Retailers who use clothing security tags notice a boost in profits beyond expectations. It is a simple yet often overlooked formula for figuring out the return on stopping retail shrinkage or inventory loss. Simply divide the value of the lost merchandise by the net profit (not gross profit margin which is obviously much higher).
Example, a $35 stolen shirt with a net margin of three percent requires $1,166.67 in sales to recoup the loss. Hard to believe isn’t it. It is one of those “I don’t look at that because I don’t want to know” things. Loosing one $35 item is not a $35 loss. In order for the business to replace the items total retail value of $35 you will need a net profit of $35. $35 divided by a net profit of 3% is $1,166.67.
So obviously a very powerful way to boost profit margins is to control losses and use products like clothing security tags to keep the merchandise on the rack. If total losses is 5% in a $1mil per year clothing boutique the total lost merchandise is $50,000 per year. Now look at that divided by the net margin and you will get $1.6mil. If you can reduce your losses by a realistic 50% by using security tags on clothes you will be adding $25k to the profit margin. I’ll leave that one to you to figure the boost in net margin…it is significant.