BOOKSTORE AND MORE: Textbooks to T-shirts, co-op system earns millions for UT

By Renuka Rayasam
Austin American-Statesman
August 9, 2004 Monday

George Mitchell is president of an Austin retailer with sales approaching $40 million a year and customers across the country. It's preparing to expand to a seventh location, just two blocks from its main store.

His stores are the nation's biggest purveyors of a particular line of merchandise to which his customers are intensely devoted. He just returned from a trip to China to negotiate better deals with manufacturers.

But Mitchell doesn't run a conventional business. He runs the University of Texas Co-operative Store, which has evolved from a simple on-campus bookstore to a business that sells everything from school books and supplies to a huge variety of UT-branded merchandise -- nearly $9 million worth last year.

It's a rarity among campus co-ops, one of a handful that run college bookstores. And it's the only one that returns such a large amount of money each year to the university, according to the National Association of College Stores.

This year, the Co-op will turn over about $3 million to the university in the form of student and faculty awards and grants to a wide range of campus programs.

In two weeks, the Co-op's stores will be mobbed with students stocking up for the school year, and as many as 300 part-timers will join the full-time staff of 90. Mitchell and other executives will pitch in, working the cash registers and bagging books.

Although nearly every UT student uses the Co-op, few know much about the business behind it or what happens to the money it generates.

"So many people I talk to have a negative opinion" about the Co-op, said Amy Hester, a junior majoring in advertising who will serve her second year as a student member of the Co-op board this year.

One of her biggest surprises serving on the board's audit committee was learning that the Co-op makes a much higher margin on UT logo items than it does on textbooks. Though textbooks, new and used, account for about half the Co-op's sales, they're "not some huge cash cow," she said.

No place sells more UT branded items than the Co-op does. Stepping into the main store on Guadalupe Street is like wading into a sea of burnt orange. It's not just T-shirts (30,000 sold last year) and coffee mugs, but also chess sets, fuzzy slippers, blankets, baby bibs, candles and golf balls.

The UT faithful can decorate their homes with items such as a $325 rocking chair emblazoned with the university seal and a $40 burnt orange blown glass Santa ornament. They can put their toddlers on a burnt orange tricycle ($59.99) and privately declare their allegiance with UT underwear.

The biggest-selling item isn't even orange. It's the $15.99 silver Longhorn emblem, ubiquitous on Austin cars.

Sales of such items rise and fall not just with the academic calendar, but also with the fortunes of the UT football team.

Last year, heading into the game with the University of Arkansas, the Co-op's sales of UT merchandise were up 30 percent over the previous year. But after Texas lost, sales dropped about 7 to 8 percent, and they dropped another 15 percent after the team lost to the University of Oklahoma.

"Oklahoma is the key to the season," Mitchell said. "If we beat Oklahoma, our sales skyrocket."

In 1987, when Mitchell came to Texas, the Co-op, then a single storefront, had $9 million in sales and was losing about $1 million a year. The next year, it made a $250,000 profit. It has turned a profit every year since.

,p>Mitchell had experience in retail and a passion for turning around money-losing college bookstores. He had done it for the University of Miami, Georgia Tech and the University of Maryland before landing in Austin. He decided to stay, promising his wife no more moves.

"I thought, 'This will be my last hurrah,' " said Mitchell, whose contract is up in five years.

When Mitchell came to the Co-op, he said, it wasn't being run like a business. The store sold a random assortment of odds and ends that weren't making any money.

"We had an unbelievably large camera department" at the time, he said.

The Co-op also sold liquor and beer.

"The first day they wanted me to sign my name to a liquor license, I got rid of that," Mitchell said.

Within the first 18 months, he got rid of losing lines and streamlined the staff. By the late 1990s, sales were approaching $20 million a year. And the Co-op was on the move.

In 1994, a new store opened near the UT Law School. Four years later, the store on East Riverside Drive opened to serve the huge number of students who live in that part of Austin. One of the most visible changes was leasing out the perennially money-losing trade book division, books other than texts, to Barnes & Noble in 1997.

In 2001, the Co-op bought out one of its chief competitors, Bevo's Bookstore, turning the space into an outlet store. Within weeks, the Co-op's remaining rival, Texas Textbooks, closed its doors. This fall, students will find a small dollar store within the outlet, selling essentials at bargain prices.

Last year, the Co-op opened its women's store, which sells everything from cosmetics to burnt orange bikinis and purses, just a few doors from the main store. Mitchell said he had seen an increase in sales of items for women and decided he could build a bigger business from it.

And last month, the Co-op signed a lease for the former Tower Records store at Guadalupe and 24th streets. Mitchell said no decisions have been made about how to use the space. All told, the Co-op will occupy 30,000 square feet on the Drag.

Contrary to what many students believe, the Co-op makes a higher margin from the "orange market," as UT-branded merchandise is called, and not pricey textbooks.

But textbook prices are most students' No. 1 complaint, even though the Co-op hands out nearly $1 million a year in rebates to students who save their receipts. Aside from the Co-op, students' only alternative is to buy online.

"I'm a little bitter" about the high book prices, said Courtney Morris, a senior majoring in ethnic studies. Last week, she paid $22.95 for a used atlas for her summer meteorology class, and she says she spends about $400 a semester for books.

The Co-op's structure -- turning most of its profit back to the university -- doesn't make sense to her.

"I know they see all of us as stakeholders," Morris said. "But I'd settle for cheaper books."

Students have a hand in running the Co-op. The board includes four student members, who are elected to two-year terms. The university administration picks the four faculty board members, usually business or law professors, who serve four-year terms.

The Co-op board meets once a month and approves major decisions, such as picking the president or approving new store leases. It also allocates annual grants to university programs, a Co-op tradition for decades.

The grants include two annual award programs. The 5-year-old student awards, named after Mitchell, provide $75,000 a year to students who excel academically. The Robert W. Hamilton Awards distribute a similar amount, including two $10,000 prizes, to help faculty members publish their work.

The Co-op also supports study-abroad programs, research fellowships, UT athletics, student organizations and the annual "Explore UT" campus open house.

Last year the Co-op also made $1.8 million in one-time donations for projects such as the new career services center at the School of Social Work and renovation of the student lounge at the nursing school.

That activity has helped win the UT Co-op a unique reputation in the community of university co-ops. Many give rebates to students, but none contributes so much to support university life.

No co-ops "that I've seen donate (profit) back to the university the way George does," said Bill Simpson, longtime general manager of the University of Connecticut Co-op. "Those are Texas-size donations."

rrayasam@statesman.com; 912-2942