INC NEWS - update on DukeCard: three interesting developments

[John Schelp]

Dear neighbor,

As you know, Duke executive vice president Tallman
Trask promised to get back to me within a month on how
Duke was going to reduce costs for the DukeCard. 

The month has come and gone and still no word from Dr.
Trask. No cause for concern, though. Both Dr. Trask
and President Brodhead were encouraging in their
replies. 

Dr. Trask specifically said that Duke was looking at
ways to reduce the DukeCard start-up costs for
merchants AND reduce the commissions charged for each
purchase. This is wonderful news for students and for
small businesses near campus.

Anyway, here are three interesting developments on the
DukeCard (which have all been shared with the
leadership at Duke):

* After posting last month's newspaper articles on the
DukeCard on a national town-gown listserv, we learned
that merchants next to Indiana University are charged
$300 in set-up costs and 3-5% in commissions. (Duke
charges $1200-3500 for set-up and 18% for commissions
on each purchase.)

* A Duke official said in The Chronicle that DukeCard
purchases are non-taxable and thus can only be used on
campus. Duke kicks merchants out of the system who
accept Points from students off-campus. It's
interesting that Duke's system is set up to avoid
taxes, thereby denying revenue to local jurisdictions.

* UNC students can link their UNCOneCards to an area
bank account -- and use it as a check-card at
off-campus businesses. Sounds like Chapel Hill has a
good model that Duke can try to emulate.

Will share whatever I hear from Tallman Trask.

happy thanksgiving,
John

Below are background notes, letter to President
Brodhead and recent H-S article.

****

Duke Card blues: Merchants want rules eased for using
student card to buy off campus (Herald-Sun, 13
November 2005)

The way John Schelp sees it, Duke University is an
island of 11,000 credit-card holders who eat, drink
and shop with currency that most off-campus businesses
can't accept. 

"It's a captive audience you have on campus," he said.


That's why Schelp and some merchants are calling on
the university to make it easier for local businesses
to accept Duke Cards, the debit and meal card that's
generally regarded as the standard currency on Duke's
campus. 

"That's almost the only thing you take out of your
wallet all week," said Ian Long, a sophomore English
major from California. 

But Duke requires off-campus merchants to spend $1,200
in initial set-up costs and pay an 18 percent
commission to be able to accept the Duke Card. What's
more, only restaurants can participate and they have
to deliver food to campus to take advantage of the
program. 

While 15 restaurants, 11 of them locally based, have
signed on to the plan since 1990, Schelp, president of
the Old [West] Durham Neighborhood Association, has
heard others complain that the costs are prohibitive. 

"It's just too much," he said. 

He's pressing Duke President Richard Brodhead and
Executive Vice President Tallman Trask to make the
system easier and cheaper. Trask agreed to review the
program, and Schelp expects to hear from him on
Friday, a month from their last conversation. 

But Schelp isn't just looking for financial
concessions; he also wants to see Duke allow all sorts
of merchants to accept the Duke Card for both on- and
off-campus sales. 

"This is good for Duke, it's good for town-gown
relations and it's good for students," he said. "It's
a win-win-win." 

Duke is conducting a financial and legal analysis of
its existing program, spokesman John Burness said. He
wouldn't specify what aspects of the program might be
tweaked. 

"We have a variety of different options and no
conclusions yet," he said last week. "Our goals in
making whatever changes might come about are to
provide greater convenience to our students while
helping to encourage existing businesses closest to
the campus to thrive." 

Students spend about $3 million a year on food
purchases from the 15 restaurants that deliver to
campus as part of the Duke Card program, Burness said.


"The feedback [from those businesses] is
overwhelmingly positive," he said. Many vendors have
told Burness' colleagues that "if they didn't have
this relationship with the Duke Card program, they
wouldn't be in business," he said. 

Jimmy John's Sandwich Shops, which just started
accepting the Duke Card and delivering to campus this
year, is reaping the benefits, said manager Tone
Gould. Half of the Ninth Street restaurant's sales
come from Duke Card purchases, he said. 

Likewise, Pop's Trattoria has been accepting the Duke
Card since August. Even though the cost of the program
is high, the extra business is still a benefit, said
Matthew Bason, who owns the Peabody Place restaurant
with chefs Chris Stinnett and John Vandergrift. 

The order volume is currently low enough that it
doesn't require any extra staff, and students using
the Duke Card aren't taking up seats that would
otherwise be occupied by diners paying all their money
to Pop's, he said. 

"We're not losing business based on it, and the
business gained is business we didn't have before,"
Bason said. "For us, what the Duke Card offers is a
little bit of an extra bonus to any night's business."


Pop's currently is filling four or five orders each
night through Gourmet Dining and Bakery, an Internet
service developed by Duke students that takes the
orders and delivers the food to campus. Five of GDB's
11 participating restaurants accept the Duke Card; the
others accept payment by credit card only. 

Meanwhile, Blue Corn Café supports Duke, but its
business is strong enough that it doesn't need to
accept the Duke Card and pay the corresponding high
commission, said owners Danielle and Antonio Rios. The
restaurant's margins are tight enough without having
to give a cut to the university, they said. 

The financial requirements aren't the only reason
restaurants don't participate. Fowler's Food and Wine
co-owner William Simpson would be happy to pay the
commission if dealing with Duke weren't so difficult,
he said. 

"We love Duke students and we'd love to be able to
offer the card," he said. "But finding the right
person who can make the right decision -- we've run
into logistical problems." 

The Regulator Book Shop also doesn't take Duke Cards,
but that doesn't stop students from trying to use them
there, said co-owner John Valentine. 

"Students always ask if we take Flex cards," he said.
"They assume we do, but the tariff Duke charges is too
steep." 

The Regulator sells textbooks for 150 courses and also
has a good relationship with Duke's athletic
department, Valentine said. Still, he'd be happier if
it were easier for students to spend money at his
store. 

"With or without Duke, we will survive, but the more
Duke we can have, the better," he said. 

The perception has always been that the university
replicates the community's good ideas on campus so
that students have no reason to leave, Valentine said.
But Ninth Street also must make itself an attractive
alternative to Duke so students will venture out to
nearby stores and restaurants, he said. 

Long, who visits Ninth Street about once a week to eat
or shop at The Regulator, said he leaves campus more
often than many of his classmates. Local businesses
shouldn't have to accept the Duke Card to draw
students to the surrounding areas, he said, but he
acknowledged it would be an effective marketing
strategy. 

"People feel really comfortable in the Duke bubble and
aren't as willing to get off onto Ninth Street as they
should be," he said. 

****

[Oct 18-19, 2005]

folks,

When Duke does something right, they need to be
praised. It looks like Duke is doing something right
with their DukeCards!

Dr. Brodhead was kind enough to reply to my email and
asked me to talk with Tallman Trask III about the idea
of reducing costs for DukeCards (so more local
businesses can participate).

As we indicated, the set-up costs and high percentage
that DukeCards skim off each student purchase
effectively keep local businesses out of the system.
(Merchants have told us Duke has been taking up to 18%
per purchase.)

Just got off the phone with Dr. Trask.

He told me Duke is looking at ways to reduce the
DukeCard start-up costs for merchants AND reduce the
commissions charged for each purchase.

Dr. Trask said they'll get back to me in a month and
I'll let everyone know what happens.

This is wonderful news that both benefits
locally-owned businesses and provides more options for
students.

In the meantime, it must be said that Dr. Brodhead has
brought some refreshing air into Allen Building.

all the very best,

John Schelp
Old West Durham

****

Background:

The high costs effectively keep most local businesses
from participating. So, Duke's system is mostly
supporting national chains (not locally-owned
businesses). Below is our Oct 12 letter to Duke's
president.

Cutting DukeCard costs for local merchants would help
businesses in Brightleaf Square, downtown, Ninth
Street, West End, and small shops in locally-owned
Northgate Mall.

On the radio show, Dr. Brodhead suggested I call his
office this afternoon to talk about cutting DukeCard
costs for local merchants. Will let everybody know
what Duke thinks about this idea.

****

[sent on 12 Oct 2005]

Dr. Brodhead,

We would like to thank Clay Adams and the Division of
Student Affairs (copied here) for asking for feedback
on Duke's Ninth Street Block Party, recently held in
Old West Durham.

We talked about the Block Party with 9th Street
merchants and at our last neighborhood board meeting,
which also includes representation from 9th Street.

At first we talked about ideas such as scheduling the
event during move-in orientation week, expanding the
target audience beyond first-year students, and having
buses run from West Campus to Ninth Street.

But the conversation soon went beyond these matters.

We talked about a systemic problem that a first-year
student raised in the Chronicle article about the
Block Party (and that we've heard from others).

>From the Chronicle (9/23/05):

>Freshman Melanie Wright said students often do not
venture off campus because they prefer the convenience
of FLEX and food points to pocket cash.

>"It’s easy to get caught up in the DukeCard and
forget about part of the large community," Wright said

We've heard from Ninth Street merchants that set-up
costs for merchants to participate in the FLEX and
food points is expensive. These costs are compounded
by the fact that Duke apparently skims a percentage
off each purchase.

These costs, particularly the set-up costs, make it
problematic for small businesses to join.

The result is Duke's card system mostly benefits
national chains like Domino's and Papa Johns, who have
the resources (and the volume) to absorb the set-up
costs.

This leaves many small locally-owned businesses near
campus effectively shut out of the system and, as the
quote above indicates, less able to attract student
patrons. (Below is some background on the benefits of
supporting a locally-owned business.)

In fact, some merchants tell us Duke hasn't even asked
them to participate in the program since the late
1980s.

If Duke is truly interested in neighborhood
partnerships, improving town-gown relationships, and
encouraging healthy local business districts near
campus, perhaps you would consider absorbing the
initial set-up costs of these systems (and reducing
the percentage skim-off) so small local businesses
were on a more equal footing with the national chains?

Over the past two years, Duke officials have
repeatedly said they want to support Ninth Street,
Brightleaf Square, and downtown.

Incorporating these suggestions offers Duke a chance
to prove its words through its deeds.

thank you,

John Schelp (president) & Kelly Jarrett (vice-pres)
Old West Durham Neighborhood Association
Diversity, Harmony, Community

== a Duke-Durham partnership neighborhood ==

cc:
Larry Moneta, Division of Student Affairs
Clay Adams, Division of Student Affairs

****

Keep your dollars in Durham? An economic analysis of a
locally owned bookstore yields some surprising
results.

This story starts in Austin, Texas, where in early
2000 plans surfaced for a downtown retail
redevelopment project, to be funded in part with
city incentive funds. Included in the development was
going to be a big new Borders Bookstore. All of this
was slated for the block at Sixth and Lamar-right
across the street from BookPeople, one of Texas'
biggest and best independent bookstores.

BookPeople's co-owner, Steve Bercu, obviously wasn't
too thrilled about all of this. But instead of just
yelling and screaming, he responded by hitting the
books--the economics books, that is. Bercu hired an
economics consulting firm to evaluate the economic
impact of local merchants versus national chains. Not
surprisingly, the study showed that local retailers
put more money back into the local economy. What was
surprising was how big the difference was.

For every $100 spent at BookPeople, the study showed
that $45 stayed in the local community. For $100 spent
at Borders, only $13 stayed in Austin, and the rest
"got on a plane at midnight and left," as Bercu put
it. SO THE INDEPENDENT BOOKSTORE GENERATED THREE TIMES
MORE LOCAL ECONOMIC ACTIVITY THAN THE CHAIN BOOKSTORE.
(Capitals added for emphasis).

Feeding this information into the proposed new
development, the consulting firm found that, even with
a wildly optimistic scenario that 50% of Borders'
business was "new" business (not business diverted
from existing ocal merchants), adding a Borders was
actually going to REDUCE local economic activity by
millions of dollars a year.

Bercu took his study to the Austin City Council, where
Borders had little o say in response. The city council
voted to withdraw their incentives for the Borders
project, and Borders withdrew from the development.

BookPeople's financial structure is not all that
different from The Regulator's. (And Border's
financial structure isn't much different from Barnes
and Noble's). So the numbers that Bercu came up with
in Austin would pretty much hold true here in Durham
as well, whichever chain bookstore you wanted to
compare us with.

Of course if you buy your books from some place like
amazon.com, the amount of your money that stays local
is extremely close to a number that starts with zero,
ends with zero, and has nothing but zeros in between.

So, if you like where you live, consider keeping your
money in the neighborhood-where it just might help
your quality of life the most.


source: The Regulator-Irregular (July 10, 2003)

****