Shame and Shoplifting at Wal-Mart

An Alabama judge's unusual efforts to discourage store theft highlight the retail giant's struggle with "shrinkage"

by Pallavi Gogoi

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Earlier this year, Lisa King Fithian entered the self-checkout lane at the Wal-Mart store in her hometown of Attalla, Ala., with a lava lamp and a pet playpen. According to court documents, she then failed to scan the two items, worth $26.97, to add them to her bill and tried to leave the store. Fithian, 46, later pleaded guilty to theft in court, although she maintained the entire incident was a misunderstanding.

Fithian's sentence was unusual. The local judge, Kenneth Robertson, had been thinking about shoplifting penalties that would be different from the fines and brief jail terms, which tend to be ineffective. He talked with the local Wal-Mart Stores manager about having Fithian go out in public with a sign around her neck declaring her crime. The manager, Neil Hawkins, gave the green light. So one Saturday Fithian wore two sandwich-board signs that declared, "I am a thief; I stole from Wal-Mart."

Since then, this town of 6,859 has become a real-life experiment in whether shaming can reduce shoplifting. More than 20 people have endured the modern-day version of The Scarlet Letter in recent months. Angela Bates wore a sign in the streets after pleading guilty to taking five tank tops, two skirts, and a pair of shorts from the Attalla Wal-Mart. Billy Williams did, too, after allegedly trying to take a fishing reel, lures, and hooks from the store. And Paula Regina Cox had to face her neighbors with a shoplifting sign when the police arrested her for allegedly taking six CDs worth $99 from Wal-Mart. Fithian, Bates, and Williams could not be reached for comment; Cox did not return phone calls seeking comment.

The placards are a sign of how much retailers such as Wal-Mart (WMT) are struggling with theft these days. The retail industry lost $41.6 billion to shoplifting and other fraud last year, up 11% from the previous year. The judicial system is also looking for alternative approaches because of the ineffectiveness of traditional punishments and the overcrowding of U.S. jails. "The conventional form of punishments, where shoplifting offenders pay a fine or go to jail, don't work to the extent of the embarrassment of standing in front of a store," says Robertson.

Shrinking Profits

Shaming punishments have been used in other states, including California, Georgia, Tennessee, and Texas, and have been applied to a variety of crimes. But Attalla's is one of the most aggressive efforts to use shaming to deter shoplifting. Robertson says that the problem required some creative thinking. "We have mechanisms in place that allow a judge to send offenders to court referral programs for DUI and offer treatments for other sorts of crimes," he says. "But there's nothing in place for a thief, so I decided to do my own therapy."

The problem is particularly acute for Wal-Mart. As the world's largest retailer, with $350 billion in annual revenues, it has the most to lose from shoplifting. Its rate of shrinkage, the industry's term of art for shoplifting and employee theft, has long been below the industry average of roughly 1.6% of sales. But the company has acknowledged that theft is having an increasingly negative impact on sales and warned that its second-quarter profit would fall at the low end of analyst expectations in part because of the losses. Analysts estimate that Wal-Mart's shrinkage has risen from half the industry average and is approaching 1%, with losses at about $3 billion a year. "We are concerned about shrinkage and are investigating the cause and are taking steps to correct it," said Eduardo Castro-Wright, CEO of Wal-Mart Stores USA earlier this year.

Wal-Mart executives have been debating the optimal shoplifting policies for its stores. Last year, the company decided to give store managers the option of not prosecuting first-time shoplifters under 18 or those who steal items valued at $25 or less. But earlier this month, it decided to get more aggressive.