HE institutions paying huge mark-ups on tech products during pandemic, says report

Probrand found that the average mark-up on goods rose to more than 50% following the emergence of COVID-19, with one institution paying margins of more than 1,200%

Higher education institutions have been paying significantly over the odds for tech products during the pandemic, according to a new report.

A study by Probrand found that the average mark-up on goods rose to more than 50% following the arrival of COVID-19.

Even before coronavirus hit, higher education (HE) was paying considerably more than it should, says the technology services provider.

Before the first lockdown, Probrand’s analysis of £4.7 million of tech spend across 14 sectors revealed that the average margin paid to suppliers was 9%; according to the Society of IT Managers, industry best practice recommends that organisations should pay no more than 3%.

In one extreme example, an institution was found to be paying margins of more than 1,200% on its purchases.

“It’s not unusual to find some organisations paying way more than 3% over the trade price of the product, especially if they don’t have price monitoring tools in place,” said Ian Nethercot, MCIPS supply chain director at Probrand.

The recent hike in margins of over 50%, however, is something else altogether.

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“COVID-19 completely changed the landscape,” added Nethercot. “We witnessed both a huge spike in demand and a significant contraction in supply, due to factories closing in Asia and planes being grounded.

“There is no doubt that this extreme supply and demand characteristic resulted in panic buying, with people prepared to buy whatever they could get their hands on, at whatever price, in order to equip staff working from home.”

While the laws of supply and demand dictate that a restriction of the former will lead to an increase in the latter, they cannot wholly account for the scale of price rises seen during lockdown, according to Nethercot.

“What some suppliers were asking of their customers far exceeded any increases we were seeing in the channel, and by some distance,” he said.

“The trade prices didn’t increase 50% on average, so there was definitely a hint of profiteering here.

“I suspect there will be a number of procurement teams retrospectively reviewing the prices paid during this difficult period and questioning the relationships they have with their suppliers.”

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