Shoplifting and Organized Retail Crime: Mall Rats

John Talamo of The Limited knows exactly how profitable shoplifting can be. He explains the fight against organized retail crime.

1 2 Page 2
Page 2 of 2

No. The whole phenomenon is just growing. If you type in Victoria's Secret into eBay, you'll probably get about 22,000 auctions on a daily basis. I'm not saying all that merchandise is stolen, but you know what, if you're selling 30 bras in different sizes at half the price, it's highly suspicious. It's not totally conclusive from a legal perspective. [But] it's like, why would I sell a $100 Express gift card on eBay for $70 [unless it were obtained illegally]? It would be like putting a $100 bill on eBay and taking $70 back. I just added a cybercrimes unit to my ORC team, two people to focus just on e-fencing and Internet crimes. We've had $100,000 cases where people are selling stuff online. These booster crews are stealing the products, they're bringing them to these online fences, and some of them have brick-and-mortar locations too.

Is most of the theft from the stores as opposed to diverting a whole truckload of goods?

Most of it is from the stores, although we do have cargo theft. We have one case that we're working now involving a fence that had 138 cartons of our Bath & Body Works lotions, and that came from cargo.

Do you think these crime rings are connected to an old-style mob, or are they a new thing?

These are more nontraditional organized crime groups. The old organized crime unit had a leader and a hierarchy under him. We don't see that here. These guys are very organized, but they operate more like a terrorist cell. If we apprehend a leader and a crew, it doesn't disrupt the operation of other leaders and their crews.

You've indicated that you're going to be doing more in the way of exercising your rights as victims. How are you changing your strategy?

We have a two-pronged legal strategy, criminal and civil. On the criminal side, we want to ensure that when we apprehend these professional criminals they receive the maximum penalty, and we put them out of business for as long as we can. On the civil side, if they have any assets, we're going to sue them for any damages they cause to our organization.

We're also weighing in at certain key points in the criminal justice process. For example, we want to monitor and attend bail hearings to influence the bail amounts. Lots of judges and prosecutors may not think that this person is part of a larger organized crime group. They may just think they're a petty shoplifter. They set the bail way too low, and then [the suspect] leaves. Like this guy we're chasing around the country now—he keeps making his bail. There have been cases where we've been able to influence those decisions, and they've made the bail really high. Then these guys sit in custody until their trial. It has a deterrent value. And you know what? If they're sitting in custody or they're incarcerated, they can't be stealing from our stores.

We also attend arraignment, sentencing and restitution hearings. In one case, at a sentencing hearing in Crescent City, Calif., the defendant was convicted of a felony and received a one-year sentence, and was also ordered to pay $132,000 in restitution, which is unheard of in a retail case. This was someone who was actually a booster and e-fencing ring. They were boosting the product themselves and selling it themselves online at eBay. One of the good things about Internet fencing is that it leaves an audit trail; that $132,000 was what they sold. At our retail, it was probably a quarter of a million dollar case. We also meet with prosecutors and try to make sure [professional criminals] do get prosecuted to the fullest extent of the law. Our people will testify and fill out impact statements. What we try to do is put a human face on a corporate victim.

There's also a theory that some of these ORC groups have a link to terrorism. They're not the terrorists committing the terrorist acts, but they're fund-raisers for terrorist groups. I attended a counterterrorism conference a few weeks ago, and they had four or five clear examples of where this was the case. A lot of the groups that we investigate don't fit that criteria, but there are some that might.

What did you think of Wal-Mart's announcement last summer that it won't prosecute people who steal less than $25 of merchandise?

I don't think there's anything wrong with the announcement or the policy. Every retailer has a similar policy. It only becomes newsworthy because it's Wal-Mart, the largest retailer in the world. We work in partnership with Wal-Mart; they have an outstanding program.

It struck me as one of those things where it's not a bad idea to have the policy, but you don't really want to publicize it.

No, I don't think so. What it tells me is they're focusing their efforts on organized retail crime, which is a greater problem than someone stealing a pack of gum.

Victoria's Secret bras are a big target, with more than $2 million of them reported stolen last year. What is it about Victoria's Secret bras?

It's a few things, and this is not an infomercial or a sales pitch. But clearly Victoria's Secret is the most dominant lingerie brand in the world. The second part is, the bras are easy to steal. You could fit a lot of bras at $48 apiece into a shopping bag, more than jeans or anything else.

How much do you change your strategy around new product lines being introduced in the stores?

The greatest risk we have is on a fragrance launch. Every time we have a fragrance launch, we have a full ORC launch strategy behind it. We track the product from the moment it's produced, to the distribution facilities, to our stores. Our field people will do inspections of the product as it comes in, do carton and piece counts to make sure it all gets there. Once the product starts to be produced and reaches its finished-goods stage, we start to monitor the Internet for sales of it. Every launch, we do find the product for sale before it's available to our customers.

On our last launch, we were able to make an arrest of a guy who was fencing the ­fragrance online.

What kind of ROI is your management looking for? Do they expect you to recover as much value of goods as you're spending, or do they see it in the bigger picture?

They see it in the bigger picture. To figure out our ROI, we look at it a few ways. One, how much product have we recovered? Last year it was about $1.5 million retail value. We also look at what we call—and this is a new method to ORC, which is a relatively new discipline within the loss prevention function—our out-of-business value.

We've assessed a value for every 30 days one of these professional criminals spends incarcerated. I would say in the last 18 months, our ORC teams' investigations have resulted in these criminals spending 618 months incarcerated, which equals 51.5 years, which is worth to us almost $2 million in out-of-business value. You add that to the $1.5 million of Limited Brands products, and now you're ­looking at $3.5 million ROI.

The other piece of it is the soft side of the ROI, but we still have to figure out a way of measuring this. If you want to come into Victoria's Secret, but someone came through—and we just had this yesterday—and stole $5,000 worth of merchandise, and now it's not available for sale, as a customer, what does that do to the experience? Do you buy something else, or do you go somewhere else?

Senior Editor Sarah D. Scalet can be reached at sscalet@cxo.com.

Copyright © 2007 IDG Communications, Inc.

1 2 Page 2
Page 2 of 2
Make your voice heard. Share your experience in CSO's Security Priorities Study.