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The inventory of Levi's jeans at Mervyns stores in the Los Angeles area was mysteriously shrinking last year, and not because of hot-rinse cycles. After setting up surveillance cameras, the retailer's loss-prevention department realized why.
Organized gangs of thieves were swiping the pants from shelves, hustling them to waiting cars and whisking them to a couple of homes in the San Fernando Valley. The hot jeans were then sold in Los Angeles' garment district.
In the end, 30 people were arrested for what Mervyns estimates was more than $1 million in losses.
Shoplifting has gone big-time. Groups of thieves armed with store floor plans and foil-lined bags to evade security sensors are making off with vast quantities of merchandise.
Selecting items from a ringleader's list -- electronics, razor blades and baby food are among favored items -- a savvy "booster" can haul off $5,000 to $10,000 of goods in a single day, according to the FBI. Such theft has grown steadily in recent years, merchants and law-enforcement officials say.
"We have witnessed a steady increase in organized retail crime," says David Hill, a police detective in Montgomery County, Md. "These groups operate with the training of a paramilitary."
In response, retailers are lobbying to strengthen laws, which they say are insufficient to combat the crime.
At an Oct. 25 hearing, National Retail Federation members urged House subcommittee members to make organized shoplifting a federal felony.
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Selling stolen goods online
The problem has also created a rift between brick-and-mortar merchants and online auction sites, which traditional vendors say have facilitated growth of the crime."The Internet has allowed a wide distribution of stolen products, whereas before, the fencing of stolen goods was limited to pawnshops and local areas," says Brad Brekke, the vice president for asset protection at Target (TGT, news, msgs).
In October 2005, the chain uncovered a ring in Houston involving five people who sold stolen Target merchandise online. According to records from the criminal investigation, the ring had unloaded $258,000 worth of goods, including electric razors, cordless phones, digital cameras and shower heads. Crooks make more selling on the Web than they do out of the back of their cars, police Detective Hill notes.
The National Retail Federation, whose members include Target, Wal-Mart Stores (WMT, news, msgs) and Safeway (SWY, news, msgs), has been meeting with U.S. Rep. Robert C. Scott, D-Va., to discuss ways to clamp down on so-called e-fencing -- for example, by making vendors disclose serial numbers of items they are selling.
Web auctioneers object. "We see this as an overreach by big, established retailers," says Hani Durzy, a spokesman for eBay (EBAY, news, msgs).
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To catch a thiefSecurity personnel at some of the nation's biggest retailers are collaborating with police to combat ever-more-brazen shoplifting schemes.
One of the group's objectives is to press for stiffer penalties. Gang members are often careful to steal little enough in a single strike to avoid serious charges if they are caught.
"At any one time, these individuals won't have a huge amount of goods, but they will be making thousands of trips. So if they are caught, what should be a higher charge is bumped down to a petty larceny, which is the legal equivalent of a traffic ticket," Los Angeles police Detective Dan Nee says.
Local law enforcers are also handicapped because these thieves often operate across state lines.
Mervyns, in the meantime, reports it has ramped up its efforts to thwart the rings. Says Mike Kennan, the chain's director of loss prevention: "The magnitude of these thefts would amaze a lot of people."
This article was reported and written by Jessica Silver-Greenberg for BusinessWeek.
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