Majority of retail fraud committed online

As technology generates new sales avenues for the retail industry, it is also apparently providing new opportunities for criminals to exploit businesses.

That is one of the key findings from the 2013 British Retail Consortium (BRC) Retail Crime Survey, released earlier this week, which indicated that retailers reported 121,707 incidents of fraud in 2012-13 – up 15% year on year.

Some 80% of the retailers participating in the study said that fraud had increased over the last 12 months, compared to 8% of companies which witnessed a reduction in fraudulent activity.

Credit and debit card fraud accounted for the majority of fraud (75%), with card-not-present fraud within this category representing almost half of these crimes. Overall, though, most of the reported fraud was committed online – 77% of which was account credit fraud.

The BRC called on the industry and authorities to work together to clamp down on this growing problem, saying: "Given that so much fraud is committed in this way, more police and retailers' resources need to be tailored to tackling it."

Co-op director of group risk Phil Willsmer told Essential Retail recently that the police are currently playing catch-up with the fraudsters when it comes to understanding new technology.

"The police are quite a way behind fraudsters in the technology stakes, and there are a lot of things online retailers do, where the police don't yet have the technical knowhow or expertise," he explained.

Lots of work is being done, particularly led by the City of London police, to make positive strides in this area, but it is only over the last 12 months where all stakeholders appear to have become significantly aligned in their pursuit to reduce fraud.

"The National Fraud Agency was set up for individuals rather than businesses," argued Willsmer.

"It was a great thing to launch but could have done with a bit more consultation with retailers to get it right. The concept is right but the implementation for a lot of retailers isn't where it should be."

Analysts predict that cybercrime could be the critical issue for retail boardrooms to address in 2014, with one commentator telling Essential Retail that neglecting the problem could result in it becoming the equivalent of last year's tractability scandal, which was brought to light by the discovery of horsemeat in various food product ranges last summer.

Cybercrime – defined by the BRC as "activity which utilises the internet to target data or other digital material or cases in which the primary motive of the attack is to disrupt systems or services" – was reportedly experienced by the majority of retailers in 2012-13.

The BRC report showed that hacking and denial of service attacks were the most critical threats, with 63% and 50% of retailers respectively reporting that they were impacted by these types of criminal activity. However, the most common cybercrime attacks for retailers last year were from computer viruses and malware – with almost four out of five retailers reporting problems of this nature.

Overall, the BRC report said that the direct cost of retail crime was £511 million in 2012-13, which was marginally lower than last year, but 166% higher than 2007-08.

Helen Dickinson, director general of the BRC, said that the combined threat of organised theft and growing online fraud means that retailers are facing "an increasingly sophisticated criminal".

"We want to work closely with police and crime commissioners and the new National Crime Agency and National Cyber Crime Unit to fight this serious crime, from fraud, to theft, to cyber-attacks," she explained.

"Our engagement has been positive so far, but it is still early days and it is important that they implement measures such as single points of contact and create dedicated business crime strategies."