PACIFIC SECURITY ALARM

THE HIGH COST OF SHRINKAGE

AND THE BENEFITS OF SOLVING THIS PROBLEM


Inventory shrinkage is a major problem for business managers. It is extremely costly and becomes even more problematic as profit margins get lower. Pacific Security Alarm can provide the solution!


The cost of shrinkage

Lets say a retailer has a dress on display which retails for $100. If this dress is stolen the retailer has to sell ten additional dresses just to make up for the loss of this one dress!

The following example will help illustrate this concept.

The reason that it takes so many dresses to be sold to make up for the lose is that when you lose the dress, you have to replace the item, and you buy new inventory with net profits. If you are realizing a 5% profit margin, each dress that you sell will contribute $5 to replace the $50 replacement cost.

The pie chart below illustrates these costs at the retail price of $100.00:

We can help business managers by providing a solution to this problem. Retailers are dealing with low profit margins in a very competitive market. PSA has the solution to these low margins. We can help increase net profit margins by 10-20%!!!!

Here is how.

Studies have shown that retailers lose from 2-5% of their sales to shrinkage. For this example, take the low end to be conservative and say a small retailer is losing 2% of his sales. If the retailer's net profit margin is 5% and PSA's system eliminates half of his shrinkage losses (1%) you have increased net eamings to 6%, or a 20% increase!!!!


HOW MUCH SHOULD A BUSINESS 0WNER INVEST IN A SURVEILLANCE CAMERA SYSTEM?

You may wonder how much should a business owner invest in a Surveillance Camera system? The following example will help illustrate how to determine a budget using an example of a typical company with ten employees and $100,000 per month in sales.

HOW MUCH WILL THE CAMERA SYSTEM SAVE IN ONE YEAR?

1. Shrinkage savings$12,000
2. Productivity savings$15,000
Total estimated savings each year$27,000

SHRINKAGE

PSA designs a system that will pay for itself in a year or less. If a retailer has sales averaging $100,000 per month, he is probably losing at least 2% or $2,000 per month to theft. We feel that we can eliminate virtually all of a retailer's shrinkage problem, but for this example, we will assume we cut his shrinkage loses in half or $1,000 per month. Solving this problem is worth $12,000 per year.

PRODUCTIVITY

By recording all operations, (with time and date on video tape) a manager can be everywhere, all of the time. We estimate that this will improve employee productivity by at least 10%. You will now be able to do the same amount of work with nine employees rather than ten. This will save you at least $15,000 per year for an entry level employee with a basic benefit package. By "catching" your employees doing something right on video tape and commending them, you can use the system to provide positive reinforcement, raise moral and at the same remind them that they are being recorded. Productivity should soar!

The new Surveillance Camera System can be presented to the employees in a very positive way. One approach is to mention the rising crime levels such as robbery and shoplifting and how that having a system deters these crimes and will make the business a safer place for the employees. The honest employees will thank the business owner.

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