When Will the Coop Ever Change? Part II
(The following is the second of a two-part feature on policy changes at the Coop.)
LAST FALL a group a gadflies made things pretty hot for the management of the Harvard Cooperative Society. Although the organizers and supporters of the alternate slate for Board of Directors fell short in their bid to attract a quorum to the annual meeting, the Coop directors heard and took to heart the ideas generated by their opposition. Besides being concerned with the Coop's internal policies, the alternate slate, organized by Wesley E. Profit '69 and Steven P. Roose '70, was interested in improving the Coop's relationship with the larger community of Cambridge and Boston. No one had ever really confronted the Coop like this before. Moreover, the fact that a thousand members turned out for the annual meeting proved to management that a significant number of members shared the belief that the Coop should look for new means of community participation.
While the failure of minorities to get any representation on the board has led the directors to establish an investigation of the current election procedure set forth in the by-laws, the issues and questions raised by the alternated slate have given birth to a second study under the Community and Operations Committee (COC), which has just gotten started under Cornelius W. May, a third-year law student.
Milton P. Brown '40, Coop president and Lincoln Filene Professor or Retailing, expects the COC to work from the inside out. "Our first job is to make sure we are giving the best service we possibly can as a store run for the benefit and convenience of its members and the other people who use it. After that we will try to see how well we are doing our job in the community," Brown says.
Keeping the Coop a profitable business, while at the same time offering both low prices and a rebate is becoming harder and harder each year. Although he won't know for sure until the close of the Coop's fiscal year at the end of June, Brown is afraid that the membership rebates will have to be cut again this year. "Nobody wants to cut them," says Brown. "But we can't pay what we don't earn. As they say, you can't get blood out of a turnip."
THE COOPS rebate policy is one of the most misunderstood aspects of its whole operation. As a cooperative society, the Coop must pay back to its members all the profits left over from members' purchases after taxes and operating expenses. Unless the Coop pays this patronage refund, that profit is liable to be taxed up to fifty per cent as it is in any large corporation.
Members account for about 82 per cent of the Coop's sales. Thus, 82 per cent of the Coop's profits go back to the membership at the end of the year. The other 18 per cent gets cut in half by taxes, and the remainder is all the Coop has left for reinvestment and growth. Although the Coop appears to have a lot of money, it really doesn't. There are not large sums hidden away in the vaults of the Harvard Trust. In fact, whenever the Coop has needed to expand in recent years, it has had to rely on debt-financing.
Brown points to a number of factors which may force the Coop to lower its dividend rate as it did two years ago. Although sales have continued to grow (they will be over $16 million this year, compared to $15,282,000 last year), expenses have risen at a faster rate. Marginality has finally caught up with the Coop. For years he Coop had endeavored to give, in a sense, a double discount. Besides the patronage refund, the Coop has always made a point of pricing as low as or lower than its competition. In fact, the Coop was founded in 1882 for the very purpose of giving undergraduates a store in the Square that priced below the monopoly prices of the other merchants. "We make every effort to price as low as anybody we regard as our immediate competition (Jordan Marsh, Lechmere, and the Harvard Square stores) on identical merchandise," Brown says.
"The arrival of the discount house in the last ten years has really put us in a squeeze," Brown admits. "We have always tried to price as low as anyone, but now that low is relatively much lower than before. In order to get a dividend, the Coop must cut corners wherever it can. The rebate has to come from somewhere if it doesn't come from higher prices. You can't have a superlative store and fixturing, $5-an-hour sales people, maintain discount prices, provide a lot of service in the form of special orders and still expect to make a high profit."
UNLIKE most college cooperatives, the Coop pays a rebate on every item in the store, from drugs to texts to cigarettes. The mark-up on cigarettes and records is so low that after the Coop pays a rebate on them, it ends up at times losing money. The Yale Co-op, for instance, only offers a rebate on those items with a high mark-up. The Coop's policy has always been to pay its members a dividend on every item they purchase.
"There are only two ways to keep the Coop profitable enough to continue paying rebates," Brown says. "Either we get the margin up or the expenses down. If we get the margin up, people will cut our throats because prices are higher. If we get expenses down, we have to cut services. For instance, we could have a lot of money if we cut back or eliminated our charge account business or our Saturday check-cashing department, but we consider these important services for our members and ones they would not want to see eliminated."
THE EVOLUTION of Harvard Square has also hurt the Coop. The traffic maze and the shortage of convenient parking has discouraged many regular customers from coming into the Square to shop anymore, Brown believes. Moreover, the "hippy milieu" of the Square in the fall and spring keeps Harvard wives from shopping the Coop. "These attitudes may very will be misconceptions," Brown says, "but the simple fact is that a lot of housewives are a little scared to shop in the Square."
Brown admits that some areas of the Coop's merchandising are due for a re-evaluation. Last fall the Coop's stock of certain novelty items, such as the "Peanuts" and Harvardiana items on the first floor, came under fire from the alternate slate. These items do sell well and have a reasonable mark-up, Brown claims. Areas needing scrutiny, however, include such merchandise as men's clothing. "Students are just not buying suits and hats any more. Perhaps we ought to see if we can't use that space to offer clothing more in tune with current tastes," Brown says. "The COC will be working with Al Zavelle, acting general manager, to see what changes are in order."
Employee training is another area where increased efficiency would help cut expenses. Although 40 per cent of the Coop's employees are considered permanent, the other 60 per cent turn over every three months. Many students work only part-time or take a sales job to pay for holiday or seasonal expenses. Giving these short-term employees adequate training is extremely difficult. Inadequate training accounts for part of the Coop's shortage rate. Each year the Coop loses 2 1/2 per cent of its sales--about $4,000,000--in shortages. These losses include not only customer and employee stealing, but also employee errors in marking and charging. If an item costs ten dollars and a salesgirl inadvertently rings it up as one dollar, the Coop loses nine dollars.
The COC is already looking into ways of improving employee training. This assignment brings them to grips with both the operation and community aspects of their job. The community is interested in employment and the Coop wants and needs good employees. No one is going to get rich working for the Coop, but it does pay the minimum wage of $1.60 per hour, with the average employee wage at $1.95 per hour. For a number of years the Coop has sought employees through Action for Boston Community Development (ABCD), the largest agency in Boston working in the poverty field. While the Coop already employs proportionately more blacks--about seven per cent--than the other department stores in the area, it is actively seeking even more.
AS A RESULT of the interest last fall, the COC, and Cornelius May in particular, have tried to explore new means of improving employment at the Coop. "Besides ABCD, we have been working with a number of tenants associations and merchants in Roxbury and Cambridge in an effort to provide additional employment opportunities," May says. "Nothing is established yet, but by the middle of May we hope to have a proposal to implement a large-scale input program. "We've pulled in a number of people from Roxbury in an attempt to set up some sort of self-replenishing feeder organization to supply the Coop with a steady stream of employees."
INCREASED community involvement was one of the central goals of the alternate slate. At first the Coop's organizers questioned a number of the Coop's employment and investment policies, where it quickly turned out that the Coop was in most cases doing a good deal already. At the time Wes Profit admitted, "Like Harvard, the Coop does a lot of worth-while things which never get publicized."
Instead of pointing out specific grievances from then on, the organizers of the alternate slate stressed the need for a new outlook on the Coop's Board of Directors. "By the time the annual meeting came around," David Kirp, instructor at the Ed School and a member of the alternate slate, said recently, "our attitude was pretty much one of 'we don't know exactly what can be done to improve the Coop's relationship with the community, but elect our slate and we will, at least, take a look at some possibilities never tried before."
ALTHOUGH that slate was not elected, its very existence and insistence has spurred the Coop to take some of those looks for itself and to expand its existing program wherever possible. "Perhaps these new approaches would have come about eventually, but they would have taken a lot longer," May says.
Because the Coop itself is in debt, it cannot be of very much direct monetary aid to the community. "To expand, the Coop had to borrow from local banks and the John Hancock Company. The terms of those loans expressly forbid us to invest in any other businesses," Brown explains. The Coop can, however, give about $5000 to charity each year, which it donates through the United Appeal.
The COC is looking into ways for the Coop to help the larger community in ways other than money. Besides the proposed employment plans, the COC will attempt to set up a reciprocal agreement with area merchants, such that the Coop will recommend customers to other stores in the community if it can't supply a desired item, and vice-versa. May is quick to point out that the Coop's new ideas do not just involve the black community. "We are trying to establish more extensive relations with