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Audit reveals $40,000 plus in overcharges by Office Depot on North Carolina state contract!
 

Office Depot overcharged North Carolina by at least $40,000 since becoming its sole source supplier for office supplies, a report issued this week by the state’s auditor has found.

The report found incorrect prices on over 1,500 transactions in the first seven months Office Depot held the contract, as well as a number of items covered under the contract that were not available for purchase.

Office Depot has operated as North Carolina’s sole source supplier since February 2006, following the state’s decision to switch from multiple vendors to a sole source model.

That move provoked fierce criticism from NOPA, omega watches replica spearheaded by a coalition of independent dealers in North Carolina who charged the state was eliminating competition in its procurement processes and favoring an out-of-state, billion dollar company over local small businesses.

According to state auditors, North Carolina’s Purchase and Contract (P&C) Division, the agency responsible for managing the contract, lacked a reliable means of monitoring purchases and failed to require permanent corrective action when it did find pricing errors and availability problems.

“While P&C’s monitoring of the office supplies contract had identified and addressed errors, no evidence was provided that P&C attempted to identify and correct the underlying cause(s) of the errors,” the auditors said.

“Pricing errors in the vendor catalog continued to exist, even though P&C was aware of the problem and had addressed known individual pricing errors, including some that resulted in overcharges to state agencies. Additionally, a number of items covered under the contract were not available best replica watches for purchase through the vendor.  In the absence of permanent, reliable corrective action, state agencies’ assurance that contracted items are available, at contracted prices, is compromised.”

“All I can say is, they told you so,” commented industry government affairs expert and INDEPENDENT DEALER columnist Paul Miller. “North Carolina dealers told everyone from the top down in the government what was happening. They had a solid plan that was fair for the state, promoted competition and would have avoided cases like this. If the state had done its own due diligence, it would never have approved this contract in the first place. Now let’s see if they can finally do the right thing and give this business back to the people with a real stake in North Carolina and that's local business!”

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How do the big chain stores stay in the game?

 

GOPD is a market research and technology company specializing in the office products industry. GOPD has been monitoring chain store pricing practices since 1999 and is the un-disputed leader in the field.

During the years of analysis, several trends appeared and continue today.

Low Price Leaders

Everyone has heard the advertising by the office supply chain stores. Guaranteed lowest prices, 110% low-price guarantee, and claims of 50% discounts. But what is the real story?

It is true that some items are deep discounted, but these are more than made up for when you look at the whole picture.

Below is a chart of the number of items the major chain stores have priced at a 10% discount or less.


Items Priced At 10% Discount or Less:


While office supply chain stores like Office Depot claim huge discounts, the majority of their prices are not that low. Compare 40% of Office Depot’s prices at 10% discount or less while only 6% are true loss leaders and you start to see how the pricing game is played.

The chain stores are experts at mixing the pricing to achieve the maximum amount of profit while attempting to fool the consumer with loss leaders.

 

Items Priced at or Over List Price:

In addition to over 40% of Depot’s prices being only 10% discount or less, it is quite common for the office supply chain stores to price items substantially higher than manufacturer suggested list price.

The only way to accurately evaluate the pricing for the office supply chain stores is to look at the complete picture. Compare all the items, loss leaders and regular supply items and the results are not what they advertise.

Average Discount Off List Price:

None of the top office supply chain stores average more than 25% discount off list price. Depot and Reliable struggle to average 15% discount off list.

So what is the answer? Do the office supply chain stores truly have the lowest prices? Some items are cheap some are high. How do you know?

The truth is you can’t know. As you will see, the chain stores are constantly changing prices to keep the low-price perception while reporting increasingly higher profits to Wall Street.


Constant Price Churning

The chain stores are constantly churning prices. Getting a good deal often depends on what day of the week you purchase the product.

Counts of Items With Price Changes:


It is common for consumers to spend dozens of hours researching office supply pricing to find competitive sources. Unfortunately, even the most careful analysis is obsolete within as short as a week due to constant price changes by the major office supply chain stores.

Prices Going Up

In order to stay in favor with Wall Street, the office supply chain stores must constantly report more profits. Profits can only be increased by cutting costs or raising prices. Once costs are reduced, the only alternative is to raise prices.

Counts Of Items With Price Increases:


These counts include those cases where the same item has changed price. It is not uncommon for the office supply chain stores to change the price on a single item, multiple times, within the same week.

 

To appreciate the magnitude that these constant price changes have on the typical consumer office supply budget, look at the following chart detailing the number of price changes by month for a single office supply chain store.

Counts of Depot Price Changes by Month:


There is no way the consumer can be assured of any pricing consistency with this constant change.

What Can You Do About This?

Not only do we monitor pricing practices for the office supply chain stores, we also monitor pricing practices from locally owned and operated independent office supply dealers.

Our research has shown, time and time again, that most local independent office supply companies are substantially lower in overall cost to the consumer.

Most independent office supply companies also offer “fixed” pricing that they honor for a length of time. This allows the consumer to accurately budget office supply expenses and not be surprised by budget overruns.

The pricing gap between the independent and the chains is so wide, and the consumer perceptions are so engrained that the chains have the lowest prices, that some independents have chosen to match the chain store prices using our services.

Without exception, every independent office supply company that uses the chain price matching service has reported much higher profits.

Decide for yourself, but know the facts.

This document was produced by GOPD, which is solely responsible for its content. www.gopd.com.

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