Ulta CEO suggests that e-commerce platforms have the potential to prevent the sale of counterfeit products.

• Organized retail crime is being exacerbated by e-commerce sites, according to Ulta Beauty CEO Dave Kimbell in his first in-depth interview on the topic.
• Kimbell stated that more can be done to prevent the sale of stolen goods, as revealed by a CNBC investigation into a nationwide network of professional thieves who stole from Ulta stores and sold their loot on Amazon.
• "It's not acceptable to have a situation where someone can steal from one retailer and have it appear on any other major platform," Kimbell stated, without referring to Amazon.

CNBC has conducted an investigation into the alleged organized theft groups that are reportedly stealing and reselling items from retailers such as Ulta Beauty, T.J. Maxx, and Walgreens.

E-commerce sites are being blamed by Ulta Beauty CEO Dave Kimbell for the sophisticated organized retail crime rings that have targeted his company, according to investigators.

Kimbell, a retail CEO, responded to a CNBC investigation that exposed a professional network of thieves who used Amazon to resell millions in stolen cosmetics from Ulta stores and other retailers across the U.S.

Kimbell stated that online marketplaces are a contributing factor to the issue.

"According to Kimbell, online marketplaces offer greater scale and opportunities for individuals to sell products. Prior to the advent of online marketplaces, people had limited options for selling stolen goods, such as selling them at flea markets or out of their car. Now, with more advanced tools, individuals can reach a broader audience both domestically and internationally."

A San Diego woman, Michelle Mack, is accused by prosecutors of using her Amazon digital storefront to resell stolen goods from stores, as part of an investigation into retail crime rings and the measures being taken by companies and law enforcement to combat the issue.

Michelle Mack, a 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 an alleged crime ring. During a raid at their California mansion in December, California Highway Patrol and Homeland Security agents 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.

""Although I'm not shocked because we've witnessed it elsewhere, the magnitude of this event is significant. This is the reality we're facing, and we must adapt to this environment," said Kimbell."

Kimbell stated that he believes it's not the responsibility of consumers to determine if a product they purchase from an online marketplace is stolen. Many customers might not even contemplate that the products they buy could be stolen from one retailer and resold by another, he added, emphasizing that this is largely an online issue.

""In brick-and-mortar stores, it's unlikely to see someone selling stolen goods at a table in front of them. We should avoid creating an environment where stolen goods from one retailer can end up on any other large-scale, mainstream platform," Kimbell stated."

Kimbell stated that it is essential for anyone selling products online to be committed to preventing the sale of stolen goods.

"I can assure you with absolute confidence that none of the products sold on Ulta.com or any online platform have been stolen from another retailer," he stated. "We possess various tools, data, analytics, and capabilities that we could utilize to take further action."

Amazon refused CNBC's request for an interview, but stated that it has "zero tolerance for the sale of stolen goods." An Amazon representative stated that the company invests $1 billion annually and employs "thousands of people" to combat fraud, including detection and prevention tools.

The spokesperson stated that Amazon collaborates with law enforcement and other retailers to "halt malefactors and make them responsible."

After her arrest, Amazon stated that it did not receive any signals indicating that Mack was selling stolen goods. Her page was subsequently removed from the platform.

How bad is organized retail crime?

Not all instances of organized retail crime are reported, tracked, or tallied, according to the National Retail Federation and the Retail Industry Leaders Association.

In 2022, the total value of goods stolen in external theft instances was $40.5 billion, which accounted for 36.15% of total shrink, a decrease from the 37% recorded in 2021.

Ulta Beauty has acknowledged retail crime as a problem but has not quantified its impact on their business. Ulta Beauty's CFO Scott Settersten and COO Kecia Steelman have discussed theft or organized retail crime specifically on earnings calls or at investor conferences.

Ulta Beauty aims to secure its fragrances in stores during the first few months of this year, as this category has been severely impacted due to its high value and the ease of reselling it, according to Kimbell.

The CEO stated that although he did not provide a specific numerical increase in organized retail crime, he confirmed that it has significantly worsened.

"Retail crime has always been a part of the retail industry, but what we've witnessed in the last few years is a significant increase," he stated.

The NRF survey reveals that retail executives are increasingly concerned about the rise in violence linked to theft, with 81% reporting an increase in violence and 28% stating that their company has shut down a specific location due to crime. Ulta, however, has not yet closed a store due to crime.

Kimbell expressed concern about the impact of rising crime on Ulta's 50,000 employees and 1,400 stores nationwide.

"Kimbell stated that these situations are not enjoyable, they are threatening and intimidating, and can be traumatic."

– Additional reporting by Ali McCadden.