The Economy's Latest Hurdle for Retailers: Shoplifting
Wednesday, December 24, 2008
Retailers have blamed the global financial crisis for a litany of ills over the past year: slumping sales, mass layoffs and bankruptcy filings. Now, they are looking to the economy to explain recent spikes in shoplifting from their stores.
Though individual retailers do not publicly report crime data, a survey of 52 national chain stores released this month by the Retail Industry Leaders Association (RILA), a trade group, showed that 84 percent reported an increase in shoplifting since the recession began. About 80 percent said organized retail crime had also jumped, and more than half said robberies and burglaries have risen, as well.
"Bad guys are smart. People do not give them credit," said Brad Brekke, vice president of assets protection at Target. "They understand odds are either for or against them, and if they see the odds swing in their favor, they will take advantage of it."
In the Washington area, Alexandria police said there have been more shoplifting reports nearly every month this year compared with last year, though they expect December to slacken. In Tysons Corner, Lt. Josh Laitinen said his officers arrested 40 people over the past three weeks on shoplifting charges. And in Montgomery County, Detective David Hill, who oversees the county's retail crime division, said many stores have told him that crime is up.
"I'm sure it's a major concern for all of them," Hill said. "No one wants to just give anything away."
Retail crime typically increases during the holiday season as customers flood stores staffed with temporary -- and often untested -- employees. Doorbuster holiday discounts and aggressive merchandising, such as stocking more products near entryways, also provide ne'er-do-wells with more opportunities. But retailers and law enforcement officials say the economic downturn is resulting in more frequent and more aggressive crimes.
Fighting these trends is an expensive proposition for retailers. According to the Center for Retail Research, a British organization that did a global survey, U.S. stores spent about $12 billion last year to combat retail crime.
Many employ security officers to monitor surveillance cameras throughout the store.
Some companies are testing new technology that can detect when a shelf is cleared of merchandise and then alert employees, according to Lee Pernice, director of retail marketing for security firm ADT.
Target is looking at so-called "benefit denial" technology that requires popular products to be activated at checkout in order to work, Brekke said, similar to the process used for gift cards. It also has begun using spiderwrap -- cables with a built-in sensor -- on hot items.
But many retailers are relying on standards such as beefing up security during the holiday season and training employees to spot suspicious behavior.
Pernice said companies face a tough choice as they watch sales and revenue slump: Does it cost more to be a victim of crime or to fight it?
Retailers lost an average of nearly $35 billion, or about 1.4 percent of their inventory, to theft last year, according to an annual survey conducted by the University of Florida. During the most recent recession in 2001, so-called shrinkage rates averaged 1.8 percent. Results for this year will not be available until 2009.
Economic downturns can lead to increased retail crime as law enforcement organizations cut costs and personnel. Retailers face declining sales, and some are choosing to reduce security staff, according to retail and loss prevention experts.
Hundreds of stores across the country are being shut down, and several retailers have filed for bankruptcy protection, scenarios that tend to lure more crooks.
The financial crisis has drained many consumers' wallets as layoffs mount and 401(k)s continue their freefall. That has contributed to an increase in so-called "opportunistic" theft from shoppers stealing for personal use or consumption.
The items stolen can span a cost range, from drugstore cosmetics to pricey electronics. Hill said many of the retail thefts he has seen over the past year were committed by first-time offenders.
"Some people are being forced to make bad decisions," said Joe LaRocca, vice president of loss prevention for the National Retail Federation, a trade group. "There is no right reason to steal from retailers."
More troubling to the industry is the growth in organized retail crime, sophisticated operations that target popular items such as baby formula or diabetic strips for resale. According to the RILA survey, 89 percent of grocery and drug stores said such crimes had risen in recent months, the most of any category of retailer.
Paul Jones, vice president of asset protection for RILA, said the increased demand for low-priced goods during these turbulent economic times is providing retail crime gangs with a larger market for stolen items.
They typically sell their products through online auction sites for less than market price, a process known as e-fencing. Consumers often do not know -- and sometimes do not care -- about the origin of those goods.
Jones said several organized retail crimes have been tied to gangs and even the mob. Earlier this year, a high-ranking member of a crime family in New Jersey was accused of using fake bar codes to buy merchandise at Lowe's for pennies and then reselling it.
"People think it's a victimless crime, that you're stealing from a corporation," Pernice said. But "it translates into higher prices for you and me and every other American out there."