Icelandic Entrepreneurs: Palmi Jonsson

Palmi Jonsson, born 3 June 1923 at the farm Hof in Hofdastrond in Skagafjordur, was the son of a prosperous farmer and his wife. Palmi was sent to Reykjavik to be educated, first at the Menntaskolinn (Reykjavik Grammar School) and then at the University of Iceland where he graduated in law in 1951. More interested in business than in practising law, after graduation Palmi worked for a while in a car import agency, but he soon started his own small company, the first real milk-shake and hamburger stand in Reykjavik which quickly became popular.

Since the Great Depression, the Icelanders had been subject to stringent currency and import controls which meant, in effect, that possibilities to establish new import or retail businesses were limited. But in 1959–1960, the newly formed coalition government of the Independence Party and the Social Democrats abolished those controls. Palmi Jonsson was one of the entrepreneurs who seized the new opportunities. Having sold his milk-shake stand with a good profit, in the autumn of 1959 he founded the retail company Hagkaup, initially with a business partner, but later as sole owner. The idea was to operate a discount store in the American fashion, buying cheap goods wholesale, some directly from abroad, clothes, shampoos, typewriters, tents, fishing gear, chairs, etc., and then selling them at a low price, either by mail or in a rustic shop which was set up in Eskihlid in Reykjavik. Hagkaup was very well-received by the public, and in 1964, the company started producing its own clothes and also opened another shop, in Laekjargata in the city centre. By 1966, Palmi Jonsson was already paying the highest income tax in Reykjavik.

In 1967, Palmi started importing cheap fruits from abroad and established food divisions in his shops, to the dismay of his competitors who were not able to offer the same low prices. They tried for a while to organise a boycott of Hagkaup by the Icelandic wholesale merchants, but this failed. In the next few years, Palmi invested in other enterprises such as mink and poultry farming. But Hagkaup remained his main interest, and in 1970, he established the first Icelandic supermarket, at Skeifan in Reykjavik; it was an immediate success. In the 1970s, Palmi was greatly assisted by a retired manager from the English retail chain John Lewis, by the name of Stanly Carter. He taught the Icelandic pioneer a lot about the complicated operation of a supermarket, how to supervise staff, control costs, manage supplies and keep the books. Carter helped Palmi taking the step from entrepreneurship to management, escaping “the founder’s trap”.

In his Florida vacations in the early 1980s, Palmi Jonsson observed how shopping malls there provided an escape from the heat and humidity outside. He decided to try to establish a big shopping mall in Reykjavik. Despite fierce opposition from the left-wing parties on the Reykjavik city council, in 1983 Palmi obtained, with firm support of Mayor David Oddsson from the Independence Party, a large building plot in a good location. Taking a huge risk by building the shopping mall, mostly financed by bank loans, Palmi, with his two sons, Sigurdur Gisli and Jon, overcame all difficulties: In August 1987 the shopping mall was inaugurated and given the name Kringlan. From the beginning, it was very successful. The Icelanders appreciated the chance of escaping the cold weather and to walk between shops at leisure. Continuing to run his shops in Kringlan and elsewhere, Palmi also obtained the Icelandic license for IKEA goods which became very popular.

Palmi Jonsson in Hagkaup was more than an entrepreneur: he was also a champion for economic freedom. He succeeded in breaking many formal or informal monopolies in Iceland, such as in selling books and glasses, previously subject to special permits. He also wanted to liberate Icelandic agriculture from over-protection and over-regulation, although he was not as successful in this as in his many other endeavours. He firmly believed in consumer choice. A tall, handsome and strongly built man, Palmi was quiet, even withdrawn, but restless in the pursuit of new business opportunities. He was married to Jonina Sigridur Gisladottir, and they had four children, two sons and two daughters. When Palmi died of heart failure on 4 April 1991, less than 68 years of age, he was probably the richest man in Iceland; but he was also popular and respected. “By offering low prices, Palmi Jonsson has done more to improve the living standards of the Icelandic working class than sixty years of labour union activities”, was a common remark. A short biography of Palmi was published in the magazine Andvari in 1993, by Professor Hannes H. Gissurarson.

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