100 Years of Tradition

Alice Knox '19 probably swears by the Harvard Cooperative Society. At 84, she is the oldest employee of what is more commonly referred to by patrons as the "Coop," the oldest and probably the most respected college retail cooperative in the country. The Coop celebrated its 100th anniversary last spring, and Knox has worked in its book department for more than half its existence. A warm, down-to-earth woman, she bubbles with enthusiasm, fond memories, and evident pride when discussing the Harvard Square institution that is only 16 years her senior. "I don't know anybody who works harder to give good service," she says, adding, "It's getting awfully big. When it was smaller, we knew everyone. It was like a family."

The Coop is a family no longer. The whir of modernization has transformed the store in ways Knox scarcely could have imagined when she entered the operation in 1925--and, what's more, in ways that would have appeared utterly alien to the cooperative's motley founders some 50 years earlier. It has grown from "a shelf or two in what was chiefly a fruit store" (as one historian puts it) to a multi-million dollar diversified retail business with six branches around the Boston area. Throughout the school year and summer, students, alumni and faculty of Harvard and MIT, as well as the general public, crowd the stores in search of not only obscure textbooks, but also suits, furniture, records, t-shirts, posters, candy, and a host of other odd goods. This remarkable rise has been attributed to sustained good business acumen and management, and high visibility in the Square. But in recent years, these very factors have sparked a growing debate over whether the cooperative has shed some of its original ideals.

Certainly Charles H. Kip, class of 1883, had no idea what direction the cooperative would take when he founded it in March of 1882. He wasn't sue it would last one year, let alone a hundred. But the then Harvard junior was concerned about the $150 tuition the College charged and wanted to find some way to combat what he and the other students felt were exorbitant prices charged by Harvard Square merchants for books and wood Supported strongly by the Crimson and the nowdefur 'Echo, as well as several influential faculty members, Kip and four of his classmates enlisted about 400 Harvard-affiliated persons to invest in the cooperative at two dollars a head and opened the "Society"--the nickname, "Coop," didn't catch on for several months--for business at 13 Harvard Row (next to Church Street). The stock of the new store was meager; according to an early history of the Coop by former Business School professor N.S.B. Gras, it offered only "stationery and some second-hand books."

The venture took hold, however. In its first year, the Coop notched nearly $14,000 in sales and, according to Gras, saved members (the only people eligible then to shop there) $4,500 through sharply reduced prices. Despite some early financial near-disasters and several location changes, the cooperative grew steadily, in 1924 finally moving to a four-story red-brick building at its current location in Harvard Square. In due time, the Coop began distributing profits to members in year-ending patronage rebates, a practice which continues today. By 1925, sales had passed the $1 million mark, membership had topped 10,000, dues had dropped to the present one dollar annual fee, and the store was distributing over $70,000 in profits to its members annually. Meanwhile, the Coop had added two new branches--one at MIT and a second at the Business School. And the diversity of merchandise exploded. From its dinky beginnings, the Coop had developed into a regular department store, offering clothes, toys, furniture, radios, all in addition to its perpetual staple--textbooks.

The key to the Coop's early success--and to today's success as well, say current members of the Board of Directors--is simply good business management. To curb a spendthrift Harvard community, the original student founders mandated in the constitution that payment for goods be in cash only. The cash-only requirement has since changed--as any undergraduate carrying that all-important red plastic well knows--but the same keen business sense still permeates the operation.

Perhaps inevitably, student participation in running the operation declined markedly as the Coop grew and the whole approach became decidedly more businesslike. Professional managers were increasingly brought in, efficient and tight accounting procedures were developed, the stores were opened to non-members, bigger loans were taken out. And all along, sales and membership went up and up and up.

Today the Coop is every bit the modern department store, paralleling Jordan Marsh and Filenes. While the 23-member Board of Directors is made up of Harvard and MIT faculty and students and 10 "stockholders" officially own all the members' shares in trust, most of the power in the Coop is wielded by General Manager James A. Argeros, who manages the day-to-day operations. Argeros came to the Coop five years ago from the Allied Stores Corporation and is perceived by his colleagues as a tough, shrewd businessman. Under his direction in recent years. Coop membership has climbed above 100,000, sales have risen to the $40 million range (and are steadily increasing), and patronage rebates are hovering near 10 percent a year. Despite some slips--most notably in the early '70s, when, according to present directors, bad management caused a financial pinch of low sales and rebates--the Coop is firmly entrenched and continues to grow.

Coop management is proud of its track record--and makes no bones about it. "They [the stores] feel they are serving the students," says vice president Donald P. Severance, who is also a development officer at MIT. Chimes in Argeros, "Over the long haul, a person shopping at the Coop gets quality, value--and a rebate." This is Argeros' chief selling point, and he invariably returns to it in discussion. "The biggest beneficiary of the Coop's progress are the members," he says, pointing out that increased profits mean bigger rebates for Coop members.

Actually, not all the profits go back to Coop members. Roughly 40 percent of Coop business comes from non-members, and so about 40 percent of the profits gets ploughed back into the cooperative. And even with the rebate, recent years have seen growing dissatisfaction with the direction the Coop has chosen. Many students complain that the Coop overprices in some areas, making the rebate offer meaningless. Argeros maintains that the Coop offers good value in comparison to similar stores. In addition, a number of students believe that, as Guy Molyneux '81-4 puts it, "[The Coop] has very little to do with being a cooperative." An outgoing progressive student member of the Board of Directors, he charges that the Coop has become too much of a big business with too much emphasis on profits.

The example cited by proponents of this view is the uproar over the unionization drive going on now (see accompanying story). Another was the expansion of the Coop into downtown Boston two years ago, which some criticized as having nothing to do with students' needs. Coop officials then defended the move by pointing out that the new store was in the same building housing the downtown Boston Harvard Club and thus served an important Coop constituency, alumni. And recently, several officials said that sales there have helped balance less profitable parts of the Coop operation like textbooks--and thus--you guessed it's contribute to better rebates.

Textbook prices, in fact, are one of the thornier issues facing the Coop and perhaps the best example of the philosophical debate over the Coop's direction. Textbooks, almost everyone who knows about the Coop agrees, are simply not profitable for the store. With an extensive search service, liberal return policy, and relatively low mark-up, the Coop annually faces a break-even prospect at best in the field. Yet at the same time, students are looking themselves at an increasingly tight financial squeeze, and overall textbook prices are not insignificant, running most Harvard students upwards of $300 a year. Molyneux says flatly the Coop should use profits from other departments--clothes for example--to subsidize textbook prices and even urges a lower rebate if necessary. The Coop's primary purpose, he explains, is low prices on books and supplies for students, and all Coop policies should be subordinated to that goal.

One senior member of the Board of Directors termed such a proposal "nonsense." Under the law, the Coop, as a cooperative society, pays no taxes on the profits it distributes back to members, only on the profits it makes from non-members, Thus, he said, if the Coop cuts the rebate down, a chunk of the money made would have to go to the government. And, he notes, that would mean Coop members would be sharing profits with non-members--something "antithetical to the whole cooperative effort."

Plainly, it is going to be difficult for Coop members like Molyneux to accomplish some of the changes they would like to see in the cooperative. But that doesn't mean they're not trying. In recent elections a group of students have formed a slate of candidates to run for the Board of Directors on a reform platform. Several members of the "Coop Group," as they call themselves, won spots on the Board in the past two years. These reformers have a long way to go--but at least it's a start.

But in their quest for change, the Coop Group and other reformers are going against 100 years of Coop tradition in a management that clearly believes in the correctness of their policy. One senior official, who wished to remain unidentified, states with conviction. "The only way we can try to serve the members is to maximize profits....The Coop just wouldn't operate effectively if it were a social club--it doesn't work that way." That's a lot of tradition to change.