A Bid for Cooperation

Retail loss prevention professionals have been fighting on two fronts for much of the last decade — with store thieves, and with online auction sites that made selling purloined goods easier.

Ken Amos, divisional vice president of loss prevention for Walgreens, recalls a meeting held several years ago to discuss how LP professionals could work with online auction giant eBay. “It was a very contentious environment, very confrontational,” he says. “Neither side was willing to compromise.”

Signs now point to an encouraging shift in the relationship between eBay and the retail community. Paul Jones, a former LP executive with Limited Brands and Federated Department Stores, took the helm of eBay’s LP efforts a little more than a year ago. Up to that point, Amos says, eBay would cooperate with law enforcement, “but not with loss prevention at retailers.

“Now it’s more of a three-legged stool between retail loss prevention, eBay’s fraud department and law enforcement,” he says.

This change in approach – as well as an existing working relationship between Jones and Rhett Asher, the National Retail Federation’s vice president of loss prevention — was critical to the development of a formal partnership between NRF and eBay to fight organized retail crime (ORC). NRF and eBay will work with the FBI to identify crime rings that steal merchandise in bulk; regular meetings between eBay and NRF’s retail members will highlight best practices and take steps to eradicate ORC; and technology like NRF’s LERPnet and eBay’s PROACT will identify and track suspicious activity.

The NRF-eBay alliance is already paying off. Walgreens alone has taken part in two busts accounting for hundreds of thousands of dollars in stolen material. In one case, a man was arrested for shoplifting diet aids from drug stores and big-box retailers; local law enforcement notified Walgreens, which in turn contacted eBay. The online auction site sifted through its records and presented evidence that helped secure an admission to stealing more than $1.5 million in diet supplements over a two-year period. With the help of eBay and the U.S. Postal Service, the shoplifter was convicted on federal charges.

Walgreens is not the only company benefiting from the new open relationship. Scott Sanford, director of investigations for Barnes & Noble, says the improving relationship between eBay and retail LP departments “is crucial in the fight against online fencing and organized crime activities.”

These successes have “built trust,” Sanford says. “That’s what we’re really interested in. We’re not trying to shut down [sales of] all diabetic testing strips on eBay. We just want to shut down the illegal sellers. I think eBay believes this now.”

The fine print of fraud
Jones says eBay’s “intent has always been aligned with the retail community, but there might have been a breakdown in communication in explaining that.” Since he accepted his current position early last year, eBay has hosted numerous retailers onsite so that LP professionals can see how eBay operates. It also has begun to build its own team of investigators, monitoring sellers and mining data on the $60 billion worth of products sold annually.

“To give Paul credit, one of the things that he was able to do was begin to educate [eBay executives] on what fraud is and help them understand that fraud is a lot more than just transactional,” Asher says.

As he saw the changes occurring at eBay, Asher wanted to spread the word to the retail community. “I tend to be a consensus builder and get people to mingle around the right ideas,” he says. “I began to do that internally and had discussions with Paul ... We were beginning to sway the tide.”

Asher and NRF senior asset protection advisor Joe LaRocca visited eBay and saw how they monitor new sellers, power sellers and software-flagged anomalies. They came away impressed. “They certainly have made steps in the right direction,” Asher says.

The NRF-eBay partnership will help facilitate greater sharing of information “to target ORC investigations, which would further support the investigative efforts of federal, state and local law enforcement working in partnership with LP professionals,” LaRocca says. In addition, “NRF and eBay will work together on federal legislation aimed at enhancing resources to fight the problem and penalties for those who are convicted.”

One such bill, H.R. 4011, would require the U.S. Attorney General to establish multi-jurisdictional task forces to initiate investigations of organized retail theft and dismantle ORC enterprises in the six U.S. district court districts with the greatest incidence of organized retail crime, and appropriate $5 million annually for four years to fund the efforts.

In the past, there was “this coalition of retailers leading the charge on legislation to go after the online auction sites,” Asher says. “It was a lot of noise that the various members of Congress had to weed through and figure out what was right and wrong.” Now, the world’s largest retail trade association and online seller are joining forces to better “serve our customers based on safe and legitimate transactions that don’t compromise anyone’s integrity,” he says.

Asher will also lead a working group of retailers and eBay representatives to “review things that the retail industry is doing to mitigate the loss of product,” and how retailers can best provide feedback to eBay.

“Retailers use eBay, too,” Asher says. “There are a lot of retailers that have eBay stores. It’s a relationship that makes sense, and moving forward it will really go a long way toward mitigating or slowing down the amount of stolen, illegal, unsafe product that ends up for sale online.”