Each year, consumers defraud retailers to the tune of billions of dollars. Some of the statistics about shoplifting alone are mind-boggling. One in 11 Americans has stolen something from a store, and over 10 million people have been caught shoplifting just within the past five years. A 2016 survey conducted by the National Retail Federation found that in 2015, retailers lost $16.6 billion to shoplifting by their customers. Other types of consumer fraud like identity theft, returning stolen or used merchandise, and using counterfeit coupons also hurt retailers. For example, when identity theft stories hit the news, it scares off many would-be shoppers. To add insult to injury, the store has to pay for goods sold to identity thieves. Such fraud also harms honest consumers because retailers pass on the incurred costs.
How do consumers see these different fraudulent activities? Which type of retail fraud is seen as more serious, and which one is relatively less serious? And do consumer perceptions coincide with actual retailer losses?
As part of an ongoing academic research project, I recently asked 200 adult Americans to evaluate eight different types of fraud that consumers commonly perpetrate in at retail stores (and websites). 44.5% of the surveyed sample was female. Their average age was 35-44 years, and their average income was $50-75K per year. In the survey, the specific instruction given was as follows:
“In each case, please indicate the degree to which each of the following behaviors represents a minor vs. major ethical transgression. By "minor transgression," we mean behavior that can be considered to be unethical but doesn't violate the law or cause significant harm to others. By "major transgression" we mean behavior that is clearly illegal and/or causes significant harm to others.”
Their responses were obtained on scales that ranged from 1 to 10, with higher values indicating more serious ethical transgression.
The table below provides the mean rating that respondents gave to each fraud. The list is arranged in descending order from what consumers see as the most significant ethical transgression to the least significant. The last column describes each fraud’s consequences for retailers.
The survey found a number of interesting results. They can be summarized with in just one sentence:
Here are three of the most interesting findings:
1) Identity theft is seen as a greater moral transgression than shoplifting by consumers. The surveyed consumers saw identity theft as a statistically more serious ethical transgression than shoplifting (although both were in the top three). But this is a mismatch in effects on retailers. For retailers, the financial losses when consumers steal merchandise is four times as big as the amount lost from identity theft.
2) One form of shoplifting is seen as more serious than other types of shoplifting. Taking merchandise from the store without paying for it was evaluated as the second-most serious ethical transgression in the survey. But survey-takers rated essentially doing the same thing in the process of self-scanning products in a grocery store as a significantly less serious wrongdoing. And returning merchandise after using it was the least serious offense of the eight in the list I tested. While consumers see these types of fraudulent consumer behavior in different terms, for retailers the outcome from all three types is identical: they lose money and have to write off the merchandise. (Even for wardrobing, retailers lose a significant amount of money because the merchandise has to be marked down, if it can be sold at all).
3) Porch piracy is viewed as a serious ethical transgression. The phenomenon of taking delivered packages from people’s doorsteps has grown rapidly in the last few years with the growth of online shopping. In the survey, it was statistically indistinguishable from identity theft as the most serious ethical offense evaluated, and much higher than shoplifting. Here is more evidence that in consumers’ eyes, all stealing is not the same. Stealing at the store is one thing, stealing from someone’s front porch is another thing, and significantly more unethical.
In a future post, I will consider the reasons for these differences in evaluations and why the consumer-retailer mismatch may be happening in more detail. I will also write about what the results of this survey mean to retailers and to most of us consumers who behave ethically when we buy things.