Law enforcement and retailers have warned the general public that this is not traditional shoplifting. Somewhat, what they’re seeing is theft organized by criminal networks.
And there is a reason it’s on the rise.
“What fuels this as an enterprise is the convenience of reselling stolen merchandise on online marketplaces,” said Illinois Attorney General Kwame Raoul, who convened a national task force of state attorneys to make it easier to analyze across state lines. “It’s not the age where it’s done at flea markets or within the alley or in parking lots.”
Retailers say a complete of $68.9 billion of products were stolen in 2019. In 2020, three-quarters said they saw a rise in organized crime and greater than half reported cargo theft. Some big chains blame organized theft for recent store closures or for his or her decisions to limit hours.
For the U.S. Government’s Homeland Security Investigations unit, organized retail crime probes are on the rise. Arrests and indictments increased last yr from 2020, together with the worth of stolen goods that was seized.
While data is imprecise concerning the perpetrators, there’s growing consensus that a wholly different group ought to be held accountable: e-commerce sites.
Amazon, eBay and Facebook are the places where these stolen goods are being sold, and critics say they are not doing enough to place an end to the racket. The businesses disagree.
Amazon, as an illustration, says it spent greater than $900 million and employed greater than 12,000 people in 2021 to stop fraud and abuse. The corporate also says it requests “proofs of sourcing” when it has concerns about how products were obtained, and works with authorities to weed out criminality.
Online retailers have long distinguished themselves from traditional brick-and-mortar chains by saying that, with regards to third-party sellers, they’re only a marketplace. Unlike products purchased off the shelf at Walmart or Home Depot, web corporations have claimed they are not liable for the standard and safety of products from outside merchants who use their platform.
That defense doesn’t work with regards to enabling the sale of stolen goods. In December, 20 major retailers, including Home Depot, Best Buy, Walgreens and Kroger, sent a letter to Congress, asking lawmakers to crack down on online marketplaces by requiring stricter verification of sellers.
“We don’t need people to be selling anonymously,” said Scott Glenn, who leads asset protection at Home Depot. “If we as Home Depot have to grasp who our suppliers are, then Amazon, eBay, whoever is selling must also have to grasp who their sellers are.”
The House has passed a bill called the INFORM Consumers Act, which might require some sellers on sites similar to Amazon, eBay and Meta’s Facebook Marketplace to offer a verifiable checking account, tax ID and a working email and phone number. Democratic Illinois Sen. Dick Durbin co-authored the unique bill. It’s now awaiting a vote within the Senate.
“Back in 2008, I introduced my first bill to handle the issue of illicit products sold online and the marketplaces told me, ‘Don’t be concerned, we’re taking good care of this. You do not need laws,'” Durbin said at a Senate Committee Hearing in November. “Well, here we’re 13 years later and this problem hasn’t gone away. It’s gotten much, much worse.”
Durbin told CNBC that he’s needed to rewrite the bill several times primarily due to pushback from the marketplaces.
“They earn cash on the sales, and so they don’t need to make it harder for his or her sellers,” Durbin said in an interview. “They need to make it easier. They do not care, I’m sorry to say, a few of them don’t care what happens once the sale is made.”
In its current form, the bill requires verification data only from sellers doing north of $5,000 in revenue every two years. It also requires marketplaces to present consumers a technique to contact certain sellers after making a purchase order, and a system for reporting suspicious seller behavior or illicit goods.
Amazon, eBay and Meta all say they support the bill.
“I believe they finally got here to the conclusion that we were just never going to stop bothering them until they did it,” Durbin said.
Attorney General Kwame Raoul publicizes the creation of the Organized Retail Crime Task Force in Chicago, Illinois, on December 2, 2021
atrick Ryan/Office of the Illinois Attorney General
Amazon, eBay and Meta told CNBC they’ve already enacted quite a lot of safeguards to maintain stolen goods off their sites.
“EBay isn’t a spot to cover yourself and take a look at and offload some of these things,” said Mike Carson, director of eBay’s regulatory policy group. “The bottom line is getting that intelligence to acknowledge when an item is stolen.”
Amazon would not provide an interview but said in a press release, “Amazon doesn’t allow third-party sellers to list stolen goods in our store, and we work closely with law enforcement, retailers, and types to stop bad actors and hold them accountable, including withholding funds, terminating accounts, and making law enforcement referrals.”
Raoul of Illinois met with Amazon’s general counsel last yr to debate the issue.
“I can have said in some unspecified time in the future something to the effect of, ‘Hey, I’m inviting you into the kitchen. But if you happen to don’t come into the kitchen in good faith, you are going to be on the menu,'” Raoul said.
Illinois, Arkansas, Colorado and Ohio have already passed their very own laws requiring seller verification for dealing in online goods. But advocacy groups and an Amazon-hired lobbying firm argued against the Ohio bill, saying it will impede business for law-abiding sellers.
“Us cracking down on the organized retail crime industry is not going to put Amazon or every other online platform out of business,” Raoul said.
Amazon said that in 2020 it began rolling out a verification program that requires the “overwhelming majority” of sellers to attend a one-on-one video meeting and show a government ID. Amazon verifies seller addresses by mailing a postcard with a novel code to the vendor, who then manually enters it on the location.
Rachel Greer, a former Amazon product safety manager, says criminal organizations can easily get past this hurdle.
“They’ll advertise on Craigslist for somebody to own the business, and it is a business opportunity, right?” Greer said. “So that they enroll and so they think that they are doing something really cool. They usually get on the phone with Amazon and do the phone video call to validate that they seem to be a legitimate person. They’ve a passport. They’ve a U.S.-based address. The products flow through the account, and so they get 2% of the whole lot that goes through.”
An Amazon spokesperson told CNBC by email that, “If we detect an account is working in bad faith or related to bad actors, we move quickly to revoke bad actor selling privileges.”
The issue is complicated by the proven fact that so many online sellers are in foreign countries with different legal systems. Amazon began inviting Chinese sellers to its marketplace around 2013, and inside just a few years was coping with a full-blown crisis in counterfeits and scams.
“They’ll advertise for people within the U.S. who will front these Chinese-based corporations,” said Greer, who recently wrote a book called “No Dead Babies” about unsafe products on Amazon. “So it’s really not very difficult to do. There’s whole conferences on easy methods to do that in China.”
Amazon told CNBC that as a part of the vendor vetting process, the corporate “uses a proprietary machine learning system that analyzes a whole bunch of unique data points” to discover seller risks, and it might determine “if an account changes hands after registration.”
A Fendi store in San Francisco was one in all several targeted during a spree of robberies in November, 2021.
On Facebook Marketplace, it’s relatively easy to begin selling. Although hawking stolen goods is against its policies, Meta doesn’t typically require proof of identity beyond the essential name and verifiable email or phone number needed to open a Facebook account.
One Ohio man, as an illustration, said he was making $2,500 a day posting stolen power tools on Facebook Marketplace, then meeting customers in a parking zone to sell the tools for nearly half-price.
Under pressure from legislators and retailers, Meta now says it’s began to gather and confirm business information from some sellers and display that information to buyers.
“We prohibit the sale of stolen goods and use plenty of tools to stop this sort of illicit activity on our platform,” a spokesperson told CNBC by email. “Nevertheless, organized retail crime is an industry-wide challenge, and stopping it requires ongoing collaboration between retailers, law enforcement and online marketplaces.”
Meta said that in 2021 it received government requests for data on greater than 700,000 user accounts and provided some information for greater than 70% of them.
EBay relies on a program called the PROACT, a two-way reporting system through which retailers warn eBay in the event that they’ve had a big theft, and the corporate then watches for matching items to seem on the market on its site. Carson, who leads the trouble, says eBay spends tens of millions of dollars on staff and back-end technology to run this system.
“If persons are hearing stories about stolen goods being sold on eBay, in the event that they’re receiving stolen goods, after which get contacted by law enforcement, we’re actually going to lose customers,” Carson said.
Lisa LaBruno, who helps lead the Retail Industry Leaders Association, said her group has “asked for years for Facebook and Amazon to implement an identical program to eBay.” RILA represents some 100 major retailers.
EBay also has a proven track record with regards to assisting law enforcement. In May, 41 people were arrested after a three-year investigation uncovered $3.8 million of stolen goods from stores similar to Bloomingdale’s and Duane Reade that were being sold on eBay.
Carson said the corporate has “risk models that can detect things that look suspicious.”
“For those who’re a brand-new seller and also you list 15 iPhones on the location and also you never sold anything perfectly, we’re probably going to flag you,” he said.
In 2019, Edwin Barkley pleaded guilty to Interstate Transportation of Stolen Property in reference to an investigation by CMPD and the U.S. Secret Service-Organized Crime Task Force.
Charlotte-Mecklenburg Police Department
How Home Depot tracks and prevents theft
Home Depot’s Glenn says there are some clear flags that investigators notice when stolen goods are being sold. One example is a site listing Home Depot’s proprietary products “at a price higher than we are able to sell it at,” Glenn said.
He added that Home Depot has unique barcodes on some items that the corporate can track.
“If I see that number and I do know that number is sitting on an internet site somewhere, I can actually track backwards through the provision chain,” Glenn said. “How did it get there? What store was it assigned to? Was it ever paid for? Was it ever returned? What distribution center did it come from?”
Some high-end apparel corporations use an identical approach. Lululemon says it has 100% of its merchandise equipped with RFID tags, which may be scanned to prove authenticity or discover a stolen item once it’s recovered.
But unique identifiers do little to stop a theft from occurring in the primary place.
Thefts that fall into the category of organized retail crime follow a typical pattern. A criminal network hires a person or crew, called “boosters,” who may be skilled thieves and even people trafficked into the U.S. from other countries. After a robbery, boosters turn over the stolen goods to someone waiting nearby, called a “fence.” The fence pays the booster in money, normally a few quarter of the retail value, after which takes the haul to a house or warehouse, where a “cleaner” removes anti-theft devices or markings. The products then get sent to the larger criminal network, and are frequently resold online.
“It was you’d should go to a pawn shop, you’d should go discover a place to sell it at a flea market,” Glenn said. “Now you might have the flexibility to ship it from your house.”
Glenn took CNBC on a tour of a Home Depot in Hiram, Georgia, where the corporate is piloting some technology to stop this sort of theft. One example is a tower of cameras running surveillance over the parking zone and testing license plate recognition technology.
Then there’s point-of-sale security. A Bluetooth-enabled chip embedded in some power tools, for instance, keeps them from turning on at home unless they have been scanned at a register. The corporate also has carts that lock up on the exit in the event that they have not been discreetly scanned by going through a checkout lane.
Home Depot has a whole bunch of cameras in each store and is experimenting with ways to trace items as shoppers put them of their baskets. Glenn said the corporate loses billions of dollars per yr due to theft, and it’s spending tens of millions on prevention.
Meanwhile, arrests are happening.
Five members of an organized retail crime ring pleaded guilty to the theft of tens of millions of dollars of products in 2021 in San Mateo County, California. $8 million of stolen goods were seized in what law enforcement says is the most important organized crime ring bust in California history.
San Mateo County Sheriff’s Office
An Atlanta man is reporting to federal prison this month after selling greater than $6 million of stolen goods on Amazon, Walmart and Sears. An Amazon seller often known as “The Medicine Man” was recently arrested following weeks of surveillance. Law enforcement said the $8 million of stolen goods seized makes it the most important organized retail crime bust in California history.
Glenn, who’s been working within the loss prevention industry for 26 years, says losses from organized retail crime have grown at double-digit rates since he joined Home Depot 4 years ago.
“Previously, I believed perhaps it was just a little bit overblown,” Glenn said. “I’ve seen it in real life. I’ve seen it growing. I’ve seen the impact of it. I’ve seen the videos of it. I’ve seen all the several cases, the files we’ve got over this. And so it isn’t only growing over the past five years, I might say it’s grown incrementally over the past two, throughout the pandemic.”
One key to stopping the trend, Glenn insists, is healthier policing of sellers from the web marketplaces.
“At the tip of the day, we’re not asking them to do anything greater than what we already do as brick-and-mortar retailers,” he said.