The new business of shoplifting

It's this time of the year again. Classes have started (at least for us here in Canada) and in the first lesson it’s the thorny job of the business ethics professor to win over the skeptics. Those students who think that they shouldn’t be in this class in the first place. Those who need convincing that the law is just not enough to keep businesses on the bright side of life.

This day and age though, one doesn’t have to go far to find ammunition to make the case. This week, it can be found in a fascinating article in The New Yorker. The topic is shoplifting and how US retailers are trying to deal with it. Mind you, this is not about stingy shopkeepers trying to slap wrists of cheeky kids attempting to sneak out with a free ice cream. It is a US$ 40bn business issue for the industry. And it straddles class - remember Winona Ryder being caught with $5,000 of designer goods in Beverly Hills? It is also one of the most professionalized ‘sectors’ of the wider organized crime industry.

From a business ethics perspective this story is fascinating for at least two reasons. First, it is just mindboggling how much the industry has developed strategies, departments and instruments to prevent shoplifting. ‘Asset protection units’ as these are called – btw, relish the ‘amoralized’ language companies use! From hundreds of in-store cameras, armies of detectives on the shop floor, detailed profiling of customers, and even the operation of entire forensic labs, retailers have created their own mini law enforcement empires. The retailer Target alone faces 75,000 'theft apprehensions' a year. As their head of asset protection argues,

Even if all the U.S. attorneys across the country stopped prosecuting bank robberies, fraud, drug trafficking, and even terrorism, there would still not be enough capacity to prosecute even the apprehensions made by Target.

The result is simple enough: the tackling of this ethical issue is a core task for business. The article is a fascinating read for the challenges, risks and limits of addressing the problem in the corporate world.

The second aspect is even more striking: roughly half of all losses in retail are the responsibility of employees! It raises the thorny question of why these people commit such crimes. Fair enough, many organized crime rings try to recruit employees or even place their members as shop assistants. But for many shop assistants, being on low wages while selling $ 1,000 Armani Suits, the temptation may just be too much. As one VP of asset protection of a New York retailer argues in the article:

You're on commission selling. When times are good, you make a fortune. September through the holiday season, you're raking it in. Then Christmas is over, no one is shopping, gas is four dollars a gallon, and your paycheck went from fifteen hundred to five hundred a week and you have to pay off those bills from that Caribbean vacation you took when the money was rolling in. So you think, I'll credit my card for a thousand dollars and make out a fake return. When it works the first time, you try it again. But next time you load a little more onto your card. And the way this economy's going? We're going to be busy.

It turns our attention to what we call in our business ethics book (Chapter 4) ‘situational factors’ in ethical decision making. For some employees, given the wages and the nature of their products, the temptation is just too high. Whether security cameras and store detectives are the right answer then remains up for debate. Maybe it’s the general working conditions, the level of wages and the general identification with the company. Our guess is that a more in-depth understanding of why employees do these things would help to devise more appropriate strategies. We don’t know what you think. But we would love to hear.