Half Price Books, Records, Magazines Inc. History

Address:

5803 E. Northwest Highway
Dallas, Texas 75231
U.S.A.

Telephone: (214) 360-0833
Fax: (214) 890-0850

Private Company
Founded: 1972
Employees: 1,100
Sales: $70 million (1999)
NAIC: 451211 Book Stores; 45122 Prerecorded Tape, Compact Disc, and Record Stores; 45331 Used Merchandise Stores

Company Perspectives:

Half Price Books is one of the only places where you can get cash for books you've already read. So if you have more books than shelves, bring your books to Half Price Books today and let our specialized trained buyers make you an offer. If you are unsatisfied with the offer, you may donate your books through Half Price Books. We work with several nonprofit organizations across the country through our A, E, I, O & YOU Program. And since our inventory changes daily, you will always find something new at Half Price Books. Key Dates:

Key Dates:

1972:: Ken Gjemre and Pat Anderson cofound Half Price Books in Dallas Texas; three months later they open a second store.
1983:: First Seattle store opens.
1986:: Half Price Software is founded.
1990:: Gjemre suffers a stroke in Germany.
1991:: Gjemre steps down as CEO and Pat Anderson takes over day-to-day management of company.
1995:: Anderson passes away suddenly and is succeeded by daughter, Sharon Anderson Wright.
1999:: New 55,000-square-foot flagship store opens in Dallas; Half Price Books establishes its first presence on the Internet.

Company History:

Through its chain of 64 stores in ten states, Half Price Books, Records, Magazines Inc. buys and sells nearly all used printed and recorded matter, including books, magazines, phonograph records, cassette tapes, eight track tapes, and computer software. The company is privately owned, in part by its employees; all stores in the chain are owned by the company, none are franchises. In addition to being a successful commercial venture, the company sees itself as a positive force for recycling and other important environmental concerns. In the words of founder Ken Gjemre, Half Price Books 'has been a social, political, and environmental statement from the beginning. ... I was upset at the waste in America.' The company works with nonprofit organizations throughout the United States and contributes thousand of books annually to the poor and disadvantaged in the United States and the rest of the world.

Origins

Half Price Books was the brainchild of Ken Gjemre. Gjemre was one of six children born to Norwegian immigrants who came to the United States around the turn of the century. They eventually settled on a farm in Indiana where they raised potatoes, onions, and peppermint. The frugality of farm life made a lasting impression on Gjemre. '[My parents] never threw anything away. If you took a worn-out piece of farm equipment apart, you saved the bolts because you could use them later someplace else,' he told the Houston Chronicle in 1988. That awareness of waste would become a principle upon which he later based his book business.

Gjemre received a degree in Chemistry from Purdue University and served with the American Army during the Second World War--he was with the first troops to meet Soviet forces at the Elbe in eastern Germany in 1945. After he left the service, he went to work in retail. In August, he moved to Texas to work as a vice-president for Zale, a chain of stores that specialized in jewelry, but which also sold a full line of housewares and appliances. As a buyer Gjemre was successful at what he was doing, however, he had recently become a Unitarian and he found it increasingly difficult to reconcile the nature of the work with his principles. 'My ethic was of thrift and saving,' he told Publishers Weekly in 1991. 'I was a child of the Depression, but here I was selling things on credit to people who didn't need them and couldn't afford them. I was good at it, but I didn't like it.'

In January 1972, with the Vietnam War still raging, Gjemre took a leave of absence to work for the New Party, a left liberal alternative party that counted among its supporters Dr. Benjamin Spock. Eventually he returned to Zale but was as unhappy there as ever. One day, though, he found himself in a secondhand bookstore in Dallas. Gjemre reflected a bit on the business. The busy bookstore bought books at ten percent of cover price and resold them at 50 percent of the cover price. That made its cost of goods 20 percent. Retail savvy Gjemre was amazed--normally retailers battle hard to keep costs at 50 percent. What's more, the store was selling product that people wanted, at a reasonable price, and they were goods that would otherwise have been thrown away with the trash.

It was the kind of retailing Gjemre, then 51 years old, could engage in with a clear conscience. He made the owner of the bookstore an offer to buy the business, but the deal fell through at the last minute. When it did, however, the other bookstore owner suggested Gjemre start a store of his own from the ground up. It was an attractive idea. However, at the time Gjemre was in the process of divorcing his wife and had less than $200 to his name. He was able to borrow $4,000 from a friend, 40-year-old Pat Anderson. That, together with 2,002 books from their own libraries, enabled them to open the first Half Price Books store in an abandoned laundromat in Dallas, Texas, on July 27, 1972. A local bookie who ran a shoe repair store in the same shopping center made book on how long their book business would survive. He gave them six months.

At the time the store opened, Anderson was making her way through the clinical psychology program at the University of North Texas. Within six months of opening Half Price Books, it was obvious to Gjemre that he would not be able to repay Anderson's loan as quickly as he had expected. He offered to make her his full partner in the business. She agreed and cancelled the loan. In keeping with Gjemre's philosophy of recycling, nearly everything in the store was either secondhand, like the cash register, or homemade, like the shelves the books were kept on.

Innovative Approaches to Secondhand Retail

Secondhand bookstores were nothing new. However, from the beginning, Gjemre and Anderson designed Half Price Books to be very different from the others. First, at the time most other secondhand book dealers specialized in rare editions and collector's items--books that could easily cost hundreds of dollars each. Half Price Books, on the other hand, saw its audience as the general reader, interested in buying popular reading at a low cost, or looking for books that were hard-to-find or out-of-print, but not necessarily collectible. Consequently they made it a rule not to charge more than half of the cover price for any volume.

Unlike most other secondhand bookstores, Half Price Books would buy anything printed (except newspapers) from its customers, assuming it was still in good condition. The store stocked books from the ultraconservative John Birch Society despite the fact that Gjemre was a dyed-in-the-wool liberal; it sold old issues of Gun Digest, although Gjemre was a longtime pacifist. For many years, the store was the only one in Dallas with a section devoted to Marxist-Leninist thought. There was no censorship, even of material some people would consider obscene. Half Price Books bought and sold books and magazines such as Playboy, Penthouse, and Hustler, though they were displayed and sold in rooms off-limits to children. Later, when feminists criticized such materials as degrading to women, Gjemre allowed each Half Price Books store to decide on its own whether or not to deal in such merchandise.

It did not take Gjemre long to realize that the 1,000 square feet of floor space he had was not remotely sufficient. Within three months of opening the first Half Price Books, he opened a new store in a shopping center that had five times as much space. From that time on, the business grew steadily. In fact, from the beginning, despite its steady expansion, Half Price Books never once had an unprofitable year. That was due in large part to Anderson's financial management. She was liberal politically, like Gjemre, but radically conservative when it came to borrowing&mdash⁄e refused to do it. 'If we can't afford it, we don't do it,' she told the Dallas Morning News in 1993. All growth was financed from Half Price's profits.

Liberal Approaches to Employee Policies

Half Price Books found a willing and able work force that was often as unconventional as Gjemre and Anderson. In the early 1970s the local colleges around Dallas-Fort Worth were still graduating large numbers of liberal arts majors, people who Gjemre once told Publishers Weekly 'couldn't or wouldn't work for Texas Instruments or GM or IBM. They were smart but into an alternative lifestyle.' The company also attracted actors, musicians, and writers. By the time the 1990s rolled around, some 75 percent of these early employees were still with the company and many of them had become vice-presidents or board members.

This high degree of employee loyalty was due in large part to the progressive package of worker benefits that Half Price Books put together. Half Price Books was run as an industrial democracy, which Gjemre called 'the hidden secret of how to solve strife in American industry.' Its employees have participated in full profit sharing, based on the performance of the store they worked in and of the company as a whole. About 30 percent of the company's profits each year were returned to its employees and accounted for approximately 15 percent of an employee's annual salary. Salaries were structured so that executives did not earn more than about five times what an entry level employee made. The company instituted a policy of always promoting from within its ranks.

While remaining privately owned, Half Price Books distributed shares in the company to its upper management. By the end of the 1980s, about one-third of the company was employee owned. Responsibility was also shared. Whereas at most secondhand books stores only the owner and perhaps a trusted longtime assistant is allowed to purchase books from customers, most Half Price employees are trained to evaluate books people bring in. That means customers can brings books in any time during the day or evening and know they will be able to sell their books.

Anderson also inaugurated progressive policies that made life easier for working parents. Half Price Books employees were allowed to bring their babies to work until the children were able to move around on their own. In addition to the full package of paid holidays, vacation and sick time, mothers were given four weeks of paid maternity leave, plus twenty-three extra sick days that could be used during pregnancy of after the birth of their baby. New fathers were given two weeks of paid paternity leave.

Growth and Profitability

By 1986, the chain had grown to include 23 stores, with nine in the Dallas-Fort Worth area alone. It had $17 million in annual sales. The company moved its flagship store four times in its first fourteen years. In 1986 it took over a building that had 17,000 square feet of space, a 20 percent increase over its previous store. Not only did expansion happen only when the company could afford to finance it on its own, it happened in ways other companies would shrink from in horror. In the early 1980s, one employee wanted to work and live in Seattle, Washington. So Half Price Books opened a store there in 1983. It turned out to be a shrewd move. The Seattle area was on the verge of tremendous economic and demographic growth. It became the company's most profitable area outside Texas. By 2000, it had seven stores in the Seattle area.

In addition to expanding its chain, it soon entered new product areas--frequently in just as serendipitous a manner as its chain expansion. A friend, for example, was selling Gjemre his library and asked him to take his record collection off his hands at the same time. Gjemre agreed, intending to have a one-time-only sale. He bought the records on Friday and by Sunday they had all been sold, persuading him to get into buying and selling recordings, too. By 1991, records accounted for about 15 percent of company sales. In 1986, noting the burgeoning popularity of computers, the company opened Half Price Software in a store it had vacated because it was too small to sell books in. The businesses were kept separate because the clientele were considered fundamentally different.

Gjemre was once upset when an employee purchased a lot of remainders--publishers' overstock and damaged stock. However he soon saw their sales potential--and how they fit his recycling philosophy. If he didn't sell them, they would probably end up in a landfill somewhere. Because Half Price Books bought everything it soon found it had large overstocks in certain items, for example encyclopedia missing a volume, Reader's Digest Condensed Books, and others with little conventional resale potential. To deal with these books, Half Price Books created Books By The Yard. For about $12.50 a linear yard, restaurants and decorators could purchase books, not to be read, but to create a specific ambience. Gjemre also began donating books to schools, libraries, prisons, and to the Peace Corps to distribute in the Third World.

By the end of the 1980s the company was hitting full stride. In 1988 it had 28 stores, all company owned, and annual sales of about $10 million a year. By 1990 it could boast it was the largest buyer and seller of used books in the nation, with 34 stores in seven states and sales of $18 million. Then in August 1990, 70-year-old Gjemre collapsed from a stroke on the street in Hamburg, Germany. Anderson rushed to Europe to be with him in the hospital and to bring him back to the United States. Back home, he began a slow recovery and eventually resolved to retire from the company in November 1991. By the time he gave up the day-to-day management of Half Price Books--he remained as company chairman--the company had 40 stores in eight states, 400 employees and more than $25 million in annual sales. Its main store had 26,000 square feet of sales floor and 500,000 books in stock.

New Leadership in the 1990s

Anderson, previously secretary and treasurer, succeeded Gjemre as CEO, and under her the company's impressive growth continued. By the end of 1993, it had 47 stores, mainly in the southwest but also in California, Washington, Iowa, Minnesota, Wisconsin, Indiana, and Ohio. It was opening new stores at a rate of about five a year when the company was thrown into turmoil in October 1995 after Anderson passed away unexpectedly of a heart attack. Anderson's 37-year-old daughter, Sharon 'Boots' Anderson Wright, assumed the reins of leadership. Wright had started at the company shelving books when she was only 14 years old, and before her death Anderson had been grooming her to take over the company. When Wright took over a wave of anxiety swept through the employee ranks. Would Wright and her sisters decide to sell off Half Price Books to outsiders who would in all likelihood come in and do away with the company's unique corporate culture? Much to everyone's relief, Wright never considered such a step.

The company continued its steady, strong, well-paced growth under Wright. By February 1999 it had 61 stores in ten states and annual sales of $68 million. Opening a new store was also a collective endeavor at Half Price Books. To supply stock, existing stores contributed every fiftieth book on their shelves to the new location.

In early 1999, Half Price Books opened a new flagship store in Dallas. It was the first major innovation of Wright's tenure. With 55,000 square feet it was the largest store in the chain, and challenged the company to keep so much space full. The new building also included two special rooms for readings and art exhibits, and a rare book section, with first editions, autographed copies, and other collectibles as expensive as $500. Large windows were installed in the building to provide natural light. The building's concrete frontage was replaced with a 'green belt' including trees. Half Price Books declined an offer from Starbucks to put a cafe in the new store. Unwilling to be like all the other bookstores, Half Price Books preferred to let a European restaurant from Dallas come in and provide a unique local touch.

The next hurdle for the company was to establish a presence on the Internet to challenge its nearest competitor, Powell's Books of Portland, Oregon. Computerizing its huge and constantly changing stock was seen as a complicated and expensive task, but one it was confident it would overcome.

Principal Divisions: Half Price Software; Texas Bookman.

Principal Competitors: Barnes & Noble Inc.; Borders Group Inc.; Follett Corp.; Powell's Books Inc.; Amazon.Com Inc.; Daedelus Books.

Half Price Books, Records, Magazines Inc. History

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Key Dates:

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