LPRC - CrimeScience – The Weekly Review – Episode 161 with Dr. Read Hayes, Tom Meehan & Tony D’Onofrio

Episode Date: September 21, 2023

IMPACT 2023 is 10 days away! We hope to see you there, but in the meantime, our hosts discuss choices and consequences of crime, forecasts for growth in the US and in Europe, as well as risks for global economies, and new risks emerging in cybersecurity and how to remain protected. Listen in to stay updated on hot topics in the industry and more! The post CrimeScience – The Weekly Review – Episode 161 with Dr. Read Hayes, Tom Meehan & Tony D’Onofrio appeared first on Loss Prevention Research Council.

Hi, everyone, and welcome to Crime Science. In this podcast, we explore the science of crime and the practical application of this science for loss prevention and asset protection practitioners as well as other professionals. Welcome, everybody, to another episode of Crime Science Podcast. Today, this is our latest in our weekly update series. We're going to talk a little bit about crime and loss, what we're trying to all do about it. series. We're going to talk a little bit about crime and loss, what we're trying to all do about it. And I would say that our team really over the last 25, even 30 years, have had ongoing media queries about what our take is on things and how things are rolling. But I would have to say, in my experience, particularly in the last couple of decades, this is the most frequent, intense amount of media attention ever.

And it's not unique to just myself or the LPRC team. We see the National Retail Federation, Retail Industry Leaders Association and others constantly being interviewed and talked to about what's going on. What can you describe? If there's a real problem, if things are surging, what might be causing that or what things or combinations and how severe is the damage? Is this even accurate? Is this true? How do we know? And all those types of questions. And my experience in dealing with local and national and even international media through all these years is there are good people out there trying to understand and explain to their audience. Others that kind of want to do that and others I'm not so sure. We try and talk to most of them. There are some that we don't talk to as much or maybe even don't talk to at all because we're concerned about ambushes. Or are these reporters a little lazy? Are they biased or even extremely biased? Do they have a point they want to make and they're only going to put things in there that support what they believe rather than this is an honest trying to understand different perspectives and let the reader let the viewer decide um what's going on so uh but

i i think that uh some of the recent interviews we've done people like sirius xm usa today uh fox business cnbc had one that i that was one that that I'm not sure about, and it goes on. But by and large, they seem to be good interviews and good interviewers, and they're trying to get at and create a much better understanding of the dynamics at a national and at a local level. at a local level, always with an eye toward, all right, so what could we maybe do if there is in fact a serious problem and maybe even a seriously growing problem? What's that look like? So the first place we talk a lot about is the crime harm. And again, trying to understand that in depth, that if one human, one person makes a series of decisions and choices to move through space and time to go victimize another individual, including their place of business.

That's the dynamic we're interested in, of course, as criminologists and our practitioner partners, whether they're loss prevention, asset protection or loss or excuse me, or law enforcement, that's what we're interested in. And so what kind of creates the environment for that before, during, and after an event and so on? So what we're finding is that some of the questions are kind of spiraling around how accurate is the information that the retailer and that law enforcement have to work with. And I think the simple answer is not great, but getting better, that retailers are starting to know a little more. And I think our team, we look at it as what does a crime victim, how do they perceive something? What do they notice? And then what do they record? And what do they report? I mean, those things are somewhat different, but all part of a continuum that you hope is better and quicker and more persistent that, hey, this is if we train our people to

understand, here's what I'm seeing, I believe in hearing myself or others are telling me. Here's what I'm seeing, I believe, and hearing myself or others are telling me. This is what I now think is going on. And what are important things? Who's doing this? Who all is doing this? What is it about them? What are they saying and doing?

Where are they going? How are they acting? Where are they going next? What are they driving? What tools did they use? What are the things they said, things they did or did not do? What did they look like? What were they wearing? What were they driving or riding or walking? In what directions did they go? You know, all these things that are important to understand the characteristics about the offender or offenders, the victimizer that creates the harm, things about the event itself and things about the environment at the

time of the event are very important. We believe, you know, how many cameras, how many people were present, you know, what security measures, countermeasures were in place, how well were they being executed or not, and so on. That's important because when we're talking about harm and crime, harm to that individual, making those conscious decisions and taking those choices, those are things that are important. Because the harm now, if they're making that crime attempt, and the attempt is what we're looking at, not just that the offender may think they're successful. They intimidated or harmed somebody physically or took somebody's stuff or enough of their stuff, their merchandise, their money, or other valuables or other crimes. That's really the harm now goes to the individual, the victim. That individual or individuals that were present at the time of that crime attempt is very important. They are harmed by that experience. That may contribute and increase psychological and even physical damage to them because of other crime

events or attempts that have happened in their presence, at their place, or maybe they were personally targeted or in the pathway of the offender trying to get to the target and so forth or get away. And so crime harm starts with the individuals that were present at the time of that crime attempt. What is it that they perceived? How do we document? And so on that. But what happened to them psychologically? Is there trauma? People are all different. The circumstances also create that difference. So what are they like? What do they experience? How do they perceive and respond to that? It's always stimulus and response.

So first of all, what's not really reported very accurately in the media is the harm that's created by crime attempts. Even if somebody's coming in and taking, you know, three bottles of wine or a six-pack of beer or whatever it might be, you know, an energy drink or a pack of razor blades, whatever's going on, that type of attempt, that type of crime event where that offender is now choosing to victimize creates harm. It's never, ever right to do that. There are always options. Some people are in a very desperate situation. We need to know who they are. We need to work on improving. I mean, seriously, working on improving conditions for those individuals, but for our community and neighborhoods at large and so forth.

But still, the harm that's created when somebody goes in and starts taking another's possessions is pretty phenomenal and that's a big part of what we're doing with our voice of the victims program is talking to people that are in those stores working and shopping and what they're seeing and experiencing visually how they're perceiving and how it's affecting them the next part of the crime harm, of course, is there is financial harm in that a retailer is selling merchandise that they have paid for, that they have handled through their supply chain, that they are putting in a shop, that they're paying rent or lease and or taxes, that they are paying for the handling of those products, the lighting, in other words, the electricity, all these things, licensing, and so on.

So there's a tremendous amount of cost. So when somebody comes in and takes an item or takes a garbage bag full of items once or repeatedly each and every time, the financial crime harm can be actually pretty phenomenal. Each and every time, the financial crime harm can be actually pretty phenomenal. And even if somebody is coming in once a week taking something, that adds up, particularly when they're, maybe only about $1.40 or $1.50 of that is actual profit because there's still other cost of handling plus the cost of the goods itself, plus there's a cost to money. You borrow that money with inflation, particularly currently with the current inflationary problems we've got, you're paying. Money is not worth one day what it was a month or a year ago. And so you have

borrowed money. You've purchased that item. You've shipped it and handled it. You put it into your store and have people you're paying to handle it and to sell it and all the other attending costs that we've just talked about. And now we lose that. We may have to sell it and all the other attending costs that we've just talked about. And now we lose that. We may have to sell five to 10 to 20 of those just to break even. And if somebody is carrying out a garbage bag full or whatever, now you can imagine the crime harm. And so now you look at if that store closes down or diminishing, reduces their service hours and things like that, that affects that neighborhood. That affects that community. That affects the employees that work there, their wages.

That affects the taxes that are paid or not paid to that local community for all the services rendered to them, but also to everybody else in that neighborhood and community. them, but also to everybody else in that neighborhood and community. So now you can see individuals are physically and psychologically harmed by one-off and continuing and, of course, dangerous, aggressive crime, financial disaster even in some cases, but certainly very serious financial harm to that location, to that retailer. And we talk a lot about retail chains. to that retailer. And we talk a lot about retail chains. We work with almost 88 of those major corporations in their divisions. But a lot of retail, in fact, most retailing is still local. It's still the local store or shop owner. They are being victimized in the same way that the chain stores are. Depending on what they sell, they're experiencing the same kind of psychological,

stores are, depending on what they sell, they're experiencing the same kind of psychological, physical, financial harm. And their customers suffer when they have to close down their stores, just like the chain stores. So we just want to talk a little bit about crime harm, about how devastating it can be to people, to places, including neighborhoods, communities, states, our nation, our economy, all these things. The other part of crime harm is the destabilization that it creates for that area, that neighborhood, that community. And so we see stores closing down. We see people displaced, their jobs go away, local and convenient access. Now when we see food and drug stores closing down, people don't have access to them. We've heard some local community leaders in some of these areas saying, well, it's fine, they can order online.

They can't all order online because they don't have credit cards. They may not have computers or smart devices, cable of that, or the skills or expertise to do it even. And so this is a complex issue, but stability, disorder, antisocial behavior, starting with theft, whether it's one-off or it's continuous or it's big hits or it's very aggressive, including armed robbery, are all destabilizing for that community. They're all dangerous for that community and the people there. And so we can see this ripple effect of crime harm. So we're not here to lecture, but rather to just all of us better, more deeply and broadly understand what crime is.

Crime is one hurt person harming another person. It's as simple as that. person harming another person. It's as simple as that. And they did that consciously, and they had to take steps and had opportunities to think about what they did before they did it. And so given all that, that keeps us going. We're always concerned about our families, our friends, our community members, everybody at large in trying to figure out how do we reduce crime attempts to reduce crime harm. And so we think the best way to do that is to focus on those that are making those attempts and working on those places that are breeding grounds that are being for the places that are victimized, that these co-located places and spaces we've talked about before, environment and crime, place and crime is paramount. So we think by messaging and affecting

the offender's decisions, by shaping the environment, by understanding those things are critical. But we're seeing now in places like San Francisco where these things are taking the next limit. A very primary part of placing crime is understanding how it works. People that are going to harm another person, particularly if they're serial offenders, they continuously do this, whether it's once a year, once a month, once a week, once a day, once an hour, a minute. Those serial offenders like to gather in places. They may meet other people. They have to go somewhere online or physically to convert stolen goods to cash. So clusters of places create the ingredients, the dynamics that enable crime or make crime simpler. And so the retailer attracts people

to work and shop there, their potential crime victims. Some of those people that work and shop there are themselves victimizers. They are criminal offenders themselves. Either in the moment or over time, they've decided to do this and so on. So we're very interested in people and places and clusters of places. But if we have abandoned buildings, But if we have abandoned buildings, whether it's a small shop or an old home or whatever, those are places psychoactive and create some more dynamics and energize and confuse and create even more offending of different types as people use the drugs, sell the drugs, steal from them, each other, and stores to buy drugs, to trade for drugs, to settle disputes and things like that. So now what we're seeing is dynamics when stores are starting to close because of the dangerousness and the severe financial harm that's being created in some of these communities

that we all know about. Now you're seeing more, not less, but more abandoned areas creating this cycle, this downward spiral. And in San Francisco, where they are walking away from entire shopping centers, hotel complexes. Now you're talking about not just small abandoned areas, large, vast abandoned areas, and so on. So we don't want to – I'll take it from there over to Tony, but I wanted to kind of put out that um what we're trying to work on how we're trying to understand these dynamics what can we do to affect offenders or just choices these places and their attractiveness and their and how they enable crime but also help community elected or non-elected leaders if you will understand these dynamics at the different levels the different

strata from their community, from that neighborhood, from that block, from that place scale, but from people at the same level, from individuals to employee groups to neighbors and so on, because it's all very, very important. Now, we'll be talking a lot about this at the upcoming Impact Conference, the 2nd to the 4th of October, just a couple weeks away now in Gainesville, Florida, on University of Florida's beautiful campus. So we look forward to seeing as many of you all that are able to make it. It's something to behold. There are a lot of good meetings and conferences out there, but this one is a little bit, if not a whole lot different

because the content, the venue, the labs, everything that we do here, a little different. Plus every session that we have leads to upcoming research and development. LPRC is a year round engagement, problem solving community. So you'll see the impact conference is just part of that, a huge part of that continuum. All right, with no further ado, let me turn it over to Tony D'Onofrio, and we'll take it from there, Tony.

Thank you, Reid, for all those great updates. I actually spent the last two weeks in Europe, so let me give you an update in terms of what's going on from a global point of view and also retail. And this is actually from the latest edition on the disruptive future of retail with European trends being the major driver. So what I shared this week is, first of all, globally, the new forecast is that we will have 2.6 percent GDP growth and inflation will be 7 percent. then inflation will be 7%. The Eurozone for 2023 is going to have very little growth, so just 0.6% compared to the U.S., 1.2%. Next year, U.S. is also going to drop to 0.8%,

but Europe actually goes higher to 1.2%. On inflation, the forecast is for the U.S. to end at 4.1 in 2023 and 2.4 in 2024, although U.S. is already lower, whereas Europe, the inflation is expected to be higher this year at 5.7 and 2.8 next year. There's still some global risks around with the war in Ukraine, next year. There's still some global risks around with the war in Ukraine, with the China-U.S. relations, and also some of the vulnerabilities around real estate market, financial stability, and energy security. There's a lot of debt. In fact, one of the stats that I shared, the U.S. just crossed over a trillion dollars in credit card debt and also climate change is a one that's um

very relevant to europe um the you in the ukraine war it's important because russia is the world's largest natural gas reserve country followed by iran which is also not that friendly to the western world and there's over 500 million people that live in countries that rely heavily on Russian and Ukrainian wheat. And two-thirds of the world population lives in countries that are neutral or Russia-leaning in the Ukraine war. I spoke heavily in terms of what's going on to retail sales. Retail sales have been negative in Europe for quite some time and they're also negative in the U.S. when adjusted for inflation. I spoke about inventory distortion this year being globally 1.77 trillion dollars with other stocks being just over 68% and over stocks being just around 32%. Europe is actually ranked second in terms of having the largest out of stocks, and U.S. is ranked third in terms of that.

Some of the other stats that I shared were the changes of Alibaba and also versus Amazon. So Amazon continues to grow very aggressively. They get the majority of their profitability from the AWS web services, but they have all kinds of revenue engines that they keep pulling. So they generate about $22-$38 billion from advertising. dollars from advertising. What was interesting is nearly, just nearly 50% of what Amazon does is already beyond the online stores. So, which was interesting to me because all these other services like the AWS services, subscription services, advertising, add up to 49% and it's a big number. They're also experimenting with new technologies continuously

and they're looking at their physical store portfolio, which is important to them. But on the other side of the world, Alibaba continues to also experiment with their approach to retail and they're actually trying to make progress, especially in Europe, where people are buying on Alibaba.com. So Spain, for example, being the largest place, followed by the Netherlands and even Brazil are the top three countries. And of course, Brazil is in South America. And in Asia, you also have the Singles Day in November,

which is a big holiday. Last year generated $37 billion. And they also have a large live streaming revenue generation for retail with influencers, sell things online. And there were 300 million live streaming sessions last year. What was interesting is similar to the US, the retail economy in Europe is very large. There are 5 million enterprises, a one-fifth of all European Union registered companies are in retail. 26 million or 13% of the EU workforce, which is the largest, is in retail.

And the annual revenue for retail in Europe is 7 trillion euros. But what's also interesting is that Europe tends to invest less when it comes to technology. The US tends to invest 1.9x more than what's invested in Europe when it comes to technology. Similar trends to the US. Remember the retail apocalypse and how the world was going to end in terms of retail and everything was going to go online. Similar trends. A lot more stores are being opened.

And I gave two examples. One from the US where in the latest data published by curbside research more stores were opened and closed and similar trend in the UK where more stores were opened then closed interesting in terms of how much of the retail business is going online in Europe the United Kingdom is actually aggressively moving. In fact, they're moving towards closer in the forecast period from 2022 to 2025. 35% of retail sales will be online in the UK, which is the largest in Europe.

And then in Netherlands, it really drops to about 20. And then Italy is about 12. So you can see that physical stores are gonna still be important to retail across the world, including rail, including Europe. Also interesting is what segments are going online the most in Europe. And consumer electronic is the largest

followed by apparel and fashion. 30% is the penetration expected by 2030 in terms of online and on an average across all the countries in the top three again are consumer electronics, apparel and fashion and furniture. The lowest is food. That's got the lowest percentage shifting to online. I told the audience that retail sales and the retail industry is going to continue to be robust. In 2023, we will cross $30 trillion of global retail sales. And only 24% is the forecast for 2026 that will be online. The rest will be in physical stores. So a big push on sustainability in Europe. Now there was an

interesting question that I shared. How much is sustainability worth to European shoppers? 26% of the people in France will be willing to pay over 20% for more sustainable product. It's even larger in Germany, 40%, 26% in Italy, 31% in Spain, and 10% in the UK. So sustainability is a big trend. I also share some holiday forecasts at the global level. What was interesting this year, online, $194 billion this year will be influenced by artificial intelligence. Also interesting this year, 70% of the items gifted will be resold or used items. So this circular economy in reselling goods and not throwing them in the trash is a trend that also is seen in Europe. I shared a whole bunch of other technology trends in terms of what's happening in RFID, what's happening in computer vision, what's happening in all these

different technologies that are emerging, such as edge computing. I've shared also the global impact of artificial intelligence through 2029, which worldwide is $9.2 trillion. So artificial intelligence is here to stay. And then I concluded with, again, a little bit of focus on loss prevention, because this was a loss prevention audience across Europe. I spoke to 30 retailers, and I spoke that this is really an important time for the loss prevention, primarily because of all the trends that are happening worldwide in terms of shrink and being a major concern. There's all kinds of headlines both in the UK and the US in terms of CAOs and CFOs reporting on shrink and how bad shrink is. And really, this is a good time for loss prevention to step up and really be more recognized by the executive suite and even

potentially in the future move to the executive suite. So really good discussions, really enjoying engaging with the 30 retailers. I think the future of retail is bright, and I think a lot of it will be here at the Loss Prevention Research Council, which is an important place to innovate, and I'm looking forward to someday to actually having a European Loss Prevention Research Council. And with that, let me turn it over to Tom. Thank you, Tony, and thank you, Reid. I wanted to start off with a very large cyber incident that affected MGM and Caesar, the casino brands. The MGM was down for more than a week, and I want to be careful how much detail I give because this is still somewhat developing, but the bottom line here was that there was a cyber incident that occurred,

which looks like it's a combined attack that has both ransomware and a breach involved. And so interestingly enough, about a day ago from the time of this taping, there was a Reuters and actually several reports around one of the executives from a company called Okta. And Okta is a third-party two-factor authentication or managed active directory company that helped for single sign-on had said that MGM and Caesars were three other firms that were hit, all five of their customers. While the attack is not related specifically to Okta, I think it's important to say that, they just went and said that there were five of their customers that fell victim to the same attack.

to the same attack. And so San Francisco-based OCA, which has about 17,000 customers around the world, provides identity services, multi-factor authentication, active directory, and single sign-on. They, again, were not the cause of this. They're just someone commented on it. One of the things I would say here is that this was a significant and very sophisticated attack. And for MGM, MGM was down for a week, could not use loyalty programs, could not use

their computers. Pretty significant attack. If you remember from a past podcast, similarly, in the last few weeks, we've seen a significant, sophisticated attack related to government systems. So we have a continued challenge here. But as these attacks become more prevalent, and I don't know how they become more prevalent, but more sophisticated, we need to continue to safeguard ourselves. The thing here is that these are catastrophic to business. The company that makes Clorox or Clorox wipes has basically not been into full production because of a cyber instance as well. And there are quite a bit of chatter back and forth of who is behind these attacks.

Actually, the MGM and Caesar attack has been identified as a group. The U.S. government attacks, fingers are being pointed at China. But the point here is that these attacks are occurring and they're becoming more and more sophisticated. Each and every one of us need to do everything we can to safeguard ourselves against them, both at home and at work, as well as with our family. They are not going away and they will continue to be disruptive for us for several months to come. All right. Well, thanks so much, Tom, and thanks so much, Tony. Some amazing information and always, always much appreciated.

And we wish you all the best as you're moving around the United States and around the world, trying to figure out better and better ways to get your teams to help our teams and others solve these mounting issues. So with no further ado, everybody stay safe. I want to thank Diego and Wilson, all of you all that are listening. Stay safe, stay in touch. Thanks for listening to the Crime Science Podcast presented by the Loss Prevention Research Council. If you enjoyed today's episode, you can find more crime science episodes and valuable information at lpresearch.org.

The content provided in the Crime Science Podcast is for informational purposes only and is not a substitute for legal, financial, or other advice. Views expressed by guests of the Crime Science Podcast are those of the authors and do not reflect the opinions or positions of the Loss Prevention Research Council.