Every year thieves — many of them employees — walk out of stores with apparel, jewelry and other merchandise estimated to be worth more than $30 billion, taking with them a hefty chunk of the industry's profits.
Often, the money made from reselling the goods online, to fences or returning them for rebates at the store helps fund criminal enterprises that prey on the ultimate of soft targets: retailers that aim to draw as many people as possible through their doors.
"It all comes to be another tax on the consumer," said Dan Doyle, vice president of loss prevention and human resources at department store chain Bealls Inc. "They end up footing the bill on all this. As a consumer who's concerned about higher prices, they should be mad as hell about the fact that they're out there stealing this stuff and selling it."
Far removed from the shoplifting commonly attributed to adolescents who are looking for a thrill or a freebie, the gangs targeting stores are sophisticated enterprises.
"This is their job, they have people who work for them and potentially people who work for them," said Doyle, explaining the multilayered structure of the syndicate. "They either take orders or they go out and steal stuff knowing they have a market to sell it — the Internet sites that allow people to sell merchandise somewhat anonymously. It isn't like you have to walk into a back alley where you're exposed."
Streetwear, denim, swimsuits, junior fashions and jewelry are all hot items to swipe, he said.
The gangs have a new, formidable foe: the Federal Bureau of Investigation, which has focused more attention on organized crime as of late. In conjunction with retail trade groups, the FBI helped establish an online tracking system to help stores protect themselves and aid law enforcement in capturing and prosecuting criminals.
The organized groups come in all shapes and sizes, from gangs such as MS-13, a violent street gang with Latin American roots, to organizations that use everyone from illegal immigrants to all-American types. Bealls was even hit by a group of strippers who were stealing from stores around Florida and selling the goods to a fence."Typically, the organizations that we look at or law enforcement looks at are dozens of people working together," said Brian Nadeau, who until last month was a supervisory special agent in the FBI's major theft unit before transferring to the bureau's inspection management unit.
The groups have "boosters" who steal the product, as well as fences who move the goods, people who determine what stores will be hit and scouts who get the lay of the land beforehand. Often there are drivers behind the wheel of a getaway car.
Boosters will go into stores, distract the salespeople, perhaps by setting a small fire in the back of the store or spilling something, grab thousands of dollars worth of merchandise and sneak out, only to go directly to another store, perhaps in another state along a major highway.
To combat the gangs, Nadeau has preached collaboration, even among retail rivals.
Hence the Law Enforcement Retail Partnership Network, or LERPnet, an online database that is just gearing up and connects retailers with each other and law enforcement. Companies from Bealls and Mervyns to Saks Fifth Avenue, J.C. Penney and Wal-Mart are part of the program.
Stores using the network can post descriptions and vital statistics on suspected thieves and get alerts when there has been criminal activity nearby. The authorities will also soon be able to look into the database to hopefully connect the dots to catch bad guys.
"Loss prevention people now have the ability to share this information with each other almost real-time, as it's happening," said Nadeau. "This will give the ability for a retailer in one state to quickly know that the same problem happened 45 minutes or an hour ago in another state and then notify law enforcement."
Being part of the network frees loss prevention executives from having to get approval from their superiors to share notes with their competitors.
"Law enforcement has not, in the past, been focusing heavily on organized retail theft," said Nadeau, noting the concentration was instead on areas such as drugs.
Shoplifting gangs targeting stores are getting more attention now, in part because of the FBI's new program.The Web-based approach has helped Mervyns capture professional shoplifters.
"You want to be able to heighten your team's awareness of who's out there," said Mike Keenan, director of loss prevention at Mervyns. "The value to the industry is if one loss prevention team takes out a group, that benefits all the other retailers, too. The more retailers that participate, the more valuable the system is."
If LERPnet helps authorities tie one robbery to another, a larger case can be brought against the professional criminal who, with just a slap on the wrist, might go undeterred.
"If they're back out and released, they just start out again," said Keenan. "As long as they're in jail, they're not stealing from us."
Despite growing awareness on the part of retailers, there is much room for improvement industrywide.
"Many retailers don't have vast in-store loss prevention resources," said Read Hayes, director of the Loss Prevention Research Council and co-director of the University of Florida's loss prevention research team. "They're not catching bad guys — taking prisoners, in other words."
While some large chains do have a strong loss-prevention apparatus, Hayes said most retailers are not set up to deal with organized gangs.
"They probably do not have a real handle on the scope or dynamics, and they don't have the infrastructure or resources to attack it," he said, noting a good place to start for stores is to understand how much they are impacted by theft through surveillance and research.
Though often not connected to an organized gang, employee theft is also a big drain on stores. "There's clearly an employee component [of theft] throughout the supply chain, not just in stores," said Hayes, noting retailers estimate that employee theft accounts for 30 to 40 percent of their inventory shrinkage.
The excitement and buzz that brands create around their products attract not only shoppers, but thieves who have a great incentive to steal.
Stolen goods fetch about 30 cents on the dollar on the street, 70 cents on the dollar if they're sold online or, for the more enterprising, 100 percent plus tax if they're returned to the store, said Joseph LaRocca, the National Retail Federation's vice president for loss prevention."They're going from store to store in the mall, they're loading up shopping bags, they're going from mall to mall and stealing up to $10,000 a day," said LaRocca. "These groups are very sophisticated and they, for the most part, slide in and out of stores without ever being noticed."
In addition to sophisticated surveillance of stores and malls, boosters come prepared with plans to distract employees, or tools such as jackets or "booster bags" lined with tin foil to confound antitheft sensors.
"There are shopping lists that these groups will create," said LaRocca. "The things that the goods have in common is they're highly desirable, they're easily resold in person or over the Internet."
The ease of selling goods online is a sore spot for stores.
"EBay has done very little to assist retailers' investigations, stating that their platform is merely a way to connect buyers and sellers," claimed LaRocca. "Retailers have repeatedly asked for assistance in the identification of sellers who off-load their brand goods or items believed to be stolen or fraudulently obtained, and there has been little to no response."
The online auction site did not return calls for comment.
Security experts said they could virtually stop theft tomorrow, but acknowledge that increasingly draconian protections would make customers feel unwelcome in the stores.
One antidote to being ripped off might lie within stores' grasp, though.
"If we just keep doing what we're already supposed to be doing, it's going to control organized crime — good customer service," said Chris McGoey, a Los Angeles-based security consultant. "Having people on the floor it has been proven time and time again, increases sales and reduces losses. The store looks much better, it's in stock, everything works, everyone's happy. The only downside is that you're spending some money up front to get the benefits later of increased sales and reduced inventory shrinkage."
@tradesy is turning the concept of a showroom upside down with its new space in Santa Monica. Here, the company plans to hold events, art exhibits and a showcase rare fashion pieces like this Louis Vuitton boxing set. Get all the details on Tradesy’s first showroom on WWD.com. #wwdnews
Spotted last night at the @erdem x @hm launch event: Kate Bosworth, Rashida Jones, Kirsten Dunst and Selma Blair. The party, which took place in LA, also marked the opening of their pop-up shop. “I was interested in creating a collection that wasn’t in any way disposable. It was about pieces you’d create and keep forever, things that have a permanence to it,” designer Erdem Moralioglu said. #wwdeye (📷: Katie Jones)
Renee Zellweger in yellow in 2001 and again in 2017. Chosen as one of the 12 @pantone Leading Spring Colors (and dubbed “Meadowlark”), it only makes sense that the bright hue stands the test of time and is making a resurgence this season, seen already on stars like @blakelively and @gigihadid. (📷: Donato Sardello & @rexfeatures) #wwdfashion #tbt
Dior’s 70th anniversary celebration continues with a new exhibition at the Royal Ontario Museum in Toronto. “Christian Dior,” which is scheduled to run through March 18, takes a look at the founders tenure from 1947 to 1057 and feature 40 designs. Pictured here is an evening gown from the Ailée, fall 1948-49 haute couture collection. #wwdfashion (📷: Brian Boyle)
As one of the most recognizable models in the world, Christy Turlington Burns has an insider’s view of the fashion industry and the allegations of sexual harassment swirling around it. “I can say that harassment and mistreatment have always been widely known and tolerated in the industry. The industry is surrounded by predators who thrive on the constant rejection and loneliness so many of us have experiences at some point in our careers,” Turlington told WWD, along with her suggestions for how the modeling world should protect younger women and men. Read more on WWD.com. Link in bio. (📷: Tony Palmieri) #wwdnews
@asics America has tapped a new brand ambassador: famed DJ/record producer @steveaoki. This initiative is intended to set the tone for the new brand identity and philosophy and will include partnerships with influencers and in-store and off-line activations that will continue into next year. This is Asics’ most significant marketing effort in two decades, and is expected to attract younger consumers to the brand. #wwdfashion
24-year-old Jean Prounis is redefining the rules of jewelry. Formerly a studio assistant to Jemima Kirke and a design apprentice at Ghuran, she focuses on handcrafted subtleties and ancient goldsmithing techniques. “There was a really sterile feel in the environment and I wanted to have jewelry with character that shapes how you wear it everyday,” Prounis said. Each piece is hand made in New York, either by Prounis or three other jewelers in the district. #wwdfashion
“These collections continue to build on that vision, empowering differently abled adults to express themselves through fashion,” said @tommyhilfiger of his line of adaptive apparel, which launches today. The line consists of 37 men’s and 34 women’s styles based upon the pieces from the spring Tommy Hilfiger sportswear collection. #wwdnews