"We are not immune to the retail environment,"says Murphy. "A lot of that is a reflection of thefact that retail is down."

Murphy says there is a tradeoff between rebatesand prices. If rebates rise, members complainabout the higher prices used to generate higherprofits.

If prices fall, members complain about thelower rebates.

There's also a tension between expanding salesand remaining a student cooperative, he says.

Murphy says he hopes to expand the "Coop'sbusiness" without abandoning student service. Buthe's not sure about the specifics.

Expansion probably won't come in the membershiprolls. There are 122,263 active members of theCoop, and neither Harvard nor MIT is expanding itsstudent body or faculties.

Murphy says he wants more alumni to join thesociety, and the Coop courts them during reunionswith various discount coupons.

Opening more stores would be difficult. Anysuch expansion could increase sales to non-membersand threaten the store's co-op status.

If the amount of business done by Coop membersdrops below 50 percent of all sales, the Coopwould lose that status, and a huge tax break.

The Coop spent much of the past decadestraddling that 50 percent cut-off line as itgrew. Members account for about 55 percent of allbusiness now.

"If the membership doesn't like what we'reselling, 50 percent is going to be a problem,"says Murphy. "If we want to grow the business, wehave to keep our membership up to keep thosepercentages."

The Coop has been burned at least once byopening a new outlet.

In 1980, under pressure from Harvard alumni,the Coop added a store near the Boston HarvardClub. Ten years later, facing rising rents andfalling member purchases, the Coop abandoned ship.

"It had reasonable sales, but it was a veryexpensive operation," says Bossert. "There were alot of walk-in sales from the Boston businesscommunity, but that's not the purpose of theCoop."

Expansion in the flagship stores also failed toprevent a recent decrease in sales.