A few years ago, we published an article on average office supply costs per employee. In recent years, office supply costs have been trending upwards, so we decided it was time to revisit this topic.
Managing office supply expenses
Generally speaking, office supply spending falls into two purchasing categories: contract and non-contract. We advise our clients to consider stocking as many commonly-used items as possible on contract to achieve maximum buying power and ROI.
Contracts also enable an audit system for tracking, especially helpful to reduce what we call ‘maverick spending’ as a result of employees purchasing office supplies off-contract, and then expensing those items.
Office supply costs higher for law firms
An LAC Group client sampling of several similar-sized law firms—with about 350 employees per firm—finds that office supply costs per employee fall mostly between $400-$500 per year.
Facing that fiscal reality, purchasing supplies from vendors offering volume-based discounts has the potential to result in significant cost savings.
However, despite rising office supply costs, last year a majority of our client law firms actually experienced minor reductions in per capita employee costs, compared to the previous year.
Changing vendor landscape for office supplies
With fewer vendors and reduced competition in the office supply industry, businesses have found themselves with less purchasing options as they attempt to cope with rising costs.
It is also worth noting that despite the challenges presented by rising office supply costs, the vendor market would have been even smaller had Staples and Office Depot (the two leading national vendors) been permitted to move ahead with their attempted merger.
Still, in recent years, there is at least one other major challenge that has the potential to spend the cost of office supply purchases: e-commerce behemoth Amazon.
Amazone effect: Fewer vendors, even higher prices?
According to Bloomberg/Business Week, Amazon spent over $14 million last year on lobbying regulators, as it maneuvers for positioning into new business sectors. In addition, Bloomberg also reported that Amazon “wants to power a planned, government-wide e-commerce portal for purchases of everything from office furniture to paper clips—a $50 billion market.”
Amazon’s phenomenal growth has, of course, already been felt nationwide by brick and mortar retailers. Given that history, it comes as no surprise that vendors of the multi-billion dollar office supply industry worry about Amazon’s continuing emergence as a major player in the office supply sector.
However, vendors are not the only ones that should worry about Amazon’s growing share of the office supply industry. If trends continue as expected, Amazon’s growing presence in the office supply sector has the potential to translate into higher prices for businesses stocking up on office supplies.
An examination of the average cost for office supplies charged by ‘big box’ vendors (such as Staples and Office Depot) compared to Amazon’s pricing reveals that Amazon is often far more expensive.
On average, Amazon’s prices for office supplies are 15-19 percent higher than the prices found in the big box retail stores.
Upon examination of specific items, the difference in purchasing costs between the big box stores versus Amazon is often quite substantial; the same calendar refill that costs $1.68 at a big box vendor would today cost $4.98 on Amazon. Similarly, an HP toner that runs for $186.53 at the big box stores would cost $235 if purchased on Amazon.
Higher supply costs = Need for spend management
Facing the reality of a smaller number of vendors and the trend of higher costs, the importance of controlling the amount spent on office supplies is sure to grow in the coming years.
The belief that a digital world will mean employees no longer require a wide array of office supplies is not holding up; to the contrary, demand for office supplies, particularly paper, remains quite high, particularly in the legal and healthcare sectors.
In addition to the cost of the actual items, busy procurement departments also have to factor in the manpower for oversight and the lack of market and peer benchmarking data for greater awareness and understanding. On top of that, an overall economic slowdown means that law firms and businesses would do well to pay close attention to this spend category the rest of 2019 into 2020.
With decades of experience in the office supply industry, LAC Group has the industry knowledge and data necessary to partner with procurement teams to help manage office supply spending. On average, our clients experience average annual procurement savings of 23 percent in this category.
Please contact me if you have any questions about your annual spend for paper, printing and other office product expenses.