” label”.
PC Mike Dawber, a Field Intelligence Officer on the Freight Desk at the National Vehicle Crime Intelligence Service (NaVCIS) said: “NaVCIS is here to map cargo crimes more accurately such as curtain slashes and trailer thefts and we receive more than five thousand notifications about such offences annually, but we are pleased to report there have been two big steps forward in the last twelve months”.
“Firstly, the UK needs to adopt a UK secure truck parking standard via the British Parking Association’s implemented scheme “Park Mark Freight” and ten sites are now accredited in the country. NaVCIS is looking at this with West Mercia Police for sites in their force area”.
“Secondly, there is £52.5 million of Government money being promised to improve driver welfare facilities such as showers and toilets and security such as CCTV, barrier access, lighting and fencing at existing truck parks and motorway services which is match-funded, meaning it is a potential overall investment of £105 million”.
“I’m also pleased to report that there is good policing work going on nationally that has seen 56 arrests that were made in October alone for cargo crimes”.
Christmas is the time to give and take, but the taking is providing more of a festive hangover for retailers, particularly when the taking involves taking advantage of lax and lapsed security measures that might not be as they should be as a result of the Christmas need to increase footfall and sales.
There is growing collaboration between retailers and police forces around tackling organised retail crime and its impact on the wider economic landscape. Opal (see article on page 12), for example, is proving to be an effective disruptor for organised criminality across the UK, but in the meantime, retailers are still largely having to help themselves when it comes to those non-paying Christmas customers who are also helping themselves.
