Pennies go long way in Staples deal with NY state

AP News
Posted: Jul 31, 2013 4:46 PM
Pennies go long way in Staples deal with NY state

BUFFALO, N.Y. (AP) — Staples is practically giving stuff away under a new contract with New York state, charging just a penny for hundreds of items ranging from batteries and pens to surge protectors, staplers and even paper shredders that normally sell for $1,122 each.

But as word spreads about the deals, some government agencies are having trouble finding many of the bargain items in stock. And there's no Easy Button they can push to make them appear.

"You get all excited and then reality sets in and you realize, if it looks too good to be true it probably is too good to be true. You can't necessarily get it," said Mary Rozak, spokeswoman for Albany County.

Staples Inc. was selected from among 10 bidders for the contract to be New York's primary supplier of office products, allowing state and local governments and school districts to save money by harnessing their huge buying power.

Of nearly 300 items on the contract's core products list, Staples has priced 220 of them at one cent. They include a seven-outlet surge protector with a regular list price of $25.49, an electric stapler listed at $80, a 50-pack of file pockets listed at $112.76 and a 48-pack of tissues that regularly go for $152. Most eye-catching is a paper shredder with a list price of $1,122.12.

But just two months into the three-year contract, the company appears to be struggling to fill orders promptly, especially since the contract puts no limit on how many bargain items can be ordered.

Buffalo's school district has gotten some supplies but others have been on back order for a month or not available at all, said buyer Marsha Huard. When she called a Staples representative to complain that an item had been dropped from her order altogether she was told it was because the company didn't know when it would be back in stock.

"I said, listen, you can't do that. We need it. Put it back on the order," said Huard, who wondered whether Staples was trying to "wiggle out of" its agreed-to pricing.

Albany County had received three packages of file sign-out guides and three boxes of folders but had yet to receive two shredders, five first aid kits and some labels, batteries and book ends.

State University of New York spokesman David Doyle said there have been some items that have not been in stock "but that hasn't been a deterrent to our enthusiasm in our ability to get items we need for a penny."

Ontario County, though, turned to a separate contract it has with rival Office Max after Staples was slow in making a shipment. Things have since improved, Purchasing Director Debra Gierman said, judging by an order of paper plates, inter-office envelopes and some other items that recently arrived from Staples.

"It was tough initially because they'd say 'not available.' They wouldn't even process the order," Gierman said. "And these were mainstay items that we would have bought any way, whether they were a penny or the regular price."

Staples, based in Framingham, Mass., declined to comment. "As a matter of company policy, we do not discuss publicly the details of our contracts with customers," spokesman Owen Davis replied in an email.

Heather Groll, spokeswoman for the Office of General Services, which negotiates the bulk-buying contracts for the state, said that while many buyers have said they are pleased with the pricing, the office is "receiving calls every day" from those who've been told items are on back order or that orders have been canceled. "We are working through those issues," she said.

Penny pricing may seem crazy, but Staples actually may have much more to gain than it could lose on the nearly-free items, said Arun Jain, a marketing professor at the University at Buffalo School of Management.

Not only would Staples' bid have virtually eliminated any competition for the contract, he said, it also let the company gain a foothold with the state of New York, which has been overhauling its procurement procedures to increase savings and efficiency.

"They want to have fewer suppliers or only one supplier," Jain said. "So once Staples establishes a relationship with these office supplies, maybe they hope to sell office furniture or something else to them. And maybe those items are more high-margin items."

Kevin France, an executive at Independent Stationers, an Indianapolis-based cooperative that also bid on the New York account, said Staples' once-cent pricing "is a game that big boxes play," gambling that customers will buy more than just the low-priced items.

"I don't fault the big boxes for that because everybody kind of does that ... but Staples kind of took it over the top in my opinion, pricing things at a penny," he said.

Albany County's Rozak says, complaints aside, she doesn't begrudge Staples making such a deal.

"Companies are out to do business and to make money, and to make an offer like that is a good marketing move," she said. "You know what ... it's America."