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Highlights of the October 2016 Issue


Power in Partnership, Product, Price … And Above All, Patrons


Defense Commissary Agency Deputy Director and Chief Operating Officer (COO) Michael Dowling

Tasked with transforming its business model, its assortment, and its supply chain, with the hydra-headed goals of ensuring commissaries’ relevancy to future patrons and delivering savings to offset operating costs — all while maintaining patron savings and satisfaction — the Defense Commissary Agency (DeCA) is in the midst of a sea of fundamental and pervasive change.

Shifts in processes and policies — for example variable pricing and private label — are being explored, which without careful attention to consequences, risk upending the commissary apple cart. Mike Dowling, DeCA’s Deputy Director and COO, however, does not shrink from the prospect of steering DeCA through another quantum “transformation.” After all, he’s seen a few of them before, including the birth of the consolidated agency in 1991 from its various predecessor service branch commissary systems.

In this exclusive interview, Dowling takes a step back to survey the landscape of commissary benefit reform, explains what he expects the process can yield, and offers an underlying principle as to how the agency and its partners can play a part in ensuring that commissaries “have product on the shelves, at the best price available for patrons when they shop.”

E and C News: When you speak with customers about commissaries, what do they tell you about their local stores and their perception of the benefit? What do they say they would most like to be improved?

DeCA Deputy Director and COO Michael Dowling: Many ask about the status of their commissary benefit. Let’s face it: Over the past three years, our patrons have heard a lot of discussions about the future of commissaries. At the same time, they wonder about what’s ahead for their exchanges or other services and benefits under the military umbrella. Every aspect of the Department of Defense (DoD) continues to be under scrutiny for efficiencies, and military retail is not isolated from that process.

Our patrons always demand our best. Most of the time, we deliver the benefit to that standard. When we don’t, we hear about it. At some stores that may mean improving customer service or ensuring our shelves are fully stocked during the peak periods our patrons shop. For a while now, we’ve been hearing more and more about why commissaries don’t offer private label products similar to what’s offered in stores outside the gate. Our patrons have done their homework and they know their commissary offers consistent savings. However, they also know private label products could add even more value to their benefit. ...


Knowing Customers Well, Serving Them Even Better …


AAFES Deputy Director Michael Immler

Going beneath the surface of the facts and figures, Army & Air Force Exchange Service (AAFES) deputy director Michael Immler pulls back the curtain on an organization that is quite different from that of five years ago. And even though the Exchange has implemented rigorous controls on its expenses, these and other efficiencies haven’t held it back from continuing to innovate and improve the customer experience.

At the same time, AAFES is on pace to meet its sales goal despite the headwinds of a lackluster economy, and has grown its earnings through the second quarter of fiscal 2016. It is also reaping the benefits of its recent internal customer satisfaction survey initiative, and is preparing to bring new retail, dining and entertainment offerings to Soldiers and Airmen around the world. There is also hope that at some time in the not-too-distant future, the Exchange will be able to roll out a groundbreaking Veterans Online Shopping Benefit (VOSB) that will honor all honorably discharged veterans.

The Exchange is listening closely to its customers, and it is on the move ...

E and C News: What have you learned from AAFES’s own wider-sample customer satisfaction surveys that rolled out the other year? What are customers telling you that AAFES needs to do more or less of?

Michael Immler: With the inception of customer satisfaction surveys more than 15 years ago, the Exchange learned that, in addition to an overarching score for the enterprise, more granular results were needed at the store level in order to facilitate actions. To that end, the Exchange has employed survey mechanisms that provide detailed questionsets concerning customer satisfaction action areas at the local store level.

The American Customer Satisfaction Index (ACSI) survey, which is Department of Defense (DoD)- funded, provides an annual snapshot of customer satisfaction using a random survey population of 500 respondents, and may include a blend of channels such as main stores, convenience stores, e-commerce, mall stores among others. The Exchange’s survey is web-based and operational every day of the week, averaging 1,000 responses per week and providing near real-time evaluation of our operations. Our survey is validated by the CFI Group USA, LLC, which has customer satisfaction survey credentials that are equal to the ACSI Group.

We have some concerns about the application of the ACSI survey to our multiple channels. Where we question the ACSI’s application is to a business such as ours that has customer satisfaction input based on very different channels and on very different scales of operations.

Our internal survey gives us the ability to take action based on results, and is broad enough to include actionable results down to the specific store. Further, since our survey is 24/7, the results of the survey are known in near real time so that our managers can take immediate action. We are confident in our survey processes, and go so far as to include several elements of the customer satisfaction results in our store managers’ annual evaluation process.

Among all survey comments, the most common is about the friendliness of our associates and how they go the extra mile to help customers. More than 80 percent of all of our associates worldwide have a military affiliation, either directly or through a close family member. The next most common comment is about our favorable pricing and no tax. Sometimes comments tell us things we need to improve on at a specific store, and we work those issues quickly and see the results in follow-on survey comments. ...



‘Making the NEX A Unique And Enjoyable Place to Shop’


NEXCOM Executive Vice President and Chief Operating Officer (COO) Michael Good

Evaluating the current retail environment, Michael Good, the Navy Exchange Service Command’s (NEXCOM) executive vice president and chief operating officer (COO), is enthused about NEXCOM’s continued innovations and adaptations in serving the Navy and Navy Family. The exchange service is holding its own with sales and transactions, and even though several formerly robust categories have declined, other areas have stepped up to lead sales activity, including consumables, home and sporting goods. In this exclusive interview, the COO reviews NEXCOM’s strengths and goals, and the initiatives that are slated for development and implementation during the next few months.

E and C News: Where does NEXCOM stand regarding its sales and transaction goals for 2016? What factors have been influencing NEXCOM’s attainment of its goals?

Michael Good: Compared to last year, NEXCOM is trending slightly higher both in terms of sales and transactions, while margins are somewhat lower, primarily due to the shift in what and how the consumer is buying. Retail in general, and more specifically the department store segment, has put downward pressure on areas like apparel and “Center Core.” However, we’ve been able to make up some of those sales and margins in areas like consumables, home and sporting goods.

NEX Services sales are ahead of plan and last year through July, driven by our innovative vending programs that feature the aggressive rollout of Micro Markets and the expansion of vending machine credit card readers that offer convenience to our customers. The Micro Markets alone will deliver nearly $500,000 in sales this year and are planned to reach $1 million in 2017.

Through July, our Food Services sales have exceeded both plan and last year’s sales, and will continue to be a business focus for us in 2017 as we explore new growth opportunities. We’ve experienced tremendous growth at our Pentagon food court, where we continue to add new concepts such as Robert Irvine’s Fresh concept and an Au Bon Pain. We’re also introducing new and growing companies to the portfolio at locations worldwide to offer more fresh and healthy food choices to our Sailors and their families.

Our Food and Beverage Convenience Bars located in Mini-Marts are another success story. We’re expanding this concept to overseas locations and introducing a new, branded coffee program enterprisewide that has been overwhelmingly successful at our test locations. ...



‘Investing in Marines, for Duty, Home and Self’

MCX Deputy Director and Chief Operating Officer (COO) Jennifer Ide


Although the fundamentals of goods and services at a value have not changed as part of the Marine Corps Exchange (MCX) equation, Business and Support Services Division (BSSD) Deputy Director and Chief Operating Officer (COO) Jennifer Ide and the headquarters and store-level teams take pride in enhancing the relevancy and efficiency of the MCX benefit. In this exclusive interview, Ide also discusses the ways in which the organization has aggressively innovated in anticipation of its evolving resale environment and changing patron expectations.

E and C News: What do Marine spouses and Marines, suppliers, and Marine Corps leaders tell you they want from MCX? What do they say MCX could do better?

Ide: Many say that customers’ expectations are continuing to get higher and higher, and for the most part I think that is true. But fundamentally, I don’t think it’s changed much in the 20 years I have been with MCX: goods and services at a value that are meaningful to the Marine lifestyle and support quality of life aboard our bases.

But we can always do better, everyone can! We are expanding customer outreach, feedback capabilities and are planning to implement a Customer Relations Management (CRM) system to gain further insight into patron shopping behavior. These efforts are going to reach not only the customers that shop us, but more importantly, the ones that can but don’t. ...



Supporting America’s Veterans and Caregivers


Veterans Canteen Service Chief Operating Officer (COO) James Leahy

In late May, James Leahy celebrated his first anniversary as chief operating officer (COO) of the Veterans Canteen Service (VCS). With a more than 40-year career that has spanned both the civilian sector and the canteen service, Leahy has not only helped orchestrate the transformation of the “canteens” of yore into today’s Patriot- Stores, but also spearheaded the evolution of the VCS Enterprise into a 21st-century retail operation. In this interview, Leahy talks about where the VCS is going, and where it plans to take customers on its latest retail journey.

E and C News: What are some of the advantages of the newest generations of VCS PatriotStores? Are they working out as expected and are any tweaks planned?

James Leahy: The store environment is extremely important for our patrons. For PatriotStore customers this means being able to navigate through wider aisles, shopping with enhanced signage that assists in faster decision-making at the point of purchase, and most importantly, shopping in an environment that meets the VCS mission of providing “comfort and well-being for America’s Veterans.”

Our bright, modern, and warm design is creating a positive impact on how our customers think and feel in a health-care, hospital environment. ...



Serving Marines On the Battlefield And at Home


One year ago in October, Eydie Quisumbing took up the buying responsibilities for the Marine Corps Exchanges (MCX) sporting goods area, tactical items, toys and bicycles. During her year in this position, the buyer has seen the tactical category’s business improve, but is setting the department’s sights on further improvement in this area that directly bears on Marines’ readiness.

According to Quisumbing, MCX tactical sales through Aug. 13 of fiscal 2016 were $7.69 million versus $7.63 million a year earlier, up 0.79 percent.

Looking at tactical subcategories, several of these classifications — for example, bags, stationery and weapon accessories/cleaning — have generated significant percentage sales increases thus far during fiscal 2016. ...



‘Keeping Up’ With Trends


Diana Turgut, the Army & Air Force Exchange Service (AAFES) everyday candy buyer, told E and C News that keeping up with trends covering everything from flavor profiles to packaging is a characteristic of the candy business that has taken on added significance recently.

With fiscal 2016 sales through Aug. 26 of everyday candy falling 2.5 percent to the prior year — influenced by such factors as troop reductions and cost increases among commodities such as cocoa, sugar and nuts — Turgut is especially sensitive to pricing for Exchange customers. Not only this, but staying on top of new packaging releases is directly linked to keeping stores in stock, as new SKUs replace phased-out items.

“The cost increases have increased the cost of a lot of chocolate items over the last year,” she said. “Initially, those types of cost increases create inflated sales, but those eventually level off, and the industry shows that customers are taking note of the cost increase.”

Gum is down 3.5 percent to the prior year, “which is in line with our everyday candy t rend,” Turgut noted. “Gum growth has been a challenge for the industry overall. The younger generation is not as interested in gum because they are busy with their phones. Gum companies realize this and have targeted marketing specifically towards teens. The suppliers really see the payoff in marketing on TV and in social media.” ...





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