Report: Office Depot Lies to Customers to Boost Profit on Notebooks

[Rob Williams]

From our front-page news:

Alright, so I'm sure that a very few number of our readers run to Office Depot anytime they need a new notebook, but chances are good that we all know someone who does. After all, their prices seem so tempting in the flyers, but those prices are sure to change once the customer strolls into the store, thanks to extra services that employees attempt to tack onto the receipt. This practice is nothing new, though.

What might be new is the fact that it seems fairly common inside of Office Depot to tell the customer that the notebook they want is out of stock if they opt out of the extra services (such as an extended warranty), even if it is in stock. Companies like this don't make a huge profit on items like this, so in order to help improve the matter, they sell these extra services which is just padding, since most customers will never take advantage of them.

This isn't so much a rumor as fact though, as some employees have come out of the woodwork to verify these shady practices. I'm highly doubtful that Office Depot is the only company who lies to the customer to get more money. They are probably one of the few to lie about not having stock, though. Of course, when it comes to a notebook, online is always the best way. Better prices, and no pushy salesmen/women... what's not to like?

Laptop was later contacted by a person going by the name Rich, who proved himself employed at Office Depot with a current check stub. Rich said, "I have witnessed lying about the availability of a notebook, and have been told to do so myself. Once I was talking to the customer and, while I am actually speaking, my manager comes on the radio and tells me to say it is out of stock if they aren’t getting anything with it. I always ignore him and sell it anyway because lying to the customer is flat-out wrong."

Source: DailyTech​

 

[Rob Williams]

We have followed-up to this story:

Yesterday, we linked to a story that discussed issues that could arise when purchasing a notebook at Office Depot. The story stated that if you didn't opt into additional services, such as an extended warranty, then chances are that the employee would simply tell you that the notebook is out of stock. Although it's not likely typical of all Office Depot employees, some have come out to admit that these practices do happen.

An Office Depot representative have sent us their official response to this matter:

"First, as part of our commitment to providing office supply solutions to our customers, we offer numerous products and services, including service warranties and other complementary products and services for many technology products. These offerings are similar to other sellers of consumer electronics. Office Depot's objective is to offer such products and services to our customers, without regard to whether a customer purchases or does not purchase service warranties or other complimentary products and services. Although we offer a variety of sales promotions, like most retailers, we sell customers only what they wish to purchase. We do not have, nor have we ever had, policies or strategies contrary to this objective, and we do not condone sales practices to the contrary.

Accordingly, we do not have any policies or sales objectives to limit the sales of laptop computers to only those customers who agree to purchase service warranties. Office Depot has been recognized with numerous awards for our commitment to customer service, so please know that we take this issue very seriously and will take the necessary steps to ensure that we continue to enhance the customer experience and promote quality in our customer-related processes. We are currently in the process of reviewing this situation, and if any associates have deviated from our sales objectives and policies, then they may be subject to disciplinary action, including termination."

The last line does well to sum-up how the company feels about this situation, which is good. I'm uncertain if Office Depot employees work on a commission (I'm awaiting a response on that), but if so, then that would be a good reason for a pushy worker. If not, then I'm uncertain why regular employees would feel so inclined to push services, when it doesn't really benefit them in the grand scheme. Either way, Office Depot is certainly not the only company to ever have been guilty of something like this, but it's at least nice to know that they are taking matters seriously.
​

 

[Relayer]

The original story, while troubling, wouldn't come as a surprise to anyone who's worked in retail sales. Now their response comes, and I greet it exactly the same, troubled but not surprised. They are going to throw some salesperson(s) under the bus and say, "See we don't condone this type of activity." Actually, what they don't condone is getting caught.

I used to work at Montgomery Ward. If you ran less than 10% warranty dollars to sales dollars you would be subject to actions that while they could be described as not disciplinary, in actuality that is exactly what they were. One location, that I worked at in NY, on any day you were below the 10% the next day would take you off of the sales floor (mind you now, we weren't paid an hourly rate. We were paid straight commission) for an hour to watch a training DVD on how to sell warranties. In another location in Tx. you would end up in the General Manager's office explaining why you failed the day before. He would actually sit you down in front of him and say to explain to him why you failed yesterday. All the time being as intimidating as possible. Interrupting, scolding, etc...

Sears has similar "quotas". They weren't, when I was there, as demanding as Wards was, but they still would pressure you. Sears actually lost a claim brought against them about warranty quotas by an employee some years ago. That's probably why they weren't as overtly demanding as Wards was.

I have seen managers for both companies do their best to discourage customers from buying product if they weren't buying the warranty. Especially if they were on the edge of falling below their required percentages and in danger of loosing bonuses they would receive for warranties.

I don't blame the salespersons nor the managers. It's the pressure from executives in the proverbial Ivory Towers that are the problem. They though, make sure that they are thoroughly insulated from the scrutiny by maintaining "plausible deniability".

 

[Rob Williams]

The original story, while troubling, wouldn't come as a surprise to anyone who's worked in retail sales.

The closest I've ever worked in a place like this would be a supermarket, and obviously, you don't often see employees trying to push something on customers there. Simply walking into a place like Office Depot or Best Buy tells me enough. It bugs the hell out of me when I'm just looking at something and someone comes up and asks me if I need help. If I actually looked confused, I could see it, but if I'm just browsing, I don't need no freaking help. I just hate the sales pressure in general... it's not needed.

Your relayed experience is truly ridiculous... makes me sick to think that companies like this still exist. Below the mark, so you watch an HOUR-LONG training DVD? That's when I'd flip the manager the bird, throw my badge on the floor and leave. Workplaces shouldn't be like this. If you already work on commission, obviously you want to make more money. If you are below a quota, then it was probably because of means beyond your control.

 

[odmanager]

Unethical Selling Practices

I've been a manager at Office Depot for many years. I can tell you that these practices do happen at OD.

The reason is because OD puts so much emphasis on the stores to sell PPP's (Product Protection Plans i.e. Extended warranties) and TDS (Tech Depot Services i.e. crapware removal/optimization) with every technology item that the store sells. On average, a store must attach 30% services to every qualifying item. We are also held to daily "Service Dollar" budgets. The budgets are based on the stores volume. Average budgets are around $400 each day. We must email our District Manager (DM) a midday update and a final number at closing. You can bet that one will get a call from the DM within the hour if these numbers are low or at "0". We get statements like "What are you doing about this???" "If YOU can't get this done.... I'll find someone who can!!!" "I'll bet there are lots of (out of work) former Circuit City managers that could get it done!!!... They'd love to have your job!!!"

It is these types of attitudes within OD that are encouraging managers to stoop to unethical decisions. DM's have been known to "look the other way" if there are any rumblings about unethical practices. I'll bet that if you researched the top performing "service dollars per day" stores... you would find some form of "cheating" going on. Such as:
1. "Laptop out of stock scam" - obviously what is being discussed here. Laptops/Desktop computers are easy for the employee to say they are out of stock because these items are almost always stored in a lock up that only a manager can get into. That is what is so disturbing about this story.... A MANAGER MUST BE INVOLVED IN THIS SCAM!
2. "The Clearance Table scam" - We are required to build clearance tables and have them in prominent view of the customer. If a laptop originally priced at $599.99 gets marked down $100 to $499.99. A manager/employee will use a handwritten clearance tag and price the laptop at "$669.99 with a free warranty!!!" (The price of a PPP is $169.99+$499.99=$669.99). If the customer inquires about not wanting the warranty... they are told they have to be purchased together because it was a display and has to be sodl with a warranty!
3. "Warranty switch-a-roo scam" - OD offers the customer the ability to pay to have a chair assembled. There is a specific sku that is supposed to be utilized; however, this sku does not count toward the stores "service dollars" goal. So what some managers do is build the chair for the customer and charge for a furniture PPP warranty to boost the warranty "service dollars" for the store. Some stores go one step farther by pre-building several chairs so a customer has no choice but to buy the assembled chair. The cashier knows how to ring it up. Chair + furniture PPP = a pat on the back.
4. "Oops, I charged you by mistake scam" - This doesn't happen as much now since OD got rid of "Market basket" Market Basket was a report that OD generated daily on certain items. (i.e. Every printer had to have the following items sold with it: Cable, Ink, Paper, & Warranty.) We got rated by attachment %. For example a printer with 1 item got you 25% - with 2 items you were at 50% etc... We were held to 30-50% attachment rates. What some employees would do is charge the customer for at least 2 of these items (even if the customer did not put it on the counter), then finalize the payment. The associate would then say "Here is your paper and cable with the printer!" If the customer said they did not want the paper and cable... that was fine, the employee would then process a refund for the 2 items. The key is that the original transaction got counted because the items were rung up on the same receipt! So the attachment % was at 50%.
5. "Lie about the quality scam" - If a customer was purchasing an electronic item, the sales person goes in to the warranty speech. If the customer doesn't bite, then the employee goes into the "bad quality" speech. "We've been experiencing alot of issues with this particular HP laptop. I would not recommend buying this laptop without a warranty for your own good! (sigh & shake your head in the "no" position)" If that doesn't work... go to scam #1.
6. "Take advantage of the older generation scam" - Not really a scam, but somewhat sad. When an older person makes a purchase, they tend to be more gullible than most. Alot of them buy shredders. It is easier to sell them oil and a warranty.

The employees do get a small bonus for every warranty they sell and a possible bonus based on "service dollars". However, this is not a motivation to sell the services as much as it is to keep ones job!. Also, nobody likes to get spoken down to about the horrible job they are doing by not selling.

This whole emphasis by OD on selling these services is very frustrating for all managers. In every district there are a few stores that constantly outsell the rest of the district. These stores get dangled in front of the faces of the remaining managers by the DM's as proof that it can be done. Yes... some of these stores are legit. But in several instances they are not. Me and several other managers have called these stores to get advice on what they are doing to achieve these numbers. We get the ole "I've got a great kid (xyz) that sells anything and everything. You need to hire someone like him!" Then I have my tech associate call or visit their tech associate - That's when we get the real story! (See one of the scams above). I'm not one to tattletale and see someone get fired... so we just have to live with it.

It's sad because OD is putting so much emphasis on selling "service dollars"to increase accountablilty and sales, but because of this, OD is actually selling less in many instances because of the above practices!

It all comes down to greed. Let's look at the numbers:
$400 on average per day per store X 1200+ locations = $480,000 per day.
This equals $3,360,000 per week or $14,400,000 per month.
This equates to $174,720,000 per year at a 70%+ margin!

-Lost market share and customers due to shady selling practices and policys... PRICELESS!!!

 

[Merlin]

I don't even think of OD as a place to buy a notebook or computer. Maybe printer paper or some staples.
You know, just small office articles .
But it might be fun to go in and f**k around with the system.
Like get all the way to the register while on the cell phone and then say I found a better price somewhere else on the same notebook.

 

[b1lk1]

Doesn't surprise me in the least. I was an assistant manager of an Autozone store and we had lots of add-ons we were basically forced to push on people. Cost me my job when I told the regional manager I thought he was an ass for the policies.

 

[Rob Williams]

odmanager: Thanks so much for such an in-depth look behind the scenes... very informative.

Some of what you say still surprises me... that clearance table scam is disgusting. I'd REALLY like to know if Office Depot is really worse than the rest of these brick and mortar stores, and who else partakes in such shady practices. Maybe all of them do, and I'm sure they do, to some extent.

I'll stick to online shopping.