Retail theft has gone professional. The number alone — $50.6 billion — tells the story. That was the 2018 loss total to retailers of “shrinkage”: a mild euphemism that actually encompasses shoplifting, returns fraud, employee theft and similar losses, according to the National Retail Federation, which has tracked the problem for the past 25 years. And for 21 of those years, theft by employees has accounted for the bulk of the shrinkage. Four years ago, however, shoplifting rose to the top spot as organized gangs brought production-line efficiency to what had hitherto been a mere cottage industry, as it were.

But the consequences for such stealing have undergone some shrinkage of their own, thanks to the decriminalization of shoplifting in numerous states and other jurisdictions throughout the U.S. In 2016, for example, a state attorney in Chicago announced that she would not prosecute thefts as felonies unless the value of the merchandise stolen was at least $1,000 — $700 higher than the felony threshold for retail theft in Illinois. In 2014 California voters approved a measure that downgraded the theft of property valued below $950 from a felony to a misdemeanor.

“Guys that want to help themselves to merchandise have realized that if they go into a store, grab a bunch of stuff and run out the door, the worse thing that’s going to happen to them is they get a ticket,” said Sanford D. Sigal, president and CEO of Woodland Hills, Calif.–based NewMark Merrill Cos., which owns shopping centers in California, Colorado and Illinois. “That seems like a pretty good risk-reward trade-off, and so we’re seeing more and more of that activity.”

Criminals are now organizing store thefts, purchases with stolen credit cards, and fraudulent returns. Roughly 70 percent of retailers reported an increase in organized retail crime activity in 2018, according to NRF’s most recent survey on such crime. Opioid addiction is driving a significant amount of this criminal activity, as gift cards issued for bogus returns can be traded for drugs, says Christopher J. McGourty, founder and executive director of NAORCA (National Anti-Organized Retail Crime Association) Worldwide, a Norwood, Mass.–based alliance of corporate security and law-enforcement officials.

“These are not groups that just got together and started to commit retail crime; these are criminal enterprises already into every vice you can think of: gambling, narcotics, human trafficking and gunrunning,” said Robert Moraca, NRF’s vice president for loss prevention. “As I put it, retail crime is like their day job, and the reason they got into it is because it’s very profitable.”

If the civil authorities sometimes appear to be complacent about the problem, retailers are anything but, and they are increasingly turning to technology to help them cope. Nearly 90 percent of retailers have either already implemented, are now testing out, or have plans to use point-of-sale analytics that can detect dishonest employees, returns fraud and other abnormalities, according to NRF. Returns fraud alone accounted for some $24 billion in losses — 6.5 percent of all returns — according to a 2018 survey conducted by Appriss Retail, a data-analytics firm. Appriss Retail’s technology uses artificial intelligence to reveal suspicious patterns of voids, discounts, returns and similar “sales-reducing activities,” according to Tom Rittman, vice president of marketing at the Irvine, Calif.–based firm. Typically, stores then investigate the activity to determine what may be behind it. “One of the biggest issues we see is collusion, where an employee is working with the customer on fraudulent returns,” Rittman said.

Retailers are adopting video-analytics solutions with more frequency too. One-third of the retailers NRF surveyed report that they have either rolled out video technology or are testing it, while 22 percent say they plan to implement such technology eventually. Besides using video cameras to count shoppers and track their shopping behavior, retailers are recording shoplifters in the act.

Some landlords are employing video cameras in the common areas and parking lots. NewMark Merrill rolled out smart-video systems at two of its properties. Not only does this technology provide data showing where shoppers go at a center and how much time they spend, but it can also capture images of fleeing thieves, along with license plate numbers and similar details that can aid police investigations.

“If I’m giving the police good video of people, license plates and other useful information, they’re much more likely to spend time at my center working with me to catch the bad guys,” Sigal said. “We need real data to break up crime, not just a report about a 6-foot Caucasian guy with blond hair.” In addition, shopping center managers routinely meet with merchants and work with security companies to gather information about shoplifting, items stolen from cars and other incidents that may warrant posting additional guards in certain areas, says Sigal.

The level of cooperation that shopping center owners and tenants offer to prevent crime can vary greatly, however, and the initiatives of NewMark Merrill differentiate the firm from some of its peers, according to Mark R. Doyle, president of Jack L. Hayes International, a Florida-based consulting firm that specializes in shrinkage. “Retailers have the most at stake, since it is their merchandise being stolen, and they typically do the most to prevent theft,” Doyle said. “While some landlords are very involved in keeping their centers safe, and [also] in working with retailers and police to combat theft, this appears to be more the exception than the rule.”

From a landlord’s point of view, one problem is that while the mall owner will work with tenants to provide police with camera footage of suspected criminals or crimes, retailers often fail to prosecute shoplifters, says a spokesman for one mall owner. But retailers and landlords are at least gravitating toward the same technologies, and the use of facial-recognition software is considered the next frontier. Airports, government buildings, arenas and other venues are already using this technology. But the notion of deploying it in retail settings has ignited controversy over privacy concerns. How retailers intend to stow and use the information and who has access to it are important questions. Would stores or malls use this info to ban known or suspected shoplifters from a property, for instance?

Less than 20 percent of retailers have implemented or tested facial-recognition systems, and roughly 80 percent say they have no plans to use them, according to NRF. Still, Saks Fifth Avenue, Target, Walmart and other retailers have tested the technology in the past, according to news reports. Several retailers to whom SCT reached out with inquiries about such tests failed to respond, but one Target representative did say the company takes a multilayered approach to preventing theft, including technology, training, and partnership with local law enforcement.

Like most smart-camera systems today, NewMark Merrill’s video systems are equipped with facial-recognition capability. But the firm is not using it to scan and store facial images in any database. “For me, that’s a bridge too far,” Sigal said. Indeed, he prefers to use the cameras to help gauge foot traffic patterns and measure customer experience, as well as for basic security.

McGourty concurs, though he also argues that current controversies over usage of facial recognition in stores is overblown, given the technology’s ubiquitous presence in other types of public spaces. “If retailers want to use facial recognition to protect their assets and stop the $50 billion in losses a year,” McGourty said, “they should have that right.”