Pinched by economy, retail crime on the rise

10/20/2008

NEW YORK —Retail crime is up. Economic conditions are poor. And while some may question how much recession economies spur otherwise-honest people to adjust their moral compasses to the point where pinching a tube of toothpaste or a can of shaving cream is justified to save a few dollars, many agree the two are linked.

More likely, those same pinched consumers are finding too-good-to-be-true deals on toothpaste, shaving cream, or worse, over-the-counter medicines at such alternative retail outlets as flea markets, rogue Internet sites and even anonymous sellers through online auction sites. At the end of the day, it’s that consumer who’s supporting the market of organized retail crime—where “professional” teams of shoplifters sweep shelves of products, versus the person who may only steal one or two pieces for his or her own consumption.

According to a poll of 158 loss-prevention executives conducted in September by the Food Marketing Institute, the vast majority appear convinced that the state of the economy is at least partially responsible for the recent rise in theft. Nearly three-quarters said that such retail crimes as burglary, robbery and particularly shoplifting have increased over the last three to six months. “Nearly all executives (95 percent) believe the economy is either somewhat or a major factor in the reported change,” noted FMI director of research Anne-Marie Roerink.

It appears that ORC-related shoplifting activity has been on the rise for some time. An April survey of retailers conducted by the National Retail Federation found that 85 percent of retailers identified ORC as a significant problem for their operations in the previous 12 months, compared with 79 percent one year ago.

It is a problem that has drawn the attention of Congress; Rep. Bobby Scott, D-Va., last month hosted a committee hearing on the subject as Congress considers as many as three bills designed to help combat ORC.

“Products most often stolen by professional rings include: infant formula, over-the-counter medications, razor blades, batteries, DVDs and CDs,” testified Frank Muscato, organized retail crime field investigator for Walgreens, before the Congressional committee. Citing figures from the FBI, Muscato estimated ORC costs retailers as much as $30 billion annually.

Reselling such stolen goods as infant formula or OTC medicines also raises a public health issue, as thieves are not known for their diligence in maintaining proper storage conditions for such merchandise. Muscato cited one Texas case that involved a fence who was buying $50,000 to $100,000 worth of stolen baby formula, diabetic test strips and other OTC medications a day and storing those goods in a warehouse with no temperature controls.

Selling stolen merchandise online has become especially attractive to career criminals who can make as much as 30 cents to 40 cents on the dollar in a flea market or street corner. The rise of the Internet has enabled many to operate just about as anonymously, but at higher margins—up to 70 cents to 80 cents on the dollar. And that has raised the stakes on ORC, many believe.

“Dishonest people have quickly learned the Internet presents a low-risk way to sell stolen goods, primarily due to its anonymous nature,” testified Joseph LaRocca, vice president of loss prevention with the National Retail Federation. “They are learning about the limitless opportunities offered by auction sites. Criminals are even setting up their own sites and enabling ‘secure’ customer payments through tools offered by such com panies as PayPal and Yahoo! Checkout.”

Compounding the problem, and further establishing a link between poor economic conditions and a rise in retail crime, is that shoplifting during a recessionary period can be made easier by the retailer who has cut back on staffing requirements.

Meanwhile, federal law-makers are introducing new measures to combat ORC. Reps. Brad Ellsworth, D-Ind., and Jim Jordan, R-Ohio, in July introduced the Organized Retail Crime Act of 2008 (H.R. 6491), a bill that would amend the federal criminal code, making it illegal to engage in activities that further organized retail crime. Scott introduced the E-Fencing Enforcement Act of 2008 (H.R. 6713), which would place some of the burden of vetting online vendors on the auction sites that host them. And Sen. Richard Durbin, D-Ill., in August introduced the Combating Organized Retail Crime Act of 2008 (S. 3434), which helps to clarify existing law to give law enforcement the tools to prosecute ORC, as well as to require online and offline marketplaces to investigate suspicious sales and post basic disclosure requirements.

Such click-and-ship retailers as eBay oppose much of the proposed legislation, suggesting that many of the provisions would enable brick-and-mortar retailers to challenge legitimate online sellers by requiring those sellers to substantiate their source of goods.

Meanwhile, while much of the focus has been on the rise in shoplifting, that clearly has not been the only source for the recent increase in retail crime, which many attribute to the economy. While much of this evidence is more anecdotal, and many retailers declined to comment as to whether their stores had seen an upswing in criminal activity, several others openly acknowledged the problem. Bill Earnest, chief operating officer for Kopp Drug, which operates 10 stores throughout Pennsylvania, told Drug Store News that in his 35-year career, he has seen three armed robberies in his stores—all in the past three years. In each of the holdups, the only such incidents in Kopp Drug’s 83-year history, the robbers were after pharmaceuticals rather than money.

Another leading executive at a small Midwest drug chain noted his company had seen three robberies at the pharmacy counter in the last two months alone.

“People are going to do what they can to make money or to support their drug habit,” he said.

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