Wal Mart's change of Security policy

Thursday, July 13, 2006

Wal-Mart's New Policy on Shoplifting

I never thought I'd see an ethically-interesting story about shoplifting. For those of us who study ethics, stealing stuff is not exactly a subtle moral issue.

A story in today's NY Times, "Some Leeway for the Small Shoplifter", changes that.
Wal-Mart refuses to carry smutty magazines. It will not sell compact discs with obscene lyrics. And when it catches customers shoplifting — even a pair of socks or a pack of cigarettes — it prosecutes them.But now, in a rare display of limited permissiveness, Wal-Mart is letting thieves off the hook — at least in cases involving $25 or less.According to internal documents, the company, the nation’s largest retailer and leading destination for shoplifting, will no longer prosecute first-time thieves unless they are between 18 and 65 and steal merchandise worth at least $25, putting the chain in line with the policies of many other retailers.

The reason for Wal-Mart's change of policy? The article cites two:1) It's not economically feasible to enforce zero-tolerance. According to one Wal-Mart exec quoted in the story: “If I have somebody being paid $12 an hour processing a $5 theft, I have just lost money....I have also lost the time to catch somebody stealing $100 or an organized group stealing $3,000.” 2) The zero-tolerance policy was putting a strain on some police departments, whose officers would need to be called in everytime some kid got caught swiping a pack of gum. "At some of the chain’s giant 24-hour stores, the police make up to six arrests a day..."

A few thoughts about the ethical dimensions of this story, in no particular order:
Both of the reasons offered above serve to remind us that, from an economic point of view, there is pretty much always going to be some non-zero efficient level of crime, whether in a given store or in society more generally. That is, from a financial point of view, it's almost never worth it to put in place sufficient enforcement mechanisms to drive the crime rate to zero.

The change in policy is apparently based purely on localized economic factors. So it leaves aside questions like whether theft is a moral wrong that ought, morally, to be punished. Some would argue that retailers have an obligation to do their part in punishing wrong-doing, independent of whether doing so is strictly efficient.
Some will see the amount of law-enforcement effort expended on arresting shoplifters at Wal-Mart as a "further" way in which Wal-Mart is subsidized by public coffers. In a sense, that's true. But it's only true in the same sense that your own security costs (and mine) are subsidized by public coffers. The fact that the city I live in has an effective police force is part of the reason I don't need a full-time security guard at my home. The more interesting question, regarding Wal-Mart, is whether there's something about Wal-Mart that makes it a disproportionate drain on law-enforcement budgets. That is, does your average Wal-Mart use up more law-enforcement resources than other stores its size, or than however many smaller stores you'd have to add up to equal its size? Is anything about Wal-Mart especially criminogenic?

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Some Leeway for the Small Shoplifter

By Michael Barbaro - New York Times Thursday, July 13, 2006

Wal-Mart refuses to carry smutty magazines. It will not sell compact discs with obscene lyrics. And when it catches customers shoplifting - even a pair of socks or a pack of cigarettes - it prosecutes them.

But now, in a rare display of limited permissiveness, Wal-Mart is letting thieves off the hook - at least in cases involving $25 or less.

According to internal documents, the company, the nation’s largest retailer and leading destination for shoplifting, will no longer prosecute first-time thieves unless they are between 18 and 65 and steal merchandise worth at least $25, putting the chain in line with the policies of many other retailers.

Under the new policy, a shoplifter caught trying to swipe, say, a DVD of the movie “Basic Instinct 2” ($16.87) would receive a warning, but one caught walking out of the store with “E.R. - The Complete Fifth Season” ($32.87) would face arrest.
Wal-Mart said the change would allow it to focus on theft by professional shoplifters and its own employees, who together steal the bulk of merchandise from the chain every year, rather than the teenager who occasionally takes a candy bar from the checkout counter.

It may also serve to placate small-town police departments across the country who have protested what the company has called its zero-tolerance policy on shoplifting. Employees summoned officers whether a customer stole a $5 toy or a $5,000 television set - anything over $3, the company said.

At some of the chain’s giant 24-hour stores, the police make up to six arrests a day prompting a handful of departments to hire an additional officer just to deal with the extra workload.

“I had one guy tied up at Wal-Mart every day,” said Don Zofchak, chief of police in South Strabane Township, Pa., which has 9,000 residents and 16 officers. He said the higher threshold for prosecution “would help every community to deal with this.”
J. P. Suarez, who is in charge of asset protection at Wal-Mart, said it was no longer efficient to prosecute petty shoplifters. “If I have somebody being paid $12 an hour processing a $5 theft, I have just lost money,” he said. “I have also lost the time to catch somebody stealing $100 or an organized group stealing $3,000.”
The changes in Wal-Mart’s theft policy are described in 30 pages of documents that were provided to The New York Times by WakeUpWalMart.com, a group backed by unions that have tried to organize Wal-Mart workers in the United States.
The group said it received the document from a former employee at the chain who is unhappy with the new policy.

In interviews, several current and former Wal-Mart employees said the new shoplifting policy undermines their work and would, over time, encourage more shoplifting at the chain.

But Wal-Mart said it would closely track shoplifters it did not have arrested, and would ask that they be prosecuted after a second incident. (Under the new policy, it will also seek the prosecution of all suspected shoplifters who threaten violence or fail to produce identification, no matter how much they are trying to steal. Not carrying identification is a popular tactic among professional shoplifters to avoid arrest.)

“There is not a lot of margin for success for those intent on making a living stealing from us,” Mr. Suarez said. “We will put them in jail just as we always have.”

Still, the new policy, which became effective in March, is in many ways a striking departure from Wal-Mart traditions. In the past, the company has proudly defended its aggressive prosecution of shoplifters, saying it helps hold down prices.
“Other retailers might offset the cost of shoplifting with higher prices,” a spokeswoman said in a 2004 interview. “But we don’t do that.”

Indeed, Wal-Mart’s zero-tolerance policy can be traced to its founder, Sam Walton, who tied employee bonuses to low theft rates at stores. Stolen merchandise, he wrote in his autobiography published in 1992, the year he died, “is one of the biggest enemies of profitability in the retail business.”

Over all, American retailers lose more than $30 billion a year to theft, according to the National Retail Federation, a trade group.

In the book, “Sam Walton: Made in America,” Mr. Walton boasted that the amount of merchandise lost to theft at Wal-Mart was half that of the retailing industry’s average.

With the new policy, though, employees “are confused,” said a former Wal-Mart employee who worked in the loss prevention department at a store outside San Jose, Calif..

“They want to stop shoplifters,” she said. “They want to do what they are trained to do.”

But if the shoplifter is under 18 or steals less than $25 worth of products, “they can’t do anything,” said the former employee, who left the company shortly after the new shoplifting policy was put into effect and spoke on condition of anonymity because she said she feared retribution.

Chris Kofinis, director of communications at WakeUpWalMart.com, said the policy “is a head-in-the-sand strategy that is far different than what Sam Walton would ever have wanted, and it’s not clear this is the best strategy for Wal-Mart workers.”
Mr. Suarez, the Wal-Mart executive, said there was “overwhelming” employee support for the new policy because it would more effectively deter theft.

Wal-Mart is not alone in giving shoplifters some leeway. Its new policy “is consistent with guidelines many retailers use,” said Joseph J. LaRocca, vice president for loss prevention at the National Retail Federation.

Retailers, he said, have learned that prosecuting small shoplifting cases “does not warrant the store resources or the judicial resources required, given the dollar amount that was stolen.”

In some cases, loss prevention executives said, retailers will prosecute only shoplifters who steal at least $50 or $100 worth of merchandise. The legal costs required for prosecution, they said, are simply too high. Stores must hire a lawyer for employees who become witnesses in a trial, for example, and pay workers overtime to appear in court.

Until now, they said, Wal-Mart was the exception. “They would arrest somebody for stealing a pair of socks,” said Chief Zofchak in South Strabane Township. “I felt we were spending an inordinate amount of time just dealing with Wal-Mart.”

Since Wal-Mart enforced its new shoplifting policy, arrests have fallen at the store in Harrisville, Utah, according to authorities there. But the town’s chief of police, Maxwell Jackson, still prefers the original zero-tolerance rule.
“Once the word goes out that there is a dollar limit,” he said, “there will be more stealing.