How Nike Sneakers Get Stolen at Every Turn

Date: Thursday, August 10, 2023
Source: Wall Street Journal

It’s getting harder for a pair of Air Jordans to make it all the way from the factory to a store shelf or your front porch.

Nike NKE -1.59%decrease; red down pointing triangle goods have been stolen at almost every step of the supply chain, from distribution centers, rail yards and storage trains to FedEx delivery trucks, highlighting how retail crime goes beyond shoplifting or smash-and-grab thefts in stores.

Los Angeles police in June seized at least $3 million worth of Nike products that they say were stolen from a warehouse near the Port of Los Angeles. Inside the boxes were pairs of an unreleased style of the NOCTA x Nike Glide, a $160 sneaker collaboration between the sportswear giant and hip-hop superstar Drake.

A few weeks earlier, Los Angeles County sheriff’s detectives arrested a dozen people who authorities say were part of a crime ring that over the past year stole around $750,000 in merchandise from one Nike store.

“The supply chain is under attack right now,” said Keith Lewis, vice president of operations for Verisk-owned CargoNet, a theft prevention and recovery network that often collaborates with law enforcement.

Nike, which generates more than $50 billion in annual sales, hasn’t disclosed the amount of merchandise it loses to theft and declined to comment for this article.

The journey to the U.S. for a pair of Air Jordans starts at factories in Vietnam or China, where the sneakers are typically manufactured. The sneakers then have a winding path from Asia, with several stops at ports, warehouses and distribution centers before they arrive in stores or homes. A pair of shoes are at risk of being stolen at each stop, Lewis said.

Executives at retailers such as Target, Macy’s, BJ’s Wholesale Club and Ulta Beauty have blamed criminal networks for causing problems with their inventories and called it an urgent issue. Reports of cargo theft across the supply chain increased by 63% during the first half of 2023 compared with a year earlier, according to data from CargoNet.

Nike products became more attractive targets for criminals in recent years as reselling limited-edition sneakers turned into an easy way to make a profit. Air Jordans and other designs regularly change hands for hundreds of dollars above the original price.

In February, Nike offered to pay for off-duty and more on-duty police officers to address safety and theft concerns at a northeast Portland, Ore., store, which has been closed since last year. The Portland mayor’s office said the proposal wasn’t feasible given staff limitations.

Organized retail crime groups carry out carefully planned operations. They learn about store layouts, and they create lists of valuable inventory at each location. When it comes to cargo, the groups hire spotters trained to analyze contents of shipping containers based on information in the bill of lading. Retail and logistics company employees sometimes collude with the criminal groups, according to the National Retail Federation.

“The good guys, us, we’re playing checkers, and the bad guys are playing chess,” Lewis said. “They’re always one or two steps ahead of us.”

Warehouse thefts

A tip led Los Angeles police in June to a warehouse containing millions of dollars worth of stolen merchandise, said police Capt. Alfonso Lopez. Several containers of merchandise were taken to the warehouse after making it through the Port of Los Angeles. The products were about to be shipped to different locations, but multiple containers were stolen before they could be moved to their final destination, Lopez said.

The stolen goods were being offered for sale through social media and at least three individuals bought items before authorities confiscated them, Lopez said.

The supply chain will remain vulnerable as long as companies keep working the way they do today, using an online marketplace that lets truckers, brokers and others see merchandise that needs to be moved, Lopez said. Criminals can access the system and pretend to be truckers offering to pick up cargo. Since the system moved online, the number of fraudulent tactics to skim payments and steal cargo has gained momentum.

“We’re more reactive than proactive because of the amount of activity. We need the companies to be more proactive on their aspects to prevent this from happening,” Lopez said.

Lopez’s task force has found thieves working for retail crime organizations have stolen everything from solar panels to chocolates and coffee. Most of these products are later sold via internet platforms or consignment shops, he said.

Heists at storage yards 

About $800,000 worth of Nike sneakers and other products were stolen last September from a secured container drop yard in Memphis, Tenn., where the company has its biggest distribution centers.

At least 20 trailers were broken into, and two people were arrested days later on suspicion of possessing Nike merchandise that was stolen from some of the trailers, according to police reports. The investigation is continuing.

One product those trailers contained was the Jordan 11 Cherry Red, a $225 sneaker that was scheduled for release last December. Authorities believe pairs of those Jordan 11s were being sold on online marketplaces days after the theft.

StockX, a popular platform for sneaker reselling, temporarily halted sales of the sneaker, saying at the time that the transactions violated its terms of service and that it was cooperating with law enforcement.

Law-enforcement officials and experts said one of the most common ways to unload stolen merchandise is through online marketplaces. Congress passed legislation in June seeking to deter criminals from acquiring and selling stolen or counterfeit items through these marketplaces. Resale platforms are now required to track and get personal information for all sellers with 200 or more transactions and making at least $5,000 in gross revenue during a 12-month period.

Stealing from stores

Nike’s East Los Angeles store had reported about $750,000 worth of losses from merchandise thefts over one year, and one crime ring was responsible for most of it, said Nick Stewart, a detective with the Los Angeles County sheriff’s department.

In June, police arrested several people who they say were part of that crime ring. Charges for those arrested are pending.

Stewart said his work relies on collaborating with the retailers because they can point out details about repeated incidents. Nike was one of the retailers that had a high level of theft in Los Angeles County, he said.

Stewart said the criminals look out for new product releases. They will go into the store in groups with their own bags, grab different boxes of shoes and one of them will give a signal so they all run out with the loot at the same time, he said. Sometimes they will hit multiple stores in different locations at the same time to generate confusion among law enforcement.

A year ago, Stewart’s task force wasn’t focusing on organized retail theft, but members are now looking at it closely because they have seen the damage.

“We’ve seen stores that are completely shutting down their business and moving out of the communities that we service,” Stewart said. “That’s not good.”

[Read from the original source.]