For years, the "big box" superstores - Staples, Office Depot, and Office Max have followed the traditional "snowman" pricing model - the head of the snowman being the high-volume, most used items (copy paper, file folders, post-it notes, etc.), the middle of the snowman being the occasionally purchased items (toner, breakroom supplies, janitorial supplies, etc.), and the bottom of the snowman being the thousands of items or sku's that are infrequently purchased (file cabinets, whiteboards, computer keyboards, to name just a few).

The snowman pricing model was built on the idea that most companies primarily focus on only the top 10 or 15 items they purchase.   By selling the high-visibility items below cost and attracting customers by publishing the "head of the snowman" prices on the cover of their environmentally-unfriendly flyers - the ones that have cluttered the inboxes of office managers and ultimately our landfills for the last two decades - the superstores have been practicing a bit of 'sleight of hand' magic.   

By keeping their customers focused on the high volume loss-leader pricing, they've made up margin on the body of the snowman by tilting the pricing on the less frequently purchased items upward to a level that is often higher than can be found online - with no corporate account or volume discount!  Abracadabra!  And the big secret up the sleeve is that while the top 10 or 15 items are more frequently purchased items, the head of the snowman typically only comprises 30% or less of total spend.  The other 70% - the body of the snowman - is where the big box superstores make their profits.

In a study completed last week for one of the largest construction companies in Atlanta (that currently spends an average of over $7,000 per month), we found over a dozen items on their January and February 2009 Staples invoices that could have been purchased at staples.com with no corporate "discount" whatsoever - at prices that averaged 15% less than they were charged as a "Staples Preferred" corporate customer!

While no one can predict what paper prices will do in 2009, the price increases that hit the industry in 2008 have been wreaking havoc on expense budgets as paper represents an average of 20% of the typical company's office supply expenditure.    And although the price of fuel has dropped, price increases that were levied on the consumer when fuel prices climbed in 2008 have largely stayed intact.  And with Staples acquiring Corporate Express, industry consolidation has also contributed to office supply pricing increasing across the board. 

And finally, with financial pressures affecting the big box stores, the trend toward finding ways to increase margins on their customers is very likely to continue.   Tactics like the snowman pricing model typically target the 30+ employee corporate consumers that routinely spend hundreds and even thousands of dollars per month rather than the home based businesses that typically take the time to price shop every item they purchase.   And while businesses can achieve savings by analyzing their expenditures themselves, most business efficiency experts will tell you that paying a $40,000 per year Office Manager (+ benefits) to spend 3 hours every week price shopping pens and post-it notes is not exactly the most cost-efficient model.

Spring has sprung, the economy is still sputtering, and it's time to melt the snowman.  But who has the time to analyze every item that has been purchased over the last 3-6 months and compare it with the industry average?   The answer: We do!   Ask your current office supply company to provide you with a comprehensive list of 3-6 months' purchasing (many provide this data for you online), and then ask the office supply consultant hoping to earn your business to analyze everything you purchased over the time frame, not just your top 10-15 items.   That way you can be confident that the savings projected will be the savings earned.