In order to secure a three-year purchasing contract with the state of New York, office supplier Staples agreed to sell 291 common items for a penny. They hoped to make up the difference in sales of higher-priced items, but the company neglected to put any limits on the penny purchases. You can imagine what happened. Schools, prisons, charities, and other agencies ordered “staples” such as tissue, paper towels, tape, and batteries by the truckload.
The Monroe-Woodbury school district, about 50 miles north of Manhattan, was the top bargain hunter, taking delivery of $677,000 of penny items at list prices during the contract’s first few months, paying $299.15. The numbers come from spreadsheets provided by the state in response to a Freedom of Information Law request.
Sheri Patterson, finance officer at Monroe Woodbury High School, said boxes were “stacked in hallways…we didn’t have any place to keep” them.
There were surprises. Ms. Patterson thought a penny paid for a roll of paper towels—instead, it was for a 24-roll pack. The school received 53 packs, records show. “We were just wondering whose idea this was,” said Ms. Patterson, “and if they still had their job.”
Staples declined to comment on personnel matters.
Many of the penny items ordered have not been delivered, and the state is negotiating with Staples to fulfill the terms of the contract.
A coveted penny item was a 64GB SanDisk flash drive, a large “thumb drive” to store or transfer data. It listed for $249.99 but recently was priced at $54.99 on Staples.com.
Customers ordered 128,978 of them in the contract’s first few months, documents show, compared with anticipated annual demand for 33. Staples delivered 1,080 in that period. Had it delivered all those ordered, it would have sold drives with a current retail value of $7.1 million for $1,290.
Whoever made the estimates of how many items would be purchased forgot one basic rule of retail: people will do without expensive items, but will buy if the price is right. Staples’ estimate of their loss has to be taken with a grain of salt, however. Who pays $2 for a single pad of Post-it notes? Or a thousand dollars for a shredder? I have a shredder and a bag of Post-it notes for an investment of about $6, although they’re not the same brands.