Fast-growing Schutz Shoes upgrades its fraud detectionsoftware to slash manual reviewsand improve order processing.
Online orders were flowing into shoe e-retailer Schutz Shoes,the U.S. division of Brazilian-based shoe retailer Arezzo & Co., but thesmall team spent an increasing amount of time checking whether an order wasfraudulent. When one employee on a staff of seven has to manually review thelegitimacy of an online order, that’s time away from customers and otherbusiness, says Kimberly Gort, e-commerce manager for Schutz.
Schutz Shoes started selling online in 2014 operating itse-commerce site in the basement of its New York City store. That first year,Schutz had about $350,000 in online sales. In 2015, about half of its productcatalog was available online and sales grew to $1.5 million. Now, with all ofits products available online, Schutz Shoes projects about $3 million in onlinesales for 2016, Gort says. The retailer also opened a store in Los Angeles.
With triple-digit percentage growth comes growing pains. Whenthe e-retailer received a modest five online orders a day, using the free toolfrom its e-commerce platform provider (Shopify Inc.) worked fine, Gort says.The plugin would flag orders that might be fraudulent, and the retailer decidedto approve or decline such orders. Forexample, the tool flagged an order if the credit card and shipping addressesdidn’t match, so a Schutz employee had to call the customer and determine if itwas a legitimate order. Deciding what was and wasn’t fraudulent often wasdifficult, Gort says.
“There’s always a risk,” she says. “It was like we wereplaying roulette.”
The situation frustrated the retailer and the shopper, assome shoppers were blocked from placing an order or their order was delayed orthey had to deal with a phone call from the retailer. Schutz was missing out onorders, devoting almost a full employee to manually check the orders and seekout consumers to verify information. As order volume and sales grew, themanual-review model no longer worked, Gort says.
In July, Schutz Shoes decided to integrate fraud detectionsoftware provider ClearSale onto its platform, choosing the vendor because itwas used by parent company Arezzo. It took about two weeks to integrate thetechnology onto Schutz’s site, Gort says.
ClearSale factors in about 100 variables to approve or denyorders, and then has its 500-person team to dig deeper on flagged orders, saysRafael Lourenco, vice president of operations at ClearSale. Orders can beapproved within three seconds, while an order that requires manual review willtake 24-48 hours, he says.
The impact of adding ClearSale was almost immediate, Gortsays, as Schutz Shoes was no longer on the hook to manually check flaggedorders. The e-retailer now approves 94-96% of its orders, which is about a 5%increase from when it relied on its free plugin, Gort says.
ClearSale charges per transaction and takes a 0.4-1.5% cut ofthe sale. The commission is worth it, Gort says, as more sales are approved. InAugust, Schutz Shoes paid ClearSale $1,500. The retailer processed 1,200 onlineorders that month, 1,002 of which ClearSale reviewed in some capacity; of those1,002 orders, 973 (97.1%) were approved.
ClearSale has about 2,000 clients, and more than 90% areretailers, Lourenco says. Across all of its clients, 93.5% of orders areautomatically approved, Lourenco says.
Recently, ClearSale updated its formula with another variableto approve or deny orders. The feature factors in how long a consumer is on thewebsite before she purchases. The shorter it is, the more suspect. However,this is only one variable and a short time between landings on the site andpurchasing will not automatically flag an order, Lourenco says. The new featureincreased ClearSale’s average approval rate by 1%, he says.