Lawmakers heed retailers’ calls to fight organized theft

The epidemic of shoplifting, smash-and-grab robberies and “flash robs” at businesses across the U.S. has become so bad that it has caught the attention of leaders in Washington.

One of America’s largest retailers, Target, startled investors with a statistic in its most recent earnings call: Its stores were on pace to lose up to $600 million by the end of the fiscal year because of “shrinkage” or lost inventory.

The main culprit is a huge spike in organized theft, and Target is hardly alone. One retail coalition described organized theft as a $70 billion-per-year headache for the industry.

Congress is scrambling to fight back.

President Biden recently signed a spending bill that included the INFORM Consumers Act, which forces Amazon and other online marketplaces to gather contact information, tax IDs and other records from high-volume sellers. The hope is to inject enough sunlight into the selling process to ensure that online markets do not unwittingly facilitate gangs that fence stolen goods.

“A lot of street crime is actually driven by organized crime,” Sen. Bill Cassidy, Louisiana Republican and chief co-sponsor of the bill, told The Washington Times. “If you go after these high-volume online sales of stolen goods, you would do something positive as regards to crime in general.”

Retail lobbyists are pushing for more, including a bill that would prod the federal government to team with state and local authorities in identifying and disrupting criminal rings that target stores and shuffle goods around the country.

Organized retail theft is “interstate, not just intrastate. It’s really important for federal law enforcement to work together and share information,” said Michael Hanson, senior executive vice president of public affairs at the Retail Industry Leaders Association.

Evening newscasts are rife with shocking footage of teenagers or others ransacking luxury stores or “flash robs,” in which groups of thieves overwhelm store security and stuff products into their pockets before running off. Wawa said last year that it was forced to close two stores in the heart of Philadelphia because of security concerns after thieves repeatedly ransacked shelves.

A steady drip of quieter, organized thefts from shelves is taking a big bite out of retailers.

Mr. Hanson said organized fencers enlist people — often those who are down on their luck and easy prey for gangs — to go into stores and slip items into their bags or clothing. The thieves get a cut of the proceeds once they turn over the products to the gangs, which fence the goods online.

In the spring, California Attorney General Rob Bonta charged nine people with operating organized retail theft in the state. Authorities recovered $62,000 in cash and $135,000 in stolen merchandise from major retailers such as Macy’s, Columbia Sportswear, Abercrombie & Fitch, J.C. Penney and Lululemon. Prosecutors said the thieves transported hundreds of thousands of dollars worth of goods, held the items and shipped them internationally.

Retail lobbyists say organized theft is a growing problem that is fed by the ease of setting up fly-by-night operations online to move goods and then shutting down vendor accounts without accountability from buyers and online marketplaces that facilitate the sales.

Mr. Hanson said retailers noticed a rise in organized theft during the COVID-19 pandemic as many consumers relied on the internet to shop.

Beyond selling stolen goods, shadowy vendors traffic in counterfeit toys and products that can be dangerous, such as knockoff hovercraft that burst into flames.

“There was documentation of curtains catching on fire and kids ending up in burn units,” Mr. Cassidy said.

The INFORM Consumers Act, which Mr. Cassidy pushed with Sen. Richard J. Durbin, Illinois Democrat, attempts to rectify the issue by requiring online marketplaces to authenticate the government ID, tax ID, bank account information and contact information of high-volume sellers, defined as vendors who make 200 or more sales in 12 months amounting to $5,000 or more.

Marketplaces must provide vendors’ contact information and a hotline where consumers can report suspicious activity.

Online markets that fail to collect the information can be fined by the Federal Trade Commission when the law is fully implemented in late June.

Another effort, the Combating Organized Retail Crime Act, is championed by lawmakers in both parties but is still pending.

It would create a center to combat organized retail crime at the Department of Homeland Security to increase federal coordination with state and local law enforcement agencies so they can track and recover goods and disrupt and prosecute illicit gangs that drive retail theft.

Meanwhile, retailers are tabulating their losses.

Target Chief Financial Officer Michael Fiddelke told investors in November that incremental shrinkage, driven by theft, had reduced margins by $400 million compared with last year and that losses would grow to $600 million for the full year.

“We know we’re not alone across retail in seeing a trend that I think has gotten increasingly worse over the last 12 to 18 months,” he said on the earnings call. “So we’re taking the right actions in our stores to help curb that trend where we can, but that becomes an increasing headwind on our business and we know the business of others.”

The items most targeted at Home Depot stores include wire and wiring devices, power tools and smart-home products.

“Organized retail crime is an ongoing issue, and it has been on the rise over the last several years for many retailers,” said Evelyn J. Fornes, a senior manager for communication and advocacy at Home Depot. “We have a multitude of initiatives in place to mitigate the issue, including human and technology resources to make theft in our stores more difficult, close partnerships with law enforcement and significant efforts working with federal and state task forces to fight this problem.”

Ms. Fornes called the INFORM Consumers Act a “great first step” but, like executives at other retailers, she wants to see how the law is enacted, the creation of federal, state and local task forces to combat the problem, and better training for law enforcement and prosecutors.

Other companies say the situation has improved over the past year. Walgreens said its shrinkage stabilized from 3.5% in 2021 to 2.5% in its most recent quarter.

Walgreens finance chief James Kehoe told investors on an earnings call this month that the company might have “cried too much last year” about the problem.

“We’re getting mixed messages from the retailers,” Mr. Cassidy said. “We’ll have to see how [the INFORM Consumers Act] is implemented and see if we can crack down on the fencing aspect.”

In the meantime, stores are doing what they can to reduce theft.

Home improvement stores are including Bluetooth technology in frequently stolen items such as drills and saws so people cannot walk out of the store without tripping an alarm.

Other retailers have adopted carts that seize up at store exits if they are loaded with stolen goods. Many stores are putting more items behind plexiglass.

“That’s not what they want to do,” Mr. Hanson said, “but it’s hard to sell goods when they are continually stolen.”

Correction: An article about organized retail theft had an incomplete title for Michael Hanson, who is quoted. He is the senior executive vice president of public affairs at the Retail Industry Leaders Association.