The face of retail theft is changing. What is causing the change? The growing Internet marketplace. Mike Keenan, director of loss prevention for Mervyns Department Stores, discusses the issue. (For more of Keenan’s insights, read his article on www.lpinformation.com.)

Retail theft is becoming more serious and more damaging to retailers. Can you explain what is happening?

The Internet marketplace has been expanding at a rate that no one truly understands. The laws and law enforcement are having difficulty in keeping up with the speed of technology. Very few legal controls exist in the Internet marketplace. Risk of detection is a major component in deterring theft, [and] there is almost no risk of detection when selling stolen merchandise in the Internet marketplace.

How has the relative ease of selling stolen goods via the Internet caused retail theft to increase?
The purchasing of discounted stolen merchandise via online marketplaces creates demand. This motivates people to steal to fill the demand, [and] I believe that this demand is creating a very large number of “new” thieves who use the Internet marketplace to sell the merchandise they steal. These new thieves are shifting the balance of “professional” shoplifters versus “casual/opportunistic” shoplifters, in the process creating more people who steal as professionals to make money illegitimately.

How does this impact the retail economy?
If we use $100 million of theft by professional shoplifters as an example, the victimized retailers had $100 million in shortage and a corresponding $100 million of lost sales. Since the retailers did not make any sales, there was no sales tax collected. This impacts local, state and federal funding.

But it doesn’t stop there. The Internet marketplace customers bought the $100 million worth of merchandise. Because they purchased what they needed, these customers did not go shopping … [and] no demand was created. This causes the retailer to reduce its supply, which negatively impacts profitability. This results in cost reductions to offset low sales and puts people in the retail sector out of work.

Now they are looking to buy at the lowest possible prices because they aren’t working. In addition, the weak economy we are currently experiencing adds to people’s buying at the best prices available. All of this leads to increased purchasing of stolen merchandise in the Internet marketplace.

How are “professional shoplifters” exploiting the Internet?
Prior to the Internet marketplace, most fences sold their product locally in physical locations that people had to travel to. These stores were rarely located in the nicer parts of town; their customers would be people who knew that they were getting a “deal” but didn’t ask questions. Most “good” people would not go to a fence.

The Internet has allowed for the unrestricted expansion of anonymous Internet-based marketplaces for stolen and fraudulently obtained goods. In the Internet marketplace, the buyer and seller are faceless. A seller on the Internet does not have to prove ownership of what they are selling and the buyer doesn’t know if something has been stolen or not. This is where the major change is occurring. In my opinion, “honest” people are buying stolen merchandise, which they never would have done before.

What can be done about this issue?
If people are not afraid of being caught or arrested for selling stolen merchandise, there is no deterrent. The selling of stolen merchandise on the Internet will continue because it is financially rewarding with very little risk. This is a formula that will result in increasing theft until there are laws enacted that will enable law enforcement to identify and arrest the people who are selling the stolen merchandise.

There are many legislative efforts being made throughout the country and … we need to get them into place as quickly as possible. And today’s retailer must recognize this threat and be more aggressive than ever before in addressing internal and external theft.