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Pinched by economy, retail crime on the rise

BY Michael Johnsen

NEW YORK —Retail crime is up. Economic conditions are poor. And while some may question how much recession economies spur otherwise-honest people to adjust their moral compasses to the point where pinching a tube of toothpaste or a can of shaving cream is justified to save a few dollars, many agree the two are linked.

More likely, those same pinched consumers are finding too-good-to-be-true deals on toothpaste, shaving cream, or worse, over-the-counter medicines at such alternative retail outlets as flea markets, rogue Internet sites and even anonymous sellers through online auction sites. At the end of the day, it’s that consumer who’s supporting the market of organized retail crime—where “professional” teams of shoplifters sweep shelves of products, versus the person who may only steal one or two pieces for his or her own consumption.

According to a poll of 158 loss-prevention executives conducted in September by the Food Marketing Institute, the vast majority appear convinced that the state of the economy is at least partially responsible for the recent rise in theft. Nearly three-quarters said that such retail crimes as burglary, robbery and particularly shoplifting have increased over the last three to six months. “Nearly all executives (95 percent) believe the economy is either somewhat or a major factor in the reported change,” noted FMI director of research Anne-Marie Roerink.

It appears that ORC-related shoplifting activity has been on the rise for some time. An April survey of retailers conducted by the National Retail Federation found that 85 percent of retailers identified ORC as a significant problem for their operations in the previous 12 months, compared with 79 percent one year ago.

It is a problem that has drawn the attention of Congress; Rep. Bobby Scott, D-Va., last month hosted a committee hearing on the subject as Congress considers as many as three bills designed to help combat ORC.

“Products most often stolen by professional rings include: infant formula, over-the-counter medications, razor blades, batteries, DVDs and CDs,” testified Frank Muscato, organized retail crime field investigator for Walgreens, before the Congressional committee. Citing figures from the FBI, Muscato estimated ORC costs retailers as much as $30 billion annually.

Reselling such stolen goods as infant formula or OTC medicines also raises a public health issue, as thieves are not known for their diligence in maintaining proper storage conditions for such merchandise. Muscato cited one Texas case that involved a fence who was buying $50,000 to $100,000 worth of stolen baby formula, diabetic test strips and other OTC medications a day and storing those goods in a warehouse with no temperature controls.

Selling stolen merchandise online has become especially attractive to career criminals who can make as much as 30 cents to 40 cents on the dollar in a flea market or street corner. The rise of the Internet has enabled many to operate just about as anonymously, but at higher margins—up to 70 cents to 80 cents on the dollar. And that has raised the stakes on ORC, many believe.

“Dishonest people have quickly learned the Internet presents a low-risk way to sell stolen goods, primarily due to its anonymous nature,” testified Joseph LaRocca, vice president of loss prevention with the National Retail Federation. “They are learning about the limitless opportunities offered by auction sites. Criminals are even setting up their own sites and enabling ‘secure’ customer payments through tools offered by such com panies as PayPal and Yahoo! Checkout.”

Compounding the problem, and further establishing a link between poor economic conditions and a rise in retail crime, is that shoplifting during a recessionary period can be made easier by the retailer who has cut back on staffing requirements.

Meanwhile, federal law-makers are introducing new measures to combat ORC. Reps. Brad Ellsworth, D-Ind., and Jim Jordan, R-Ohio, in July introduced the Organized Retail Crime Act of 2008 (H.R. 6491), a bill that would amend the federal criminal code, making it illegal to engage in activities that further organized retail crime. Scott introduced the E-Fencing Enforcement Act of 2008 (H.R. 6713), which would place some of the burden of vetting online vendors on the auction sites that host them. And Sen. Richard Durbin, D-Ill., in August introduced the Combating Organized Retail Crime Act of 2008 (S. 3434), which helps to clarify existing law to give law enforcement the tools to prosecute ORC, as well as to require online and offline marketplaces to investigate suspicious sales and post basic disclosure requirements.

Such click-and-ship retailers as eBay oppose much of the proposed legislation, suggesting that many of the provisions would enable brick-and-mortar retailers to challenge legitimate online sellers by requiring those sellers to substantiate their source of goods.

Meanwhile, while much of the focus has been on the rise in shoplifting, that clearly has not been the only source for the recent increase in retail crime, which many attribute to the economy. While much of this evidence is more anecdotal, and many retailers declined to comment as to whether their stores had seen an upswing in criminal activity, several others openly acknowledged the problem. Bill Earnest, chief operating officer for Kopp Drug, which operates 10 stores throughout Pennsylvania, told Drug Store News that in his 35-year career, he has seen three armed robberies in his stores—all in the past three years. In each of the holdups, the only such incidents in Kopp Drug’s 83-year history, the robbers were after pharmaceuticals rather than money.

Another leading executive at a small Midwest drug chain noted his company had seen three robberies at the pharmacy counter in the last two months alone.

“People are going to do what they can to make money or to support their drug habit,” he said.

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Battery makers upgrade power sources, get more shelf space

BY Mike Duff

LOS ANGELES and ST. LOUIS, Mo. As new products keep rolling in from major battery brand manufacturers, retailers are updating their marketing to maximize the potential of increasingly specific product functions.

On Aug. 18, Energizer announced the launch of its new Advanced Lithium battery, one designed to reliably power wireless gaming accessories, digital cameras, hand-held games or MP3 players.

Five weeks earlier, Panasonic introduced the EVOLTA battery, which it characterized as the world’s longest lasting AA alkaline battery cell in more devices. EVOLTA represents a certain resistance to battery specialization. “We see the trend in batteries going toward more ‘middle-drain’ applications as the reduction in power consumption needs of appliances has resulted in less high-drain devices needing primary battery power. EVOLTA eliminates the confusion for consumers and gives them confidence that our battery will perform well across many applications,” said Matt Sora, vice president of sales and marketing.

While others keyed on batteries, Duracell focused on the kind of line extensions. Among the new products debuted was Duracell Daylite, the cornerstone of new flashlight line designed to take LED lighting to the next level, the company stated, by capturing and using 100 of the light generated versus 70 percent in more typical instances. The flashlight introduction came hard on the heels of the debut of Duracell’s My Pocket Charger and the PowerSource Mini, which were developed to complement cell phones, BlackBerrys and MP3 players.

Ultimately, said Duracell spokesman Kurt Iverson, battery producers are bringing technology to bear in developing more effective, longer lasting products that use innovation to provide power more efficiently. “In the case of the Daylite flashlight, it’s getting a product to work using less battery power and still produce a brighter beam of light,” he said.

The involvement of major battery brands in a range of portable energy dependent items certainly is stretching traditional brand boundaries and merchandising concepts as well.

Jacqueline Burwitz, spokeswoman for Energizer said that, while the brand remains the one that keeps on going and going, the company’s merchandising support has evolved with its product line. “It has changed. Now it’s a matter of pairing the right battery with the right device,” she said.

Battery makers have encouraged many retailers to create ancillary product display spaces that complement the products they power, but drug chains haven’t necessarily bitten, as many prefer to depend on a battery center merchandising program. “We have those sections,” said Stacy Rinehart, a USA Drug spokeswoman. “We have our batteries in those displays.”

That doesn’t necessarily mean, however, that drug chains aren’t changing to the existing market.

Rather than develop secondary displays, Walgreens focuses on appropriately expanding its battery centers to make it easier to shop for specific applications, said Robert Elfinger, a company spokesman. 

“The battery section has grown significantly,” he said. “Customers are starting to understand that high-draining devices such as digital cameras are getting specific batteries, and they are looking for some of the new high-tech batteries. We’re expanding the battery sections to accommodate them.”

Thus, drug chains, for the most part, feel as if a battery center, usually conspicuously positioned, makes sense in terms of both attracting customers and return from floor space, as it can keep pace with developments in the category if properly configured to changes in the market.

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Survey says 40 percent of shoppers plan to start holiday gift-shopping before Halloween

BY Jenna Duncan

WASHINGTON The National Retail Federation today released results of its 2008 Holiday Consumer Intentions and Actions Survey, run by BIGresearch, showing that the average American holiday shopper plans to spend more than $800 each on holiday shopping.

The NRF’s survey results showed that 40.2 percent of consumers said that they will begin  holiday shopping before Halloween and survey respondents plan to spend about $832 on average on holiday items. This average reflects only a 1.9 percent increase over last year’s average total: $816.69. It’s the lowest anticipated spending increase NFR launched its survey in 2002.

Forty percent of survey respondents said that sales and/or promotions is the biggest lure to where they will shop, while 12.6 percent said they will seek “everyday low-prices.” Only 5.6 percent said they would choose holiday shopping locations based on convenience and 5.2 said it depends on customer service.

NRF president and chief executive officer, Tracy Mullin, said, “Retailers are going into this holiday season with their eyes wide open, knowing that savings and promotions will be the main incentive for shoppers. No one is canceling Christmas because money is tight, but consumers will be sticking to their budgets and looking for good deals when deciding where to spend this holiday season.”

Survey repondents also said they would spend about $51.43 each on decorations, $32.43 for greeting cards and postage, $95.04 on candy and food and $22.61 on flowers. The Internet has seen steady rates of shoppers: 44.2 percent of the shoppers in the survey said they were buying gifts online, flat from 44.3 last year. NRF has said that it predicts holiday sales to increase 2.2 percent over last year, for a total of $470.4 billion.

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