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NOVEMBER 19, 2007
Shoplifters Get Smarter They're better organized and unloading hot goods online. Should they be prosecuted as felons? The inventory of Levi's jeans at Mervyns stores in the Los Angeles area was mysteriously shrinking last year, and not because of hot-rinse cycles. After setting up surveillance cameras, the retailer's loss-prevention department realized why. Organized gangs of thieves were swiping the pants from shelves, hustling them to waiting cars, and whisking them to a couple of homes in the San Fernando Valley. The hot jeans were then sold in L.A.'s garment district. In the end, 30 people were arrested for what Mervyns estimates was more than $1 million in losses. Shoplifting has gone big-time. Groups of thieves armed with store floorplans and foil-lined bags to evade security sensors are making off with vast quantities of merchandise. Selecting items from a ringleader's list—electronics, razor blades, and baby food are among favored items—a savvy "booster" can haul off $5,000 to $10,000 of goods in a single day, according to the FBI. Such theft has grown steadily in recent years, merchants and law enforcement officials say. "We have witnessed a steady increase in organized retail crime," says David Hill, a Montgomery County (Md.) police detective. "These groups operate with the training of a paramilitary." In response, retailers are lobbying to strengthen laws, which they say are insufficient to combat the crime. At an Oct. 25 hearing, NRF members urged House subcommittee members to make organized shoplifting a federal felony. The problem has also created a rift between brick-and-mortar merchants and online auction sites, which traditional vendors say have facilitated growth of the crime. "The Internet has allowed a wide distribution of stolen products, whereas before, the fencing of stolen goods was limited to pawnshops and local areas," says Brad Brekke, vice-president for asset protection at Target (TGT ). In October, 2005, the chain uncovered a ring in Houston involving five people who sold stolen Target merchandise online. According to records from the criminal investigation, the ring unloaded $258,000 worth of goods, including electric razors, cordless phones, digital cameras, and shower heads. Crooks make more selling on the Web than they do out of the back of their cars, notes Maryland's Hill. TOUGHER MEASURES The National Retail Federation (NRF), whose members include Target, Wal-Mart (WMT ), and Safeway (SWY ), has been meeting with Representative Robert C. Scott (D-Va.) to discuss ways to clamp down on e-fencing—for example, by making vendors disclose serial numbers of items they are selling. Web auctioneers object. "We see this as an overreach by big, established retailers," says Hani Durzy, a spokesman for eBay (EBAY ). Online issues aside, retailers say better laws are needed to fight the problem. "Organized retail crime is low-risk and high-profit," says Joseph LaRocca, vice-president for loss prevention at the NRF. One of the group's objectives is to press for stiffer penalties. Gang members are often careful to steal little enough in a single strike to avoid serious charges if they are caught. "At any one time, these individuals won't have a huge amount of goods, but they will be making thousands of trips. So if they are caught, what should be a higher charge is bumped down to a petty larceny, which is the legal equivalent of a traffic ticket," says L.A. Police Detective Dan Nee. Local law enforcers are also handicapped because these thieves often operate across state lines. Mervyns, meantime, reports it has ramped up its efforts to thwart the rings. Says Mike Kennan, director of loss prevention at the Hayward (Calif.)-based chain: "The magnitude of these thefts would amaze a lot of people."  By Jessica Silver-Greenberg Get BusinessWeek directly on your desktop with our RSS feeds.  Add BusinessWeek news to your Web site with our headline feed. Click to buy an e-print or reprint of a BusinessWeek or BusinessWeek Online story or video. To subscribe online to BusinessWeek magazine, please click here. Learn more, go to the BusinessWeekOnline home page  | | |
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