As vice president of loss prevention at Limited Brands in Columbus, Ohio, Talamo has made it his mission to fight organized retail crime—groups of professional shoplifters who can steal $25,000 worth of merchandise from a mall in one fell swoop, then turn around and sell the loot to a fencing operation that offers it to the public at half the retail price. According to one Limited informant, a good "boosting" operation, as these crews of shoplifters are called, can net more than $40,000 in one day—"not bad for a day's worth of shopping," Talamo quips.
No wonder organized retail crime (called ORC here) is a booming business. In the last year, Victoria's Secret—Limited's most popular target—has had more than $2.7 million worth of bras reported stolen, a more than 80 percent increase over the previous year. But Talamo, who is also cochair of the Joint Organized Retail Crime Task Force established by the National Retail Federation, is working to make ORC decidedly less profitable. He does this both by leading an aggressive team of investigators and by working to educate law enforcement, prosecutors and judges about this type of crime.
"Limited Brands and John specifically have really helped put organized retail crime on the map over the last three or four years," says Joseph LaRocca, vice president of loss prevention at the National Retail Federation, a trade group in Washington, D.C. "No case is a good case. A case means that someone got away with something. But Limited has been able to really show the industry what good investigative skills and good collaboration with law enforcement can produce."
Senior Editor Sarah D. Scalet recently spoke to Talamo about how ORC works, how Limited Brands is changing its strategy to focus on fencing operations and victims' rights, and why thieves are so attracted to Victoria's Secret bras.
CSO: How organized is organized retail crime these days?
John Talamo: It's a very big business. Every year the University of Florida conducts a security survey, and in the last results, shrink as a whole was $37.4 billion total. Thirty-three percent of that was external theft, the majority of which is organized retail crime theft. So ORC conservatively is a $12.3 billion problem, but I believe that number is understated because it doesn't include credit card fraud, counterfeiting and receipt fraud. ORC is a bigger problem than auto theft, which is $7.6 billion; burglary, which is $3.5 billion; and larceny, which is $5.15 billion (according to the FBI's uniform crime report of 2004). In 2006, President Bush signed the first-ever organized retail crime legislation, H.R. 3402, which establishes an FBI task force on ORC and also the creation of a national database. The mere fact that we now have federal legislation that crosses over the boundaries of state lines will be a big help. But this [fight] is just in its infancy right now.
What constitutes a big boosting operation?
In a normal crew, you'll have a leader, who negotiates the deal with the fence—and that's important, because after they steal the product they need to be able to move it quickly to the fence. You'll also have someone to drive the vehicle, which is usually a van; in addition to being the getaway car, it's really the storage locker. Then you have someone who's called the distracter, who will distract the sales associates. If the group wants to steal bras from the front of the store, the distracter may say, "I have a question about your new fragrance," and take the salesperson off to the fragrance area. They may also have a lookout—someone who watches to see who's coming, and who may have a code for the group if they see something. They may have a booster, the person who actually steals the product, and a mule, who carries the product out to the van. A good crew also has someone who does countersurveillance, now that groups like us, Target, Wal-Mart, TJX and Gap have our own ORC departments. We're watching them; they're watching us. If they notice loss prevention professionals, they'll move on.
Here's how it works. You know how people hold merchandise up in the air to look at it? When the booster is ready to steal, maybe the lookout holds up a top, so that when employees look over, all they'll see is what looks like a customer looking at a piece of product. What they don't see is the booster on their knees on the floor taking the product out of the drawers and putting it into the booster bag, which is usually lined with aluminum foil or duct tape that helps defeat the [electronic article surveillance system]. Then you'll have a mule who'll pick the bag up from inside the store and carry it out to the van. They'll put the goods in there, and then they'll repeat the process. It's a repeatable business model—when something works, you keep using it.
They'll also change their appearance. They'll change their tops. They'll put on sunglasses or take off sunglasses. We've seen some use wigs. You wouldn't believe some of these pictures. You'll see someone who has her hair up and no makeup, and now she has her hair down and makeup, and she looks like almost a different person.
So you have to catch all of them in the van, not just the mule with the bag.
That's our goal. We have one case we're working on where our team has apprehended an individual in five different states. He has warrants out for his arrest in five different states. This individual will have two of everything—two vans, two boosters. In Rhode Island, we apprehended his crew but only got one van. The other van got away. When two boosters go in opposite directions, depending on your manpower you can only go after one of them.
Our strategy is based on data analysis and intelligence. Once we've identified a location that has been frequented by these professional boosters, when our team gets to the mall, our ORC manager will contact mall security and say, "We're going to be here today working the mall." They've already established a relationship with security and the police department in these areas. Then they'll start conducting surveillance. Someone will be in the parking lot looking for somebody coming back and forth to a van, dropping product. If we see that, we'll pick up surveillance of that person back to the mall. Also they'll do surveillance of our stores. We usually have four stores in a mall—Victoria's Secret, Express, Limited, Bath & Body Works, sometimes White Barn Candle Company. Once they identify a crew that starts to steal from our stores, what they do is continue the surveillance. They don't apprehend the mule. The team leader will call our local police contact and say, "OK, we have identified a professional crew stealing from our stores. We've observed them stealing the product; we've followed them out to the vehicle. This is what the vehicle looks like, and this is the plate number." They'll continue the surveillance for as long as the crew works the mall.
How do you decide what malls you're going to do surveillance at, and when?
We have an incident reporting package, and I've created an organized retail crime section in it. In our company, we consider any theft where $500 of merchandise is stolen an ORC theft. That gets called in and goes into our database. We collect all the necessary data. What day of the week was it? Where did it happen? Mall, brand, date, time and method of operation. We have a few years' worth of data. We know that we usually don't experience any ORC thefts prior to noon or 1 p.m. Usually Mondays and Tuesdays are very quiet. Wednesday starts to pick up. It builds Thursday and Friday, and then peaks on Saturday.
Because the malls are more crowded?
Yes. When the mall is crowded, it's easy to blend in and take advantage of a busy store team. Sunday is also busy, but it declines; sometimes Sunday is a travel day for the crews. From that data analysis, we know which stores are targeted most frequently, what time they're targeted.
We continue to focus on data analysis, trying to come up with that elusive predictive model. What we're trying to work at now is if you're in New Jersey and someone steals from Woodbridge, I'd like to know that 70 percent of the time they're going to Menlo Park. If we have ORC staff in the area, we can send them there, apprehend the crew and recover the products stolen from Woodbridge. If we don't have any ORC team members in the area, we could call the mall and let our stores know to be on the lookout. We have over 3,800 stores, and we only have 30 people on the ORC team, so we have to be smart at deploying our resources.
Is most of your effort focused on the thefts versus shutting down the fencing operations?
We spend a lot of time on the fences also. They all link together. One of the things we're experimenting with is, in the New York City area, we've actually created what we call a fence operations team. But all the ORC teams work the malls and work the fences. We try to give fences a priority, because if we shut down a fence then the crews have no one to sell to.
Can you describe a big fencing operation?
There are three kinds of fences that we work. The first is fences that are open to the public. These are street-front stores, and anyone could walk inside. Second, there are fences that are completely underground, where you'll need either an invitation or a referral to get in. They'll be in the basement of someone's home, or we've seen many times the whole home is a fence.
Would a small shop owner go to one of these places, or is the buyer actually going to use the product?
In these types of locations, the clientele is mainly the local population that's buying retail product to use themselves or give as gifts. These are people who probably wouldn't pay $48 for a bra at Victoria's Secret because they can't afford it, but they'll pay half the price for it. But we also see people coming in from other countries and buying suitcases full of product to take back to resell. I was involved in a fence operation where a woman had three suitcases stacked inside each other and $7,000 in cash, so she was planning on bringing the stuff overseas to sell.
People must know they're buying something that's been stolen.
I would think so. Many times these fence operators are very popular in the community, because they provide a service. Even though buyers may think it's stolen, they're not going to turn in someone who's providing a service in their community.
The third kind of fencing is e-fencing on the Internet. If you think about the old days, if I was a crook selling stolen jeans out of the back of my car, maybe I could sell 10, 20, 30 pairs of jeans a week. But if I put it on eBay, I have access to a global consumer. The sky is the limit. Maybe instead of selling 30 pairs of jeans a week I'm selling 300. Well, where am I getting those jeans? It's a supply and demand issue. The more I can sell, the more they'll steal. [For more on e-fencing, see "Auction Blocks,"]
The fences are getting smarter. When I first started doing fence investigations, in the early 1990s, fences would keep all their product in their fence location. Then, your only risk was getting burglarized or held up by a rival gang or business; they never had to worry about being arrested. Now with all the attention around ORC, they're dividing up their inventory. Big fences have places where they do storage and processing.
We just shut down a big one in Queens, N.Y. It was called Corona Fashions, and it was open to the public in an area where there's a lot of fence activity. This particular place had a couple thousand units from all our brands. They had Express jeans, Victoria's Secret bras and panties, and some Victoria's Secret fragrance. We started to do surveillance of the location. We saw the owner of the place open in the morning, and at the end of the day we followed him to another location. At this other location, late in the evening booster crews would drive up with garbage bags filled with product. The store owner would process the product and separate it by brand, and then bring it over to the store as needed. We worked in close partnership with the New York Police Department's organized theft task force on this investigation, and when search warrants were obtained we were able to see the inner workings of the facility. That place had about $1 million worth of product when it was raided, of all different brands.
If you think about it, what makes all this worthwhile? Thieves have turned retail theft into a lucrative business. We have intelligence from a crew leader turned informant, and he says that his crew—he had a big crew, and they were good—would target as many as seven malls in a day. They'd steal about $25,000 per mall. So you figure that's $175,000 in a day, and they'd unload it for about 25 percent of ticketed value. So that's $43,750. Not bad for a day's worth of shopping.
What percentage do you think is going through online channels like eBay or Craigslist?
It's escalating.
Does that mean other areas are decreasing?