Why did Aztec Shops have $3 million to go off campus and buy the property their competitor was using?
Ken Appel, the former owner of KB Books on the outskirts of SDSU, said he didn’t want students to “wonder what happened when they come back to school this fall.” So in May he contacted the campus newspaper, the Daily Aztec, to announce his decision to close the business.
Daily Aztec article on the door of KB Books
From a few feet south of campus, for most of the time on the east side of College Avenue, KB Books worked personally with students, sold them textbooks at discounted rates, and then bought them back if possible, all over the course of 30 years. The store competed directly with the SDSU Bookstore operated by the nonprofit Aztec Shops.
Student journalist Natalia Xibille followed up on Appel’s overture and wrote a front-page story on the factors that led to his decision, especially a poisonous relationship with Aztec Shops. The story reads much like a sad goodbye. It quotes Appel as saying, “The original intent of this business was to provide students with alternatives...and I felt like us leaving the marketplace puts them in a much riskier place to be taken advantage of, and I would hate to see that.”
Appel and a partner, who eventually went on to other things, started KB Books in 1985. “I was attending UCSD,” he told me as we sat in the store’s back office in early June. “We began as a protest of the way the bookstore there was treating us and the other students. Their attitude was, ‘Get in line and we’ll help you when we get around to it.’ Sure, I was interested in the business side, too, but the primary objective was to enhance the interests of students. Operating from the perspective of students has been the philosophy of KB Books ever since.”
Appel’s move has nothing to do with moving on to greener pastures. “I haven’t decided what I’m going to do next,” he said. The old shelves full of books in his store are now gone, and the remaining inventory and operating equipment must all go by the end of summer. Aztec Shops bought the property for $3 million in 2012 and has been honoring the lease Appel had with the previous owner until September 1. After that, Aztec Shops is raising rent for the space by 32 percent.
KB Books also operated stores near Mesa College (since 1988) and City College (since 1991). As an instructor in those colleges as well as SDSU, I remember the stacks of flyers that KB sent into classrooms offering lower prices than the campus stores.
“Our average discount was always in the range of 20 percent,” said Appel. “To get those prices we would work harder than the SDSU Bookstore at shopping around in the textbook market, often in the middle of semesters when the demand is lower. Then, when we’d find great deals — occasionally discovering prices 40 or 50 percent lower than during the peak purchasing times — and simply pass those discounts on to students. We also occasionally offered rebates to particular groups on campus, such as fraternities and sororities.”
I ask Appel if Aztec Shops objected to his sending the flyers into classrooms. “Oh, sure, we got flak from them for everything,” he said. “They never liked us. I heard early on that Harvey Goodfriend, the head of Aztec Shops for many years, said when we opened that he would be putting us out of business within two years. They’ve never forgiven us for existing. They didn’t really recognize our right to exist.”
As an example of the hostile business environment he faced at SDSU, Appel cites a longstanding relationship he had with the Educational Opportunity Program, which helps students from disadvantaged backgrounds. “Twelve years ago,” he said, “we pioneered an activity with EOP at the start of each school year where the kids came onto campus for a special orientation. I’d give a quick little speech to let them know about us and what to expect about textbooks. I’d tell the kids, ‘In high school you were usually given your books, but now you’re going to have a rude awakening. So here’s some strategy for dealing with it and also a really nice discount.’ EOP felt that was helpful for their students, who are in the program because they’re financially challenged.
“Then, last year EOP told me an SDSU vice president called and said KB Books can no longer get up and say anything when the kids arrive on campus, that only campus personnel can speak. That, despite the fact that KB initiated the activity, has been doing it for a dozen years, there’s never been a problem, and we’ve been nothing but supportive of the EOP students and the university.
The comparisons are from last semester (Spring ’16) and the classes are all large-enrollment classes.
“These are the kind of tactics that we’ve dealt with. Of course, the reality is that, even without Aztec Shops doing all this dirty business, it’s still a tough market, especially given the ability of students to go online for their books. But Aztec Shops pushed us over the edge.”
The final straw was Aztec Shops purchasing the building KB used for years to do business. “You know that when you competitor becomes your landlord, you’re in big trouble,” said Appel.
Unlike KB Books, Aztec Shops does not have to pay rent for its space, which is a building in the heart of campus. “We have never been in true business-to-business competition with Aztec Shops,” Appel continues.
On campus, Aztec Shops functions as an “auxiliary” that assists SDSU with work in dormitories, food service, and in running the SDSU Bookstore. Off campus, it manages commercial and real estate properties in the university’s interest. So, although Aztec Shops is not a part of the university, it enjoys significant benefits from their working relationship.
Appel told me that, during disagreements he occasionally had with Aztec Shops, its representatives would claim they spoke as an independent entity or as an arm of the university, depending which position benefitted them more on the issue in question.
I emailed Donna Tusack to ask how Aztec Shops gives back to students, an explanation one often hears on campus of why its pricing is so high on books as well as other commodities, such as food. (Last semester at least one of its fast-food stores offered a $9 peanut butter smoothie.) Tusack is both the chief executive of Aztec Shops and SDSU’s “associate vice-resident of business and financial affairs.” “Just a quick note,” she wrote back, “to let you know I received your email and will respond next week.” That week finished on August 12, ten days before the fall semester began, when most students are stocking up on their textbooks for the fall semester — for the first time in 30 years exclusively in the SDSU Bookstore. Tusack’s response has never arrived.
“Somewhere along the line,” Ken Appel told me, “Aztec Shops got the idea that they have a divine right to sell the students their textbooks with few restrictions. My view is very different, namely, that they are a quasi-public subsidized entity. And because they take that subsidy, they have responsibilities. I think they don’t understand that responsibility. When you’re on the public payroll, you have responsibilities to the people you serve, in this case to refrain from gouging students with textbook prices which cost them hundreds of dollars a year. You also should not go out and act like a predator, the way, say, corporations like Amazon.com have gone after bookstore chains. That’s the rough-and-tumble world of the business world. But you are not a real business. You are taking state money. So it’s not right to go out and prey on small businesses, using all the advantages that you have. Why did Aztec Shops have a $3 million war chest to go off campus and snatch up the property their competitor was using? The only reason they had it was because they have all these advantages of sitting in the middle of campus free of charge, which you and I pay for.
“Competition benefits SDSU students, and I welcome competition. If you want to compete, that’s business. But what bothers me is when you have unfair competition that affects our ability to spread the truth about what textbook prices can be.”