A New Beginning, A New Direction

E and C NEWS

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Highlights of the May 2017 Issue


Laser-Focused on Servicemembers, Executing the Mission Bianchi


Rear Adm. Robert J. Bianchi, SC, USN (Ret.), Chief Executive Officer

Rear Adm. Robert J. Bianchi, SC, USN (Ret.), chief executive officer (CEO) of the Navy Exchange Service Command (NEXCOM), is not only the first civilian leader of the NEX, he is also the senior-most leader, in terms of years of service, among the current group of military resale directors and CEOs. Some might say the NEXCOM leader’s highly adapted temperament and insight have been carefully honed through his years of service and resale leadership to navigate the NEX through today’s turbulent retail transformation and government convulsions. While we have no doubt he’d prefer less stormy seas, none would question Bianchi’s complete commitment to doing the right thing for the Sailors and Marines, retirees and their families who make up the bulk of the Navy Exchange’s customers.

E and C News: What do you think are some of the lessons learned for military resale in the last several years?

REAR ADM. ROBERT J. BIANCHI, SC, USN (RET.): I have learned over the years that there will always be some “challenge of the moment,” such as dealing with the impacts of sequestration, or implementing Defense Resale Business Optimization Board (DRBOB) initiatives such as the Veterans online shopping benefit, or effecting DeCA’s commissary transformation initiatives.

The one thing that doesn’t change within my organization, or within any of our other military resale partners, is a laser focus on our servicemembers and executing our mission — and that is what we need to continue to focus on in order to remain relevant and successful.

Past surveys have shown very clearly that our patrons value their exchange and commissary benefits — it’s up to those of us who lead military resale organizations to ensure that we’re maintaining and protecting the current level of benefits, and doing so in the most customer-focused and cost-effective manner.

At NEXCOM, we know that the most important thing we can do each and every day is provide PREMIER customer service, new and exciting merchandise and service options, and a solid value proposition. If we first and foremost take care of our patrons — who are the best in the world — the rest will sort itself out.

As for the larger world of retail, we know that although we have a very specific customer base, our customers can choose to shop anywhere. So it has become increasingly more evident that pricing and the overall shopping experience are the key elements to winning in retail.

We must continue to focus on and actively engage our military customers and their families, through promotional activities, by partnering with the base community to sponsor events such as our NEXCares and homecoming celebrations, and take every opportunity to remind them that their NEX is always here for them — no matter where they are stationed around the world!

E and C News: If you had Aladdin’s lamp, what would you like to fix in military resale and what would you propose doing to fix it?

BIANCHI: Interesting question! I would use it to help people better understand that military resale is a key non-pay benefit — part of the overall compensation package that helps recruit, drive positive morale, retain talented and motivated servicemembers and reward them for their service to our country.

Because there are fewer veterans as a percentage of our overall population than there were in the past, we now have fewer policymakers who have a firsthand understanding of the value and importance of the military resale benefit to a deployed Sailor halfway around the world in a remote location like Djibouti, a young spouse trying to make a go of it overseas for the very first time, or a military family working to make ends meet at an expensive duty station.

I would also like find a way to make it easier to implement changes on behalf of our customers in a timelier manner. Whether it is investing in new technology or a new product, it is often more challenging to respond to the quickly evolving nature of retail and our customers compared to the civilian retail industry.

That being said, the key advantage to operating within the military retail system is that it gives us a much greater connection to, and understanding of, our customers, and this emotional connection is our “secret sauce” that most commercial retailers today struggle to develop and maintain.


As Sales Slide, DeCA Fast Tracks ‘Wave Two’ of Category Negotiations


• RICHMOND, Va. — The next set of product categories the Defense Commissary Agency (DeCA) aims to negotiate with industry will impact about 20 percent of the DeCA assortment. The items range from coffee, tea and frozen fruit to canned foods, household cleaning and packaged meats. And the agency is trying to get through it in a big hurry.

“Wave Two” of what DeCA calls its “Category Performance Improvement” (CPI) initiative is slated to involve about 60 subcategories. “It’s going to encompass about $1.1 billion of our at-cost sales — a lot of items — and we’re going to try to get through it very quickly,” DeCA Executive Director of Transformation Chris Burns told members of industry at a roundtable meeting here in April.

The kickoff of a second wave of merchandise assortment negotiations came as commissary sales continued to slide, down 7.14 percent year-todate through March, according to DeCA, with transactions down about 5 percent. With that, commissaries were on track to generate around $4.9 billion in fiscal 2017, a low-water mark not seen since 1998. “The waters are rough right now, and they’re not going to smooth anytime soon, but we will get through it; we’ll be OK,” Burns said, citing $5.5 billion as an initial sales goal.

White House Calls for Workforce Reduction, Reform Plans as Hiring Freeze Ends


• WASHINGTON — Just as the federal hiring freeze that hit the commissary system staffing levels at store level ended, the White House’s Office of Management and Budget (OMB) Executive Office issued a memorandum calling for agencies to “begin taking immediate actions to achieve near-term workforce reductions and cost savings, including planning for funding levels in the President’s Fiscal Year (FY) 2018 Budget Blueprint; Develop a plan to maximize employee performance by June 30, 2017; and Submit an Agency Reform Plan to OMB in September 2017 as part of the agency’s FY 2019 Budget submission … that includes long-term workforce reductions.”

With the commissary system already deeply engaged in congressionally mandated transformative reforms, it was unclear to what extent the April 12 Memorandum could add any new workforce actions to those already being carried out in the system. The mandate, however, could give momentum to the Defense Commissary Agency’s (DeCA) aspirations to begin partially converting some employees to nonappropriated fund (NAF) hires, based in part on the ability of commercial-style reforms to generate profits that could offset appropriations.

As this issue went to press, the Office of Personnel Management (OPM) reportedly had not yet received any requests to process buyout or early retirement authority.

Swipe Fee Battle Looms with Implications for Resale


• ARLINGTON, Va. — As the new Congress likely tackles financial and regulatory reforms with its markup of the Financial CHOICE Act of 2017, questions about the current level of “swipe fees” that were capped by the Durbin Amendment in the Dodd-Frank Act are emerging that could have revenue and cost implications for military resale organizations, and in turn, on dividends to morale, welfare and recreation (MWR).

Caps on interchange fees (a.k.a. “swipe fees”), paid by merchants to banks and credit card companies for processing credit and debit card transactions, were set by the Consumer Financial Protection Act (CFPA) of 2010. They are expected to be lifted if a provision in section 735 of the Financial CHOICE Act currently before Congress is ultimately passed and signed by the President.

The bill, as it stood as this issue went to press, called for the “Prohibition of Government price controls for payment card transactions” through the “repeal of Section 1075 of the Consumer Financial Protection Act of 2010.”

Commissary 'Customer Appreciation' Case-Lot Sales Focus on Name Brands


FORT LEE — Patrons of most Stateside commissaries stocked up on products offered at case-lot discounts during the Defense Commissary Agency’s (DeCA) spring “Customer Appreciation Case-Lot Sale” event, which took place from mid-to-late April through this month.

“Many of our military members and their families relish the opportunity to buy cases of items similar to what they’d see in commercial club stores,” said Tracie Russ, DeCA’s director of sales. “On top of shopping in bulk, our patrons realize huge savings — that’s a deal they can’t afford to miss,” she said.

AAFES Execs' New Roles, Promotions


DALLAS — The Army & Air Force Exchange Service (AAFES) announced several personnel changes and promotions effective during the April 2017 through July 2017 time frame. Among these, Paul Olney — who is responsible for Snack Avenue in the Exchange’s Merchandising Directorate (MD) — was promoted to buyer IV, effective in July. According to an AAFES spokesman, Olney will be reporting to the Pacific Buying Office in the summer of 2017, and his successor as Snack Avenue buyer had not yet been announced as this issue went to press. Also in the MD

Navy Vendor Base Access Transition in Flux


HILLSBORO, Ore. — According to SureID, the company behind the RAPIDGate credentialing system used at many armed services installations around the country, the “program has resumed operations at all participating Navy bases,” but advised its users accessing Navy installations to “please contact the Navy” for “questions regarding [Defense Biometrics Identification Systems] DBIDS.”

As this issue went to press, CNIC’s Operations and Management site still reflected the update, “Effective 14 August, 2017, [Navy Commercial Access Control System] NCACS credentials will no longer be accepted for base access for contractors, vendors, and suppliers.” CNIC stated, “Any new contractor, vendor or supplier requesting base access AFTER 31 May will be required to obtain a DBIDS credential. NCACS credentials will no longer be issued.”

SureID said it filed a bid protest, April 18, with the Government Accountability Office (GAO) “challenging the U.S. Government’s decision to ‘in-source’ vendor credentialing and access control services to the Navy.” This came shortly after Commander, Navy Installations Command (CNIC) Navy District Washington, D.C., ordered Navy installation commanders to begin transitioning to DBIDS effective immediately on April 17, and to go into full effect by Aug. 17.


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Perna Honors AAFES Associates for Dedication to Excellence


• REDSTONE ARSENAL, Ala. — On April 18, Army & Air Force Exchange Service (AAFES) associates at the installation here received a once-in-a-lifetime honor — a challenge coin and sincere words of thanks from Gen. Gustave Perna, USA, commander, U.S. Army Materiel Command (AMC).

The four-star general, who was Chairman of the AAFES Board of Directors from August 2014 through September of 2016, presented challenge coins to several associates during his visit, and shook hands with associates, congratulating them by name while expressing his appreciation for their dedication to excellence.

“I wish I had time to recognize the entire team, because what all of you do is truly about taking care of Soldiers and families,” Perna said. “You are a great team, and I am very grateful for what you do.”

Exchange Recognizes Three Stores for Operational Excellence, Service and Support


• FRISCO, Texas — The Army & Air Force Exchange Service (AAFES) recently recognized a trio of its exchanges as among the best in its worldwide network.

The three exchanges — U.K. East Consolidated, England; Barksdale AFB, La., and Selfridge ANGB, Mich. — were each named the winners of AAFES’s most coveted award for operational excellence, the Director/CEO Cup.

The annual award — which was presented to the winning stores during the worldwide Main Store Managers/General Managers (MSM/GM) Conference held here in March — honors one store in each size category (small, medium, and large). The Selfridge Exchange won in the small store category, Barksdale won among mediumsized stores and U.K. East Consolidated was the top large store.

“All exchanges go above and beyond for military shoppers, but these exchanges truly stand out for their ability to serve the best customers in the world,” said Air Force Chief Master Sgt. Luis Reyes, AAFES’s senior enlisted advisor. “These teams set the standard for how the Exchange can best serve Soldiers, Airmen and families.”


Read More NEWSMAKERS ...

Connecting the Dots for The Big Picture


Pat Igoe, long-time vice president/general merchandise manager (VP/GMM) of Consumables for the Navy Exchange Service Command (NEXCOM), has a vision for the remainder of fiscal 2017 and into 2018. It includes a list of priorities that she believes she and her Consumables team can fulfill as the second quarter moves along …

E and C News: Changes in retailing have put more of a focus than ever upon consumables, or so it seems. Looking at the big picture, what are your priorities for your categories in 2017?

Pat Igoe: The “Big Picture” and priorities for 2017 are best described as “Connect the Dots”: Our goal is to connect store experiences with merchandising functions and to the Navy community. These elements have great synergistic effect and drive customer loyalty.


  • “Elevate” our communication of value and Navy values.
  • “Drive” added newness and increase exclusive brands and products.
  • “Right Product,” right time, right place.
  • “Personalize” and localize our customer experience.
  • “Strengthen” our emotional connection with our patron.


  • Assortment/Brand Rationalization: Greater brand and assortment clarity, reduce fringe assortments.
  • Marketing/Communication Evolution: Strengthen digital and social communication while continuing to evolve traditional marketing, with the goal of personalizing communication with the customer.
  • Stronger Business/Resource Focus.
  • Develop Greater Flexibility.
  • End-to-End Customer Experience: “the customer journey.”



Pack Type, Sell-Through and Sales Growth Guide 2017 Plans


Danielle Pelland, the Army & Air Force Exchange Service’s (AAFES) senior buyer responsible for seasonal candy, is already fully engaged in how the Exchange will pursue its Halloween candy selection for 2017, and has been reviewing and re-tuning the Halloween assortment since the end of calendar year 2016. Last year’s celebration produced a double-digit sales increase and Pelland is exploring the possibilities for further sales headroom.


As part of her goal of getting just the right assortment into AAFES stores in time for the this year’s October celebration, Pelland told E and C News that as with other prime candy holidays during the year, she prepares for Halloween by “taking a close look at the categories within a season to see where we can gain efficiencies within the assortment; right-sizing the SKU count; selecting correct pack type for each store format; and planning the assortment at the pack-type level.” ...


Read more about AAFES HALLOWEEN CANDY ...

Mature, But Still Energetic


Energy drinks has been a strong category in military stores for at least a decade, and as fiscal 2017 unfolds, it seems to be maturing as a category. Spectacular sales volume increases, once the norm, have been replaced by steady performance in a category that has evolved to become a significant and reliable sales generator. In the Navy Exchange Service Command’s (NEXCOM) case, it has become the exchange service’s largest nonalcoholic beverage category.

Jeff Baker, NEXCOM buyer, beer and beverages, said the category “has matured and for the last three years it has remained flat,” with the numbers for fiscal 2016 bearing this out.

Baker reported that NEXCOM’s dollar volume for energy drinks during fiscal 2016 was $18.05 million, a 0.73-percent decrease from the prior year’s $18.19 million tally. ...


Read more about NEXCOM ENERGY DRINKS ...

Commemorating, Celebrating, Challenging, Congratulating …


Ronald Reid, Navy Exchange Service Command (NEXCOM) Navy Pride, souvenir merchandise and emblematics/logo buyer, is tasked with keeping the exchange service’s selection in these categories one step ahead of customer wants and needs.

“One of the key ways I try to keep our assortment fresh and up-to-date is by emulating things that are doing well in other NEX departments or in the commercial sector,” he said. “I speak with my colleagues and see what is working for them. I tour the various stores and the web to see what is trending, what customers are gravitating to or talking about. I look for colors, styles, fabrications and pricing to see how I can translate that into a NEX logo business.”

Reid said suppliers play an integral role in the logo business. “In order to develop a winning assortment, we have to work as a team,” he explained. “Sales managers, designers and I talk and exchange ideas on a regular basis. Suppliers know what is selling and trending in their businesses, the new technology that can be executed on their product, and much more.” ...



Exchange QSR Clicks with Customers


The bar has been raised in quickserve restaurants (QSR), and it’s not just the menu this time, although that has been raised, too. High-tech has come to food, and customers expect electronic ordering and menu options that rival the best main street has to offer.

Whether looking for a hamburger or a garden salad, a sub sandwich or a wrap, the dining options offered by the Army & Air Force Exchange Service (AAFES) are nearly endless and mirror much of the variety found outside the gate. With 1,712 restaurants in its worldwide QSR portfolio, most of them name-brand fast food (NBFF) operations. AAFES delivers the branded experience A (A&W) to nearly Z (Wing Zone) and everything in between.

Michael Deerhake, vice president (VP) of the Exchange’s Food, Fuel and Theater Operations, which oversees the QSR portfolio, reported that fiscal 2016 sales for these entities were $867 million, or 1.4-percent above the previous year. He noted that AAFES “expects to achieve a slightly higher growth rate in 2017,” but numerous trends influence sales. ...


Read more about AAFES QSR/NBFF ...


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