The Business of Shoplifting. Second City Style Fashion Blog

Shoplifting is big business. Gone are the days when a store's concern was a kid stealing a t-shirt for a cheap thrill. In a very interesting article in today's WWD titled, "Retail's Latest Plague: Fighting Back Against Shoplifting Gangs," by Evan Clark, points out the money made from reselling the goods online, to fences or returning them for rebates at the store helps fund criminal enterprises...really hurt us all.

Someone has to pay for this and guess what? It's us. "It all comes to be another tax on the consumer," said Dan Doyle, vice president of loss prevention and human resources at department store chain Bealls Inc. "They end up footing the bill on all this. As a consumer who's concerned about higher prices, they should be mad as hell about the fact that they're out there stealing this stuff and selling it."

"This is their job, they have people who work for them and potentially people who work for them," said Doyle, explaining the multilayered structure of the syndicate. "They either take orders or they go out and steal stuff knowing they have a market to sell it — the Internet sites that allow people to sell merchandise somewhat anonymously. It isn't like you have to walk into a back alley where you're exposed."

The Federal Bureau of Investigation has focused more attention on organized crime as of late. In conjunction with retail trade groups, the FBI helped establish an online tracking system to help stores protect themselves and aid law enforcement in capturing and prosecuting criminals.

The organized groups come in all shapes and sizes, from gangs such as MS-13, a violent street gang with Latin American roots, to organizations that use everyone from illegal immigrants to all-American types. Bealls was even hit by a group of strippers who were stealing from stores around Florida and selling the goods to a fence.

"Typically, the organizations that we look at or law enforcement looks at are dozens of people working together," said Brian Nadeau, who until last month was a supervisory special agent in the FBI's major theft unit before transferring to the bureau's inspection management unit.

The groups have "boosters" who steal the product, as well as fences who move the goods, people who determine what stores will be hit and scouts who get the lay of the land beforehand. Often there are drivers behind the wheel of a getaway car.

Boosters will go into stores, distract the salespeople, perhaps by setting a small fire in the back of the store or spilling something, grab thousands of dollars worth of merchandise and sneak out, only to go directly to another store, perhaps in another state along a major highway.

To combat the gangs, Nadeau has preached collaboration, even among retail rivals.

Law Enforcement Retail Partnership Network, or LERPnet, an online database  is just gearing up and connects retailers with each other and law enforcement. Companies from Bealls and Mervyns to Saks Fifth Avenue, J.C. Penney and Wal-Mart are part of the program.

Stores using the network can post descriptions and vital statistics on suspected thieves and get alerts when there has been criminal activity nearby. The authorities will also soon be able to look into the database to hopefully connect the dots to catch bad guys.

"Loss prevention people now have the ability to share this information with each other almost real-time, as it's happening," said Nadeau. "This will give the ability for a retailer in one state to quickly know that the same problem happened 45 minutes or an hour ago in another state and then notify law enforcement."

Being part of the network frees loss prevention executives from having to get approval from their superiors to share notes with their competitors.

"Law enforcement has not, in the past, been focusing heavily on organized retail theft," said Nadeau, noting the concentration was instead on areas such as drugs.

Shoplifting gangs targeting stores are getting more attention now, in part because of the FBI's new program.

If LERPnet helps authorities tie one robbery to another, a larger case can be brought against the professional criminal who, with just a slap on the wrist, might go undeterred.

While some large chains do have a strong loss-prevention apparatus, Hayes said most retailers are not set up to deal with organized gangs.

"They probably do not have a real handle on the scope or dynamics, and they don't have the infrastructure or resources to attack it," he said, noting a good place to start for stores is to understand how much they are impacted by theft through surveillance and research.

Though often not connected to an organized gang, employee theft is also a big drain on stores. "There's clearly an employee component [of theft] throughout the supply chain, not just in stores," said Hayes, noting retailers estimate that employee theft accounts for 30 to 40% of their inventory shrinkage.

The excitement and buzz that brands create around their products attract not only shoppers, but thieves who have a great incentive to steal.

Stolen goods fetch about 30 cents on the dollar on the street, 70 cents on the dollar if they're sold online or, for the more enterprising, 100%  plus tax if they're returned to the store, said Joseph LaRocca, the National Retail Federation's vice president for loss prevention.

"They're going from store to store in the mall, they're loading up shopping bags, they're going from mall to mall and stealing up to $10,000 a day," said LaRocca. "These groups are very sophisticated and they, for the most part, slide in and out of stores without ever being noticed."

In addition to sophisticated surveillance of stores and malls, boosters come prepared with plans to distract employees, or tools such as jackets or "booster bags" lined with tin foil to confound antitheft sensors.

"EBay has done very little to assist retailers' investigations, stating that their platform is merely a way to connect buyers and sellers," claimed LaRocca. "Retailers have repeatedly asked for assistance in the identification of sellers who off-load their brand goods or items believed to be stolen or fraudulently obtained, and there has been little to no response."

Security experts said they could virtually stop theft tomorrow, but acknowledge that increasingly draconian protections would make customers feel unwelcome in the stores.

"If we just keep doing what we're already supposed to be doing, it's going to control organized crime — good customer service," said Chris McGoey, a Los Angeles-based security consultant. "Having people on the floor it has been proven time and time again, increases sales and reduces losses. The store looks much better, it's in stock, everything works, everyone's happy. The only downside is that you're spending some money up front to get the benefits later of increased sales and reduced inventory shrinkage."