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Business Officer Magazine

Rethinking Retail

As colleges and universities play a larger role in local retail—and seek more creative partnerships—students and c ommunity members reap the benefits.

By Joe Dysart

The motivators behind these innovative ventures are varied. Becoming a partner in an off-campus bookstore may simply enable the establishment to provide more bargain books and convenient hours for its student population. In other cases, an off-campus store might be the perfect vehicle for student recruitment. And in still other instances, participation in a local business is seen as a way to preserve the downtown of a community, thereby helping both students and the university’s relationship with the local community. Seeking out these off-the-beaten-path opportunities can foster goodwill and give students a twist on traditional offerings.

A Bargain at the Mall

One institution that saw such an opportunity was the University of Arkansas, Fayetteville, where top management sees its involvement in a clothing, gift, and bookstore at a local mall as more than just a new revenue stream: It’s also a perfect tool for university recruitment. “Significant benefits have already accrued from the additional exposure of our programs and products to the larger community,” says David O. Martinson, the university’s associate vice chancellor for business affairs. “And financially, the operation has been successful as well. We anticipate reaching a break-even point within the first two years and project an internal rate of return over the first three years of 51 percent.”

Specifically, Martinson says the off-campus store enables the university to connect with a market and customers typically not exposed to the institution. In addition, University of Arkansas private label merchandise sold in the store helps raise overall “brand awareness” of the university’s name. Innovative presentation areas within the store enable the institution to directly connect the public with enrollment information, details about alumni membership and benefits, and complete information about the full breadth of its continuing education program.

Opened in November 2003, the store—which the university manages without a partner—took about a year and a half from inception to ribbon-cutting and has exceeded initial sales expectations, Martinson says. “Our goal was to generate $720,000 in sales for the first 12 months; we generated sales of $923,000,” he says. Given the current growth rate, he is now projecting $6 million in sales in the first 5 years and approximately $13 million in the first 10 years. “Based on the present cost and revenue structure, we estimate generating a 12.5 percent net profit from this operation.”

Martinson credits the university bookstore director, Ali Sadeghi, with taking the lead in this initiative. He says the toughest part of getting the operation off the ground was not marketing or bringing in fixtures or finding staff. Instead, more hours than he cares to remember were expended tweaking the fine print with previous owners of the mall store and the mall management. “Most of the time was spent in legal negotiations with the previous owners and the mall management to secure a fair lease contract,” he says. “This is the most sensitive and time-consuming part of the project. It is imperative to remain extremely focused and diligent at this stage so that the goals are not compromised.”

Still, Martinson has been so encouraged with the success of the mall store that he’s currently planning the creation of a second one. “Admissions, alumnus affairs, the university press, continuing education, and the various instructional colleges and research units of the campus seem excited about the broader exposure they receive by being showcased in the mall on a daily basis,” he says.

Getting a Read on the Bookstore Scene

Wesleyan University, Middletown, Connecticut, decided in 2002 to play a more active role in the direction of its local bookstore when it became clear that the owner was not interested in enhancing existing services. Essentially, while Atticus Bookstore and Café had served the needs of both students and the local community for two decades, students complained that there were not enough used textbooks available for purchase.

“Certain products—particularly textbooks and academic supplies—were limited and often not responsive to the campus community,” says Manny Cunard, Wesleyan’s director of auxiliary operations and campus services. “We felt that short of opening a competitive store, the only effective solution was to increase our level of influence over the existing store.”

When repeated talks on improvements with the existing owner went nowhere, the university made the decision to offer to purchase the bookstore business and physical plant. After the purchase of the store was confirmed, Wesleyan went through a deliberate process of determining the best approach to effectively managing the store. A comprehensive assessment of private bookstore operators as well as an analysis of self operation led to the decision to outsource management to Follett College Stores. “In addition to an excellent financial and capital investment proposal, Follett brought to the project a significant level of experience and a thorough understanding of the college store business,” Cunard says. “They also provided excellent management experiences and a willingness to work with the university.”

All told, the transition took about two years. And although Cunard wishes sales of non-textbook items were higher and notes that the store did not meet estimates of gross revenue projections in the first year, he and Marcia Bromberg, the university’s vice president for finance and administration, have been generally pleased with the change. The bookstore, now called Broad Street Books, includes a small café as part of the makeover. “The success of the small café has been remarkable,” Cunard says. “The 16- seat coffee, soup, and sandwich bar surpassed all expectations in revenue during its first year of operation—primarily as a result of tying it to the campus meal points program.”

In fact, the coffee shop’s popularity is becoming a threat to its success. During prime dining hours, students tend to descend on the café in droves, which some members of the community find off-putting. “This situation has had its challenges: crowding at meal times, lack of seating, and to some extent, creating a somewhat intimidating environment for community members who attempt to shop during dinner hours,” Cunard says. “In response, we have added seating to the store and are working to change the main-level environment to become more inviting to the community.”

In coming months, Cunard and Bromberg hope to spike non-textbook sales by devoting their energies to reaching out even more to the local community, expanding on existing programs like the Saturday morning children’s reading program, a community book club, and support for local authors. “Broad Street Books has fulfilled all expectations,” Bromberg says. “[We’ve had] almost no complaints from faculty or students and interpret lack of interest on their part in participating in bookstore committee activities as a vote of confidence in the success of the new store.”

Enhancing Local Flavor

Gerald Whittington, vice president for business, finance, and technology at Elon University in North Carolina, is another big believer in university retail done right. He says the Cantina Roble Restaurant, a joint venture between the institution and Aramark Education, simultaneously enables his university to offer students more dining options on their meal cards and to generate goodwill with the local community.

Located across the street from campus and a vital part of Elon for years, the restaurant faced uncertain times in 2001 when the previous owner indicated that he wanted out. Fortunately, the institution was receptive to his offer to sell. “The university had previously made a commitment to the Town of Elon to help keep businesses in the area and was always open to the possibility of new venues for the students, faculty, and staff,” Whittington says.

In taking over the Cantina Roble Restaurant in 2001, Whittington decided to bring in Aramark—which had been under contract with Elon as its food-service provider for more than 40 years—as a partner. The transition took about a year, with Aramark agreeing to purchase the existing restaurant structure and both partners pooling funds to renovate the restaurant building. Fortunately, there have been few surprises along the way, Whittington says, other than the fact that bolstering a lunch crowd at the restaurant took a little longer than Aramark first anticipated.

Interestingly, Northeastern University has taken a somewhat different approach to leveraging retail while achieving similar results. Instead of buying real estate or participating in the ownership of retail businesses, the institution has aggressively networked with the local community to expand a student debit-card program, which now enables students to shop at more than 90 local merchants using their dining cards.

Originally developed in the late 1980s as a way to give students more eating options in the local community, the Husky card became the focus of an intense expansion effort in 2002, according to Maureen L. Timmons, Northeastern’s director of dining services. “We have over 25 food service locations on campus [operated by Chartwells], but we are also part of a bustling neighborhood in Boston’s Back Bay area, with hundreds of retail operations that our students regularly use,” Timmons says. “It is most convenient for them to use one card—which they or their parents deposit funds onto—at the grocery store, hardware store, restaurants, hair salons, or drugstores. Students were asking for this service, and we responded.”

Luckily for Northeastern, internal costs associated with expanding the merchant network accepting the Husky card were relatively meager since the university already had plastic cards in the hands of all students and a Diebold system infrastructure in place. That gave Timmons and her staff more time to market the expansion plan to local retailers, whose greatest expense associated with joining the card network was investing in a $400 card reader. Staying motivated was easy, since every new retailer brought into the program represented a new revenue stream. “We get between a 5 percent to 20 percent commission from vendors who participate,” Timmons says.

Perhaps most surprising about the expansion of the card’s retailer network has been the role students have played in getting the idea off the ground, she adds. The reason: Students were the primary impetus behind the concept, so they became its primary promoters, continually urging local merchants to sign up with the network. “We are surprised at how much impact students have with local vendors,” Timmons says.

In the meantime, Timmons’ staff further promotes the Husky card by publishing an institution-approved map of participating vendors, a brochure, and a Web site. “Our students enjoy the convenience it provides, and the neighbors enjoy providing the services our students are looking for and benefiting from their patronage,” she notes. “This is a perfect example of a town/gown win-win.”

Author Bio Joe Dysart, Thousand Oaks, California, covers higher education business issues for Business Officer.