Organized Crime Gives Retailers That Shrinking Feeling

Discussion
Nov 09, 2005
George Anderson

By George Anderson


The Federal Bureau of Investigation estimates that retailers lose as much as $30 billion a year to organized crime rings and now industry businesses are getting organized themselves to stop this theft.


The New York Times reported that retailers have joined together to create a national database to identify when organized criminal activity is taking place and to assist authorities in sending thieves to jail.


Organized criminal activity hurts retailers in a number of ways. Besides the obvious loss of product, organized rings resell the stolen goods to individuals or retailers.


Among the items at the top of thieves’ list are popular brands, such as Enfamil, Oil of Olay, Pepcid and Gillette shaving products.


While retailers are waking up to the threat of organized shoplifting gangs, so are law enforcement authorities. They too, say retailers, have had to readjust their preconceived notion of who is a shoplifter.


Keith White, head of loss prevention at the Gap, said, “There have been times when law enforcement has had a profile of a shoplifter as a kid with a backpack.”


Frank Muscato, Wal-Mart’s investigative coordinator, recently testified before Congress on the organized shoplifting threat.


“Because state laws are often soft and there is a lack of federal laws addressing the issue, retail theft has become a high-profit, low-risk avenue of crime,” he said.


Mr. Muscato and others are hoping the development of the database will help federal authorities connect the dots and begin to catch and prosecute those involved in this activity.


The retailers are looking to use the database, said Mr. Muscato, to “work up a case large enough for the F.B.I.” 


Moderator’s Comment: How is organized criminal activity affecting retailers? What impact does it have on consumers? What will it take to fight organized
crime in retail circles?

George Anderson – Moderator

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8 Comments on "Organized Crime Gives Retailers That Shrinking Feeling"


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Colin Peacock
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Colin Peacock
15 years 3 months ago

It is evident that organized retail crime is a real threat to the industry, not just retailers.

However, what is less clear, and the comments here support this, is the exact contribution of organized retail crime to the total shrink number of 1.54% (NRSS 2004). Today, it is very hard for us to answer this question for multiple reasons. What is clear to me, though, is that in a world of limited resources, I would focus my efforts on the drivers of shrink over which I have more control, namely damage, error and internal theft. With these elements under control and this “fog” removed, I believe I would be better able to target and address organized retail crime.

Mike Bavington
Guest
Mike Bavington
15 years 3 months ago
It’s amazing to me that even those involved in retail, as I see the commentators to be, have such a passé attitude toward theft, regardless of where it is coming from. Ask any small retail owner what he or she thinks about theft and you are bound to get a stronger answer. You know, the individuals that work 14 hour days, 7 days a week? Those that, if lucky, make less than minimum wage to operate their business. I specifically have had problems with youths who not only steal my property, but also generally interfere with my operations and, hence, indirectly ‘steal’ profits from me. When I phone the police or the school or the parents, rarely is anything done. This will continue for three reasons. Number one, we live in a non-punishment society where people’s actions are excused as mistakes and not bad behavior that must be punished. Number two, the people who have the authority and capacity to stop theft still receive the same paycheck regardless of whether or not they help solve… Read more »
Ryan Mathews
Guest
15 years 3 months ago

Ron is right, but clearly the scale of organized efforts puts this kind of shoplifting in a different league from the kid with a backpack. Retailers need to strike a balance between securing inventory and the ability to merchandise effectively with minimum loss. Otherwise, the end consumer will continue to pick up the bill.

David Livingston
Guest
15 years 3 months ago

External organized crime is minimal compared to the internal organized crime that goes on with retailers. The internal crime is what sinks retailers into bankruptcy or keeps them from using their best efforts to compete. How many times have we seen retailers make obvious poor decisions, whether it be operations, real estate, personnel hiring, or marketing, etc? Working on the real estate end, I’ve seen it time and time again where someone on the inside will get some sort of kickback in exchange for an expensive signed lease in a rotten location. Internal organized crime has wiped away hundred of billions in market cap. The $30 billion mentioned in the article is insignificant compared to what takes place internally.

Ed Dennis
Guest
Ed Dennis
15 years 3 months ago

Penalties need to be stiffened and doubled if a minor is involved in an organized theft. Shoplifting is increasing because the reward far outweighs the risk. If the risk/reward ratio is brought in line, then shoplifting will decrease. Also, it may be possible for organized criminals to be identified and screened when entering malls. I am not advising that identified criminals be denied entry into a mall but they could be advised upon entry – “We know who you are and your picture is being transmitted to every retailer and security guard in the mall. Please come in and shop till you drop but any theft will be dealt with harshly.” As to employee theft – I have never known a retailer to deal with it at all. How about establishing incentive programs that reward employees (one win – all win; one lose – all lose) if theft decreases and let the employees police each other?

Mark Lilien
Guest
15 years 3 months ago

Credit card fraud and related identity theft, particularly internet credit card fraud, are also huge loss issues. A few weeks ago, when $21,000 was stolen from my checking account via forgery, it took 3 tries on my part before the police would accept my complaint. On the third try, they ignored the evidence, and only let me speak to a clerk who gave me a receipt.

My bank charged the loss to the forger’s bank, and gave me the money back. Neither bank showed any interest in solving the crime or learning how to prevent it in the future. This disinterest is not an isolated phenomenon. The health and beauty aids theft rings are penny-ante compared to the financial thefts. I see no effective leadership from major retailers, banks or law enforcement agencies in this area. Steps taken so far are ineffectual compared to the growth of the problem.

Ron Margulis
Guest
15 years 3 months ago

While customer shoplifting and other external criminal activity is a huge problem, employee theft still outweighs it in terms of dollars lost. Sweethearting, employee shoplifting and fraud is estimated to be a $50 billion problem by the US Chamber of Commerce. Technology and new business practices are available to help address both types of theft, but retailers would be remiss in allocating resources solely to address shoplifting and other customer-related shrink.

MARK DECKARD
Guest
MARK DECKARD
15 years 3 months ago
Credit card fraud is a huge issue for multichannel merchants, especially through catalog and web order operations since it is a “card-not-present” environment. Even with the addition of the card’s 3 or 4 digit security code which are now required by many direct marketers, the identity thieves still get through. With few exceptions, I’ve found that local, state and national law enforcement agencies are relatively uninterested in taking action. Even when provided with the ship-to address, hot card number, and a working telephone number for an order that the thief is expecting to have delivered via priority overnight service. Local and state law enforcement when provided with the information to apprehend the suspect receiving the goods typically refer the retailer back to their local authorities who, in turn, claim they can do nothing since the suspect is in another state. National agencies like FBI and Secret Service ask for a fax containing relevant information to be sent to some fax machine somewhere in the bowels of some unnamed government office, never to be seen again.… Read more »
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