How the web helps Town Shoes crack store crime

When Toronto-based Town Shoes Ltd. ran six months of transaction logs through Triversity Inc.’s FraudWatch, senior executives quickly found what they were looking for. “We found--not unexpectedly, but disappointingly--that our employees were stealing from us,” Peter Gerhardt, Town Shoes vice president of finance, tells Internet Retailer.

Town Shoes is one of the few retailers that has implemented a web-based loss prevention system. Gerhardt says the company expects a quick payback on the investment. “The web is our access point to the database, all we need to get at all the information we’ve gathered in there is a browser interface,” Gerhardt says. Town Shoes operates 64 stores with 1,200 employees across Canada.

Town Shoes was searching for unauthorized credits to employees’ credit cards. It loaded six months of transaction log files into FraudWatch, then sorted refund transactions by card number and dollar amount. “We dug into the database to see if we had supporting sales transactions,” Gerhardt says. “If you find unmatched sales, you know you have a problem.”

On the first pass, Town Shoes identified four people who were giving themselves refunds. “They figured they could take a bona fide sale and give a refund to their own card and they’d never get caught,” Gerhardt says. “And they were probably right. There is no way we would have caught people if we had had to move and process all the data manually.” Each of Town Shoes’ 64 stores processes 200 transactions a day for a total of nearly 13,000 each day.

After the success with credit card and debit card fraud, Town Shoes turned to what’s known as cash post voids, in which a clerk simply voids a transaction rather than issues a refund, then pockets the cash. Again, it spotted dishonest employees pretty quickly, including one who had taken $5,000. It has identified as many as five other employees who were stealing via cash post voids.

In addition to catching the thieves, the system also flagged another problem: Cash post voids should be caught by managers who are following company policy and reviewing all such transactions daily, Gerhardt says. But the investigation showed that store managers were not reviewing all voids. “This gave us something we could use in pointing out to managers that they were not complying with company policies,” Gerhardt says.

While such information could be collected and disseminated without the Internet, the web makes the job easier and more timely, Gerhardt says. For one thing, the web allows Town Shoes investigators to know exactly what is happening while it’s happening. And the web gives them access to the information on a real-time basis in such a way that store personnel may not know what’s happening. “This can be done from any laptop,” Gerhardt says. “So if someone is in a store and needs access to records, they can pull it down from their own laptop.”

Town Shoes has not computed its payback yet on the Fraud Watch technology. “The payback will be significant in terms of deterrence,” Gerhardt says. Town Shoes pays $75 a month per store--$4,800 a month total. “I assume that for every one we catch, we’ll deter another four or five,” he says.