Online marketplaces can do more to stop crime

Read CNBC’s full investigation into the alleged organized theft groups that police say are stealing and reselling items from retailers including Ulta Beauty, T.J. Maxx and Walgreens.

Faced with sophisticated organized retail crime rings that investigators say have targeted his company, Ulta Beauty CEO Dave Kimbell is laying some blame on e-commerce sites.

In the first in-depth interview given by a retail CEO about organized theft, Kimbell responded to a monthslong CNBC investigation that showed how police broke up what they say is a professional network of thieves who used Amazon to resell millions in cosmetics stolen from Ulta stores and other retailers across the U.S.

While Kimbell wouldn’t comment directly about Amazon, he said online marketplaces are “part of the problem.”

“[Online marketplaces] give more scale and more opportunity for people to liquidate this product,” Kimbell told CNBC in an on-camera interview. “You used to have to sell stolen goods at flea markets or out of the trunk of your car, or maybe just locally. Now, you have more sophisticated tools to have a broader reach across the country or even internationally.”

As part of an investigation into retail crime rings and the actions companies and law enforcement are taking to crack down on the problem, CNBC followed a case that involved Michelle Mack, a San Diego woman whom prosecutors accuse of using her Amazon digital storefront to resell goods stolen from stores.

The 53-year-old mother of three and her husband, Kenneth Mack, were charged with conspiracy to commit organized retail theft, grand theft and receipt of stolen property in connection with the alleged crime ring. During a raid at her California mansion in December, California Highway Patrol and Homeland Security agents say they found $387,000 in suspected stolen goods, most of which had come from Ulta. Investigators say her crime ring brought in millions of dollars over more than a decade. Both Michelle Mack and Kenneth Mack have pleaded not guilty. 

For Kimbell, the scale of such an operation wasn’t surprising.

“Unfortunately, I’m not that shocked because we’ve seen it in other parts of the country,” said Kimbell. “The magnitude of this one is significant. But this is what’s happening, and this is the environment in which we’re operating.”

Kimbell said he doesn’t think the onus is on consumers to evaluate whether a product they are buying from an online marketplace is stolen. Many shoppers may not even consider that the products could be stolen from one retailer and sold by another, he said, adding it’s a largely online phenomenon.

“That doesn’t happen in brick-and-mortar [stores]. You wouldn’t come into a retailer and see somebody [at] a table in front [selling] stolen goods,” Kimbell said. “We shouldn’t have an environment where it’s possible to steal from one retailer and [have it] end up on any other platform, any other large-scale, mainstream platform.”

Anyone who sells products online “should be committed to ensuring that nothing that they sell is stolen goods,” Kimbell said.

“I can tell you with 100% certainty, nothing that we sell at Ulta.com or any online platform is product that’s been stolen from another retailer,” he said. “There are tools, there’s data, there’s analytics, there’s capabilities that we collectively have that we could try to take even more action.”

Amazon declined CNBC’s request for an interview but said in a statement the e-commerce giant has “zero tolerance for the sale of stolen goods.” An Amazon spokesperson said the company invests $1 billion annually and employs “thousands of people” to combat fraud, including detection and prevention tools.

The spokesperson said Amazon works with law enforcement and other retailers to “stop bad actors and hold them accountable.”

In the Mack case, Amazon said it did not receive signals that would have indicated the seller was offloading stolen goods. Mack’s page was taken down after her arrest.

It’s unclear exactly how big of a problem organized retail crime is. The National Retail Federation and the Retail Industry Leaders Association say not every instance is reported, tracked or tallied.

According to the most recent NRF survey on shrink — the industry term for lost inventory from damage, theft or other sources — the total value of goods stolen in external theft instances totaled $40.5 billion in 2022, representing 36.15% of total shrink, compared with 37% in 2021.

Ulta Beauty is one of a number of retailers that have started to discuss retail crime as a problem but haven’t quantified how it is affecting their businesses. Ulta Beauty Chief Financial Officer Scott Settersten and Chief Operating Officer Kecia Steelman have discussed theft or organized retail crime specifically on earnings calls or at investor conferences. 

Ulta Beauty said it aims to have all of its fragrances locked up in stores in the first few months of this year. Fragrance has been one of the hardest-hit categories for the retailer because of its high value and the relative ease of reselling it, Kimbell said.

The CEO didn’t quantify the rise of organized retail crime his company has seen, but he said “it has definitely gotten worse.”

“Retail crime has been part of the retail industry forever … but what we’ve seen over the last few years, really the last couple of years, is a significant elevation,” he said.

Retail executives are increasingly worried about a rise in violence associated with theft, according to the NRF survey, with 81% reporting an increase in violence and 28% reporting that their company has closed a specific location because of crime. Ulta said it has not yet closed a store because of crime.

Kimbell said he is particularly concerned about how the rise in crime affects Ulta’s 50,000 employees across 1,400 stores around the country.

“These situations … they’re not fun … they’re threatening; they’re intimidating,” Kimbell said. “They can be traumatic.”

– Additional reporting by Ali McCadden.