When it comes to retail crimes, Tony Gallo has seen a little bit of everything in his 25 years of experience spanning the convenience store, pawn shop and cannabis retail industries.
Gallo is the managing partner of Sapphire Risk Advisory Group, the oldest national security consulting company in the cannabis space. Since 2013, the company has worked with more than 600 clients in 35 states, helping them with the security section of their license applications and in developing policies and standard operating procedures. The Dallas-based company also helps with the design and build-out of cannabis facilities, ranging from a 1,200-square-foot dispensary in North Dakota to a 450,000-square-foot grow facility in Nevada.
“We design the video, the alarms, the access control and then bring in integrators to install the safes and all that,” Gallo says.
As cannabis has become increasingly legal, it’s now being included with the “big four” of high-risk retail industries, alongside firearms, tobacco, alcohol and pharmaceuticals — products that have a higher threat associated with theft, and therefore require additional layers of security.
“It’s not like a bicycle store or a sweater store,” Gallo explains. “If one of those stores gets robbed, so many sweaters are going to get out on the street, but it’s not really going to hurt society.”
During his career, Gallo has researched more than 2,000 armed robberies and continues to keep a keen eye on retail crime as he helps cannabis businesses limit their exposure and take steps to fortify their operations.
Marijuana Venture: Over the past nine years that you’ve been working in cannabis, how have you seen the security needs evolve in this space?
Tony Gallo
Tony Gallo: When I started in the industry, it was less of a retail industry. The first states getting involved — California, Colorado, Washington, Oregon — their security was much more lax than what you see now in states like New Jersey or Massachusetts or Ohio or Illinois.
A lot of the issues we’re seeing are in the states that have fewer security requirements and basically started the industry — and other states have been learning from those mistakes. Take the robberies that are occurring in Washington state; from what I’ve read, a majority of these robberies could easily have been prevented, or in some states, they never would have occurred because of the security that’s required. As the industry continues to mature, the security is also maturing. For example, west of the Mississippi, you see a lot of gun safes, as opposed to TL-rated safes that you would see in a jewelry store or a bank.
Gun safes were designed for guns, and if you look at the break-ins and looting that occurred a few years ago, the dispensaries that had their safes breached, every single one of them used a gun safe instead of a TL-rated safe, which is what you see in almost all of the dispensaries on the East Coast.
MV: What is being done differently on the East Coast that is reducing the number of robberies?
TG: A lot of cannabis dispensaries now are using cash boxes, which they adopted from other industries. So, at the register, all $50 and $100 bills are put in these cash boxes, and any amount of money above a certain threshold, whether it’s $500 or 1,000 or whatever, gets put in the drop box. At the end of the night, those boxes are opened, the cash is removed, and it’s counted in the back room and then placed in the deposit safe. That’s something that would greatly help Seattle businesses today and greatly reduces their problem when it comes to cash. It’s something that’s more common on the East Coast than the West Coast.
In my career, I’ve looked at more than 2,000 armed robberies. Even small things like cleaning your parking lot, making sure it’s well-lit and removing the graffiti can greatly reduce losses from robberies.
There’s a lot of things that the states are looking at, especially in merit-based states. Oregon, Washington, California and Colorado are not merit-based states; as long as you meet certain guidelines, they’re going to give you a license and it’s survival of the fittest. In Illinois, for examples, the state grades applicants, and whoever has the highest score gets the license, so you need to make sure you have a more robust security plan.
MV: Any thoughts on why we’re seeing robberies skyrocket on the West Coast and in Western Washington, in particular?
TG: When somebody robs a store and gets away with $10,000 or $100,000, that hits the newspapers. More people see that and say, “Look at this. Let’s go rob another dispensary.” And that continues to feed into it. If someone robs a dispensary and walks away with $300, the next robber is not inclined. It’s not worth it for $300.
Having done this for 25 years, you can only survive so long by some of these measures that you’re putting in place. They may be stopgaps, but they don’t address the issues that can really reduce robberies. So I see Washington continuing to have problems until those core issues are addressed — but they’re not unique problems. It’s not like this doesn’t happen in pawn shops or jewelry stores, but these issues have been addressed. There shouldn’t be reports of, say, $100,000 worth of cash being stolen, because there should be physical safeguards in place to prevent that from happening.
MV: It seems like a lot of this ultimately comes back to federal regulations that largely require people buying cannabis to pay in cash. Companies don’t necessarily have a hard time getting a bank account anymore, but they are limited in taking payments with credit cards and debit cards.
TG: That’s a very true statement. If they are able to do more credit card transactions, the amount of cash would be lower. If there was less cash in the store, there would be fewer robberies.
But there are other industries out there that deal in large amounts of cash, like pawn shops.
I agree that there’s some ownership on the federal government for not allowing more credit card transactions or fewer cash-based transactions, but it’s not that the cannabis industry is unique.
When you look at these robberies that are occurring out in Seattle — and I look at as many as I can — there’s always some sort of security breakdown that allows someone to steal $20,000 or $50,000.
Years ago, I was in the pawn industry in Houston, Texas, which had a huge, huge amount of robberies, very similar to what’s going on with cannabis retailers in Seattle. What they were able to do was upgrade their safes to reduce the amount of time someone had to get jewelry out of a safe and that cut robberies by almost 80% in the first year.
MV: With your experience in cannabis, what do you see for the industry in the next few years?
TG: I definitely feel optimistic about the industry. I believe it’s going to continue to grow and continue to be the leading growth industry in the United Sates. What I see, going back to my retail days, is that people spend money on physical security and cameras, alarms, access control and safety. But I think they missed a bigger picture, and that is internal theft. A lot of times people lose sight of the fact that more than 85% of all the losses in the cannabis industry are because of internal issues. We see a lot of robberies, and they make the headlines, because people are coming in with guns, but we don’t hear about normal retail theft — people not ringing transactions, handing merchandise to their friends or stealing merchandise themselves. So I see the industry becoming more of a retail industry and more of an accepted industry, and following the pharmaceutical space.
MV: There’s talk in Washington and some other states about adding an enhancement to crimes at cannabis shops, something similar to robberies at pharmacies. From a regulatory perspective, do you think that’s something that can have a positive impact on reducing crime?
TG: I do. I believe more effort by law enforcement or lawmakers making this more of a serious crime would be a deterrent to people. Now, it’s almost like shoplifting in San Francisco. If you get caught, they’re just going to let you go. So if you’re inclined to shoplift, why not? But if you knew that you were going to rob a dispensary in Seattle, and if you were caught, you were going to serve some serious time — much like laws for the banking industry — I think it would definitely be a deterrent.
This interview has been edited for length and clarity.