Priceonomics

At the Walgreens on Market Street in San Francisco, customers often need to call a store employee to unlock a display case for them. The customers are not tech titans buying laptop batteries or wealthy San Franciscans purchasing jewelry or top-shelf liquor. Workers unlock cases of baby formula, shampoo, and soap for a mix of office workers and low-income customers.  

It’s well known that pharmacies need to protect their stores of cold medicine, which methamphetamine cooks like Jesse Pinkman can use to make product. But why soap? Is a $6 bottle of Dove body wash really worth the squeeze?

A Walgreens keeps its precious Dove soap under lock and key

Walgreens realizes that it is; retail assistants explain that the locks prevent thefts. Understanding why requires an appreciation of the illicit market for stolen goods.

A great guide -- at least for those of us with book smarts rather than street smarts -- is an article in the Journal of Criminology, “How Prolific Thieves Sell Stolen Goods,” based on a U.K. crime reduction study. 

The main markets for humble shoplifted and stolen goods are in low-income, urban areas where inhabitants shop primarily at corner stores and street vendors and where buying stolen goods is common. A British Crime Survey found that 11% of people interviewed said they bought stolen goods in the last 5 years and 30-40% of men in areas with “adverse area or personal wealth factors” bought what they believed to be stolen goods. Knowingly or not, families in these areas purchase stolen or “fenced” goods often enough that thieves interviewed for the crime reduction study thought of themselves as “one person among many providing an essential, albeit criminal, service in supplying the wants of a bargain seeking general public.”

These thieves sell their goods in one of 5 common ways:

1) Commercial Fence: Thieves sell stolen goods to a business owner (known as a “fence”) who sells it in his or her shop or to a distributor who sells it to shop owners 

2) Residential fence: The thief will sell stolen goods to a fence buying and selling stolen goods out of his or her residence. 

3) Hawking: Thieves sell goods on street corners, in pubs, or door to door

4) Network sales: Thieves pass word of their stolen goods along a network of friends and family until a buyer is found

5) Online: Thieves sell stolen goods on sites like E-Bay, or sell them to other fences who will sell them online

Thieves and burglars are very aware of the markets for stolen goods. As the study relates, thieves steal what they know they can sell. The authors write that most thieves have a “mental loot list” that they keep in mind as they approach stores or enter homes. Thieves sometimes steal to order -- one thief volunteered that when an acquaintance requested a “Mark V Escort, soft top, in cream,” he called him when he stumbled upon that car in white and sold it to him. Generally, though, regular thieves steal what is popular on the illicit market.

The top of thieves’ mental loot list features expensive electronics like Playstations, gps systems, and DVD players. Thieves can sell items for around a third of their retail value, according to the report, or for roughly half their value if they sell them to second hand shops that will sell them for ⅔ their retail value. For expensive electronics, that means some solid, quick cash.

But price is not the only consideration. The “prolific thieves” interviewed by law enforcement suggest that the ease of selling something outweighs its retail value. One related:

“If I come across something, the first thing I think of before I take it is can I sell it. I mean I’m not going to take it if I can’t sell it, it’s no good to me. So when I’m taking that, I know exactly where it’s going.”

Not only do prolific thieves want the certainty of knowing exactly where they can sell their loot, but thieves want to get rid of it fast. One house burglar said that he took about an hour to sell stolen property. Most others interviewed sold off their loot in as little as 5 minutes. 

The best way to ensure that loot is easy to sell is to steal products with consistently large demand. A hot electronic, like an iPhone, may fit the bill. But everyday consumer products are a less lucrative guarantee. In the U.K. report, one thief explained to the police that he focused on stealing cigarettes, while yet another was driven by the constant demand for popular razors:

“... anybody, just anybody. You could walk into pubs with a carrier bag full [of Mach3 razors] and all the blokes would take em off yer. Everyone who shaves has a Mach3 razor. They [buyers] could get them off you without having to pay the full-whack.” 

In fact, the consistent demand for products like soap on the illicit market can make it as good as stealing cash. Last year, for example, New York Magazine ran a story describing how thieves steal Tide Detergent to buy drugs. The piece opens by describing one Safeway store that lost $10,000 to $15,000 a month to thefts of Tide detergent. 

Products like cigarettes and soap perform some of the major functions of money very well. Since there is a consistent demand and market for them, even when they’re not on store shelves, they retain their value. (Unlike an iPod, they never become obsolete.) Since they have standard sizes, they can also be used as a unit of account. You can pay for something with one, five, or ten packs of cigarettes depending on its value. In areas where fences or other buyers are always willing to purchase stolen products like soap, it’s just as good as money. 

For thieves, the ubiquity of a product and the presence of a large illicit market for it is more important than its actual retail value. Small time burglars can’t keep stolen goods in warehouses, waiting for a buyer and marketing products to people willing to pay a premium for a unique item. It may seem surprising that Walgreen keeps some of its cheapest items locked up, until you realize that thieves care more about an item’s ubiquity in illicit markets more than its retail price. In other words, they care more about stealing from the top two quadrants than they do about stealing items from the right-side of the below chart:

Only a sophisticated criminal organization that can place goods in warehouses and distribute more rare items to discerning customers could prioritize by retail value:

We can see this at work with the example of stolen cars. Every year, the National Insurance Crime Bureau (NICB) publishes a report detailing the most commonly stolen cars that year. Invariably they are old, mundane cars. For the last several years, Honda Civics, Honda Accords, and Toyota Camrys sold in the early to mid 90s topped the list. 

As Frank Scafidi of the NICB explains, part of the explanation is that there are simply “gazillions” of these cars on the road and their lack of newer anti theft technology makes them easier to steal. But the real reason thieves target them is for their lucrative parts. “Investigations often lead us to chop shops,” he tells us, “Supporting the reality that those cars are stolen for parts.” Since so many people need their old Camry or Honda Accord fixed, there is a robust market for spare parts, and many chop shops will happily fence stolen parts.

Of course, expensive luxury cars are a favorite target as well. A different database from the National Highway Traffic Safety Administration lists the cars with the most insurance claims per 1,000 vehicles on the road. It doesn’t distinguish between theft of items within a vehicle versus the car itself, but it’s still telling that the cars that top the list are luxury cars like the $92,000 Audi S8, BMW’s M5 sedan, the Honda S2000 roadster, and a Mercedes luxury sport coupe. It seems that most thieves steal old sedans to quickly sell their parts, while the Gone in 60 Seconds wannabes steal luxury cars.

It seems odd to see cheap products locked up like fancy jewelry, but despite our graphical explanations, the reasoning is simple. As a Walgreens cashier explained to us, “Everyone uses soap, so it’s easy to sell on the street.”

This post was written by Alex Mayyasi. Follow him on Twitter here or Google PlusTo get occasional notifications when we write blog posts, sign up for our email list.


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