Most Recent Articles In Forecasts and Analysis
Latest Forecasts and Analysis Articles
- Study: B-t-s Shoppers Seek Value, Stick to Budget
- Slowed Consumer Spending a Drag on State Tax Revenue
- Hong Kong Losing Luster as Luxury Hub, HSBC Analyst Says
More Articles By
Along with the Santa photo ops, piped-in Christmas carols and glittery window displays, the holidays also bring more nefarious traditions — shoplifting and fraudulent returns.
This story first appeared in the December 21, 2012 issue of WWD. Subscribe Today.
Cyclical as these crimes tend to be, this year stores are seeing an upswing — in part due to the Internet making it easier for crooks to find new ways to steal, to get fake IDs that can later be used for on-the-spot credit cards and to unload the stolen goods online. Security guards, meanwhile, are being extra vigilant about looking out for groups of shoppers who disperse once they enter a store but maintain contact via cell phones. Other culprits have been known to send one group in to case a store and another group to actually steal, according to a Times Square security guard.
In recent weeks, suspected shoplifters have been caught in a spate of more serious incidents. In Houston earlier this month, an off-duty deputy who was working security at a Wal-Mart store shot and killed a suspected shoplifter who allegedly tried to run him down with a car. A Bridgeport, Conn., shoplifter was arrested Thursday after hitting several vehicles with his getaway car, including a police cruiser. In Santa Fe, N.M., local police are searching for two female shoplifters who tried to use a car to plow down a Kohl’s store manager after he chased them into the store’s parking lot.
Over Thanksgiving weekend, a suspected shoplifter died after a confrontation with Wal-Mart employees and a security guard in the parking lot of the chain’s Lithonia, Ga., store. In Cherry Hill, N.J., police are looking for three men who stole $20,000 worth of Burberry clothing from a Nordstrom store in a “smash-and-grab,” stealing from mannequins near the entrance. Lieutenant Sean Redmond said, “We have also seen more sophisticated operations, where they will use a mule who goes back and forth to a car to keep dumping things.”
Four women were arrested in Tucson, Ariz., last week for allegedly stealing more than $100,000 of cosmetics, jewelry and other merchandise from local stores, and then having others sell those items at the Tanque Verde Swap Meet. Police in Louisville earlier this month arrested a shoplifter whose cell phone reportedly had voice mail messages from individuals requesting specific items and brands.
Percentage increases in retail shrinkage this holiday season might exceed those for retail sales, according to a study conducted by the Centre for Retail Research for Checkpoint Systems. Retail losses from all sources — dishonest employees, customer theft and faulty supplier and distribution losses — are expected to amount to $8.9 billion during the period from mid-November through Christmas, a 4 percent increase over their level in 2011.
As a precaution, local police forces have increased patrolling retail neighborhoods. Shoppers and store employees are also being reminded to stay alert. Law enforcement agencies and groups, such as the Harvard Square Business Association, are being more proactive about using their Facebook pages, Web sites and e-mail lists to post photos and descriptions when shoplifters do strike.
There is good reason for concern. Last year, organized retail theft cost the U.S. $30 billion across all categories, according to the Federal Bureau of Investigation. More than 940,000 incidents were reported, with the average theft being $200, according to the FBI. Compounding the problem is the abundance of online avenues shoplifters have to unload their goods to presumably unsuspecting buyers. Often retailers don’t know the amount of goods they have lost until they take inventory, one security guard said. If that weren’t enough of a headache for frazzled sales associates and cashiers, they are also keeping an eye out for counterfeit money and fraudulent returns.
The National Retail Federation’s price tag on the cost of fraudulent holiday returns is larger than the volume of a number of the trade association’s members. Return fraud will cost U.S. retailers an estimated $2.88 billion this holiday season, or about 4.6 percent of the $62.71 billion in total merchandise returned during this time of year, according to the NRF’s 2012 Return Fraud Survey. Loss-prevention executives at 60 U.S.-based retail companies responded to the survey.
These same executives said that fraudulent returns account for $8.81 billion during the full year, about 3.3 percent of the total of $263.1 billion in merchandise returned.
Although still a relatively new practice, “e-receipts” are providing a new outlet for criminal activity, as nearly two in 10 executives — 19.3 percent — reported dealing with fraud of this type. Eighty-six percent of the retailers said they allow in-store returns of merchandise purchased online, and they estimate that 3.9 percent of those returns are fraudulent. “Many shoppers love the convenience and flexibility that digital receipts offer them, and, unfortunately, criminals are finding ways to manipulate them,” said Rich Mellor, vice president of loss prevention at NRF. “Return fraud in any form is a serious threat, and we know that retailers have made significant strides in their fight against retail crime and are continuing their efforts, working with law enforcement to address this multibillion-dollar problem.”
Perhaps the most brazen of fraudulent-return methods, return of stolen merchandise, is also the most frequent, reported by 96.5 percent of the retail respondents. Return of merchandise purchased with fraudulent or stolen tender was the second most frequent, reported by 84.2 percent of retailers, followed by employee-return fraud, or collusion with external sources (80.7 percent). Thieves also have plenty of first-person accounts online, shoplifting tips and even how-to-shoplift YouTube videos (as of Thursday there were 906 versions of the latter posted). In an online essay, one shoplifter recommended buying an item one day, going back to the same store the following day with the receipt from the previous day’s purchase and picking up the same style from the sales floor to return.
Earlier this week, Orlando, Fla., authorities arrested a team of five shoplifters who were allegedly doing something similar at such stores as Coach, Rockport, Nine West and American Eagle. One thief reportedly would go into a store and fill an empty bag with merchandise, and then one of his cohorts would return to the store with the stolen goods to get a store credit. The quintet wound up with thousands of dollars’ worth of store gift cards.
“Wardrobing” — the return of used but nondefective merchandise — affected nearly two-thirds of the stores, or 64.9 percent, according to the NRF’s survey. Returns using counterfeit receipts was reported by 45.6 percent of the stores.
Executives estimated that 8.8 percent of their sales resulted in returns, and that 3.4 percent of those returns were fraudulent in nature. During the holiday season, the return percentage jumps to 10.7 percent, 4.6 percent of which are suspected of being fraudulent. Loss-prevention officials believe that 1.9 percent of returns made with a receipt are fraudulent, versus 13.4 percent of returns made without a receipt. About one in six returns — 17.3 percent — is made without a receipt. In an attempt to prevent fraudulent returns, some chains are using The Retail Equation, a California company that has patented software that keeps track of consumers’ return history and whether they had a receipt.
As far as the season at hand, Terry Fox, a loss-prevention officer at Forever 21’s Times Square store, said the early start and the wider age range of attempted shoplifters might have been triggered by Hurricane Sandy. “A lot of people are distressed and down-and-out,” Fox said, noting that many even try to steal lip gloss and candy, which only cost a few dollars. With 10,000 visitors each day, the flagship has added two people to its four-person security team for the holiday season. As is the practice in other cities, police officers, who can be found on patrol or directing traffic in Times Square, will occasionally stroll through the store, especially during weekend hours.
Security personnel also have their eyes peeled for any shoppers who might be watching them, as well as anyone hanging around a little too long outside a store’s entrance.
Retailers and security officials could potentially get reinforcement from the Milan-based Almax, which sells $5,000 EyeSee mannequins equipped with surveillance cameras. Chief executive officer Max Cantanese said 30 international retailers have inquired about the mannequins, which were developed last year.
Shoppers trying to pass off counterfeit money also have stores taking a closer look at technology, such as ADT’s counterfeit money detectors, instead of marker pens. Fox noted that some consumers are trying to use fake $10 or $20 bills instead of larger denominations, which are more scrutinized in most stores. The U.S. Federal Reserve’s Web site notes “counterfeit-detection pens are not always accurate and may give you false results,” and has set up a new money public education Web site as an added safeguard.
“Often we don’t know until we cash out at the end of the day [that fake bills have been taken],” one Times Square security guard said.
Making shoplifters pay for their crime is usually not so cut-and-dried, either. Some stores are reluctant to press charges for any losses under $100. Others prefer to ban shoplifters from returning to their stores and inform them they will be arrested for trespassing if they do. Whatever the penalty, some still see shoplifting as part of doing business. “It’s constant. We might not have anything being stolen here, but across the street they’re getting hit,” said one Times Square security guard.