Insult, meet injury.

This story first appeared in the September 2, 2009 issue of WWD. Subscribe Today.


As if the recession weren’t bad enough, the weakened economy has led to a surge in retail theft by shoplifters, rogue employees and organized criminal enterprises. And their desperation in the downturn has caused these thieves to go for bigger hauls, which they often end up selling at flea markets or online, according to loss prevention consulting firm Jack L. Hayes International.

The company’s annual Retail Theft Survey showed that apprehensions of shoplifters and dishonest retail employees rose by 7.3 percent in 2008. The shift translated to 904,226 total apprehensions at the 22 retailers that participated in the review.

More markedly, the value of merchandise recovered by retailers in such cases rose at nearly three times the rate of apprehensions — 21.6 percent to a total of $182.9 million — and the average case value rose 13.4 percent to $202.38.

“We expected this,” said Mark Doyle, president of Jack L. Hayes International, which has conducted the survey for 21 years. Doyle said downturns typically produce growth in retail theft, but that the overall amount was slightly higher than expected.

The sample set measured more than 19,000 stores with more than $570 billion in revenues, collecting data on both shoplifters and dishonest employees. Shoplifter apprehensions at the retailers were up 7.7 percent in 2008, to 832,106, while the value of merchandise taken by shoplifters gained 30.2 percent to more than $113 million.

“They’re stealing more, so when you catch them, they have more on them,” Doyle told WWD. The rise in the overall value of recovered goods might also be attributed to loss prevention staffs focusing on larger cases, he added.

The other component of the study was employee theft. Apprehensions of workers increased 3 percent to 72,120, or about one in every 30. The value of goods recovered from employees climbed 9.9 percent to $69.8 million.

Employees generally stole more than average shoplifters by a wide margin, stealing an average of $969.14 per case versus $135.81 in the average shoplifting case.

The Hayes poll joins a mounting body of evidence that suggests consumer demand for low-cost goods as well as reductions in retail staff created a growth market for shoplifting and employee theft in 2008 and the early months of 2009.

In June, preliminary results from the National Retail Security Survey, a joint effort of the University of Florida and the National Retail Federation, showed that, in 2008, retailers surveyed lost $36.5 billion to theft, or 1.5 percent of overall sales. In 2007, the 95 retailers in the study lost $34.8 billion, or 1.4 percent of sales.

Employee theft and shoplifting accounted for $28.6 billion of the 2008 losses, according to the University of Florida study.

The trend doesn’t appear to have abated this calendar year.

A survey released in May by the Retail Industry Leaders Association, which measured the first four months of 2009, found 61 percent of retailers had seen an increase in amateur and opportunistic shoplifting, while 72 percent had seen an increase in organized retail crime.

 

“We saw it in apparel, general merchandise retailers and grocers; everyone was experiencing it,” said Brian Dodge, senior vice president of communications and state affairs at RILA. “Nobody said they saw a decline.”

The downturn’s layoffs and cutbacks put a strain on household budgets that opportunistic criminals were able to exploit on the secondary market.

“During a tough economy, people are looking for the best deal they can get,” Dodge said. “They’re trying to order large quantities to defer costs, so they’re looking at flea markets and online outlets. Thieves know that.”

He added criminals have also capitalized on that demand by selling to unscrupulous retailers.

Only a small percentage of the increase in retail theft can be blamed on lone customers shoplifting in order to get by, experts said. Generally the thieves are organized gangs out to resell the stolen merchandise.

“In the great majority of cases, these aren’t people that are stealing food for that night or inexpensive items,” said Joe LaRocca, senior asset protection advisor at the NRF. “They’re taking what they’ve traditionally stolen: electronics or luxury goods.”

LaRocca and others said one of the main drivers of the theft rate is an increase in activity by organized criminal groups that target retailers.

In June, the NRF reported the rate of retailers targeted specifically by organized criminal gangs rose to 92 percent as opposed to 84 percent in 2008.

One of the more flagrant examples of organized retail crime to overlap with the downturn were thefts attributed to Atlanta’s so-called “blue jean bandits.” The thieves, believed to be members of a local street gang, targeted more than 70 premium denim and sportswear retailers in the area for an estimated $1.5 million in merchandise between 2007 and mid-2009.

In July, police arrested 11 suspects in the case after they were found removing tags from $10,000 worth of stolen goods in the backyard of a southeast Atlanta home.

Another group of organized thieves has stolen millions of dollars in jewelry and other merchandise from J.C. Penney stores in Texas and Louisiana since June. The gang gained entry to the stores through the roof and lowered themselves by rope.

And it isn’t only in the U.S. Thieves hit the Graff store in London last month and made away with $65 million worth of jewelry in one of the biggest jewel heists ever in Britain, while a string of robberies by the so-called Pink Panther gang has affected jewelers and luxury goods stores in Paris and other European cities, including Harry Winston, Chopard and Cartier. The police estimate the gang has stolen luxury goods worth more than $200 million in over 100 robberies in 20 countries since 2003.

“The unfortunate part for the retail community is that we’ve found the people stealing are being more aggressive,” said the NRF’s LaRocca.

Less extreme thieves have been able to take advantage of retailers’ scaled-back staffs and less populous sales floors.

“You go into the stores and there’s just not as many people on the floor anymore,” said Doyle at Jack L. Hayes.

Doyle recommended that retailers who have had to make cuts could combat theft by keeping sightlines open, reducing the amount of high-volume merchandise kept on the sales floor and investing in antitheft technology.

“It all gets back to customer service because the shoplifter wants and needs privacy,” Doyle said. “We may not have as many loss prevention people on the floor, so we’re really relying on regular employees as [our] eyes and ears.”

Of course, as the economy improves retailers might have reason to hope for a slowdown in theft rates. But when it released its June survey, RILA also warned organized retail crime is less likely to decline.

“These dollars often funnel back into criminal enterprises to commit more crimes,” said Dodge at RILA. “It sustains them. This is their revenue generator.”

 

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