The Domino Effect …

E and C NEWS

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Highlights of the November 2016 Issue


‘Dedication and Devotion to Duty’


Chief Operating Officer (COO) John Reiley

With more than five years under his belt as Coast Guard Exchange (CGX) chief operating officer (COO), John Reiley has participated in numerous changes at store, region and headquarters levels that have improved the retail environment for patrons of the Coast Guard’s more than 60 CGXs. In this interview, Reiley explains how changes in fleet and asset positioning, and using data to match store assortments with customer needs, are driving sales and savings, as the CGX prepares to deepen customer engagement and expand its patron base during fiscal 2017 and beyond.

E and C News: How has the CGX adapted to changes in the size and footprint of the Coast Guard? What is big Coast Guard asking you to prioritize as you deliver the benefit?

John Reiley: The size of the Coast Guard has not had a major impact on our business model. Because 47 of our 64 stores are some form of a convenience store, we are well positioned to deliver the benefit to our members.

The biggest change is the modernization of the Coast Guard fleet, which has moved assets from one base to another. Again, because of our size, we are nimble and able to respond to the changing needs of the Coast Guard relatively quickly.

As the Coast Guard continues to modernize, we are asked to adjust to the changing needs of our patrons and to ensure we protect the benefit over the long term. To protect the benefit, we have prioritized our capital projects to focus on the CGX facilities at bases with growing populations. Additionally, we have made a commitment to expand both our virtual footprint in e-commerce and our brick-and-mortar footprint of stores over the coming years.

E and C News: How do you balance driving sales and savings versus delivering a per capita dividend? How are CGX dividends distributed across the Coast Guard to keep Morale, Well-Being and Recreation (MWR) benefits fair and even?

Reiley: At first glance, it may appear as if the balance between driving sales and savings versus delivering a per capita dividend are mutually exclusive. In reality, we have been able to successfully exceed our sales and profit goals at CGX for several consecutive years by delivering savings to our customers, and therefore provide a stable per capita dividend to the Coast Guard.

Our foremost goal for all of us at CGX is to provide outstanding customer service. That service includes having the merchandise our customers want at a price our customers find very competitive.

By focusing our merchandise assortment and pricing strategy on the feedback we receive from our customers, coupled with the data from our Mi9 Retail ERP system, we have continued to drive profitable sales, resulting in a sustainable dividend now and into the future.

The per capita dividend itself has been at $50 for the past several years. The dividend amount is reviewed and approved annually by our Board of Directors. The distribution is actually based on the Personnel Allowance List (PAL), which is maintained by the U.S. Coast Guard.

E and C News: What are some of the newest initiatives CGX has been pursuing this year? What is on the docket for next year?

Reiley: In 2013, CGX began rolling out our Mi9 Retail ERP system, a new enterprise resource planning (ERP) system. We completed the rollout in summer 2014. We’ve spent a lot of time and effort analyzing data that previously had been unavailable to us. The data mining has allowed us to create category scorecards and then drill down to really focus our assortments to the SKU level by store.

The result has been a consistent increase in retail sales, margin, and gross profit. We continue to leverage the ERP to increase our automated replenishment program and manage our markdown strategy.

As we look forward, we plan to grow our virtual footprint by partnering with Mi9’s new e-commerce platform. In addition, we believe we have an opportunity to further engage our customers with our stores and associates using an integrated customer relationship management (CRM) tool from Mi9.

The result from our Customer Satisfaction Index (CSI) survey showed us that our customers who are the most engaged with CGX online and in stores are the most satisfied. They visit our stores more often and are most likely to recommend CGX to their friends that are also authorized patrons.

We look forward to launching the new CRM program in 2017 to deepen the engagement of these customers who reward us with the highest scores and highest sales.

Beyond the information technology (IT) systems, we plan to grow our brick-and-mortar footprint by opening additional “super” stores based on our Chesapeake, Va. model, beginning with our next large-format store in fiscal 2018. The purpose of both of these initiatives is to expand our patron base by reaching those who are currently outside of our retail sphere. ...


Grosso to Head AAFES Board, Piggee Vice Chair As Perna Takes Helm of Army Materiel Command


• WASHINGTON — In late September, Air Force Deputy Chief of Staff for Manpower, Personnel and Services (A1) Lt. Gen. Gina M. Grosso took over the chairmanship of the Army & Air Force Exchange Service (AAFES) Board of Directors, and Lt. Gen. Aundre Piggee, USA, became the board’s vice chair when he was promoted to three-star general and deputy chief of staff for Army Logistics (G4).

Piggee took command of Army Logistics at Fort Lee, Va., from outgoing commanding general Lt. Gen. Gustave ‘Gus’ Perna, USA, who was promoted to four-star general before taking the helm of the Army Materiel Command (AMC) at Rock Island Arsenal, Ala.

Grosso, who oversees Air Force plans and policies regarding military and civilian personnel management, including end strength management, education and training, compensation, resource allocation and Air Force services worldwide, was formerly the vice chair of the AAFES Board of Directors. However, with Perna’s departure, the chairmanship has switched to the Air Force, and Grosso was selected as chair. Grosso has been A1 since Oct. 15, 2015. ...

AAFES Names Middleton President and CMO

• DALLAS — The Army & Air Force Exchange Service (AAFES) has named long-time Exchange executive vice president (EVP) and chief merchandising officer (CMO) Ana Middleton as its new president, effective Oct. 10. The move gives the Exchange a successor to Mike Howard, who retired on Aug. 26 (see E and C News 10/16), and realigns the Exchange organization to achieve various structural and customer objectives.

AAFES director and chief executive officer (CEO) Tom Shull described the accompanying organizational shift as a move “to solidify structural realignments and assist in creating an optimal customer experience for servicemembers and their families.”

With the addition of her new role, Shull said that Middleton “will work closely with Dave Nelson” — the Exchange’s EVP and chief operating officer (COO) — “to continue improving the lines of communication and collaborative efforts of our merchandising and operations teams.” ...

DeCA Appoints Frost as West Area Director

• FORT LEE — On Nov. 10, the Defense Commissary Agency (DeCA) named Michelle Frost as director of its West Area. Expecting to begin her new job in January, Frost will take up a position previously held by the late Terry Batenhorst, who lost a battle with cancer in July. Since that time, Marty Jackson, the deputy director of both the West and Pacific areas, had served as acting director of the area.

The West Area encompasses 60 commissaries in 15 states from southeast Texas to eastern Washington and generated $1.33 billion in sales during the recently concluded fiscal 2016.

Frost had served as director of the agency’s East Area since June 13 and prior to that had been a supervisory category manager in the agency’s Sales Directorate (SD). As this issue went to press, a successor for the East Area director position has not yet been named.

“Michelle has been a terrific asset to DeCA as East Area director,” said Keith C. Hagenbuch, DeCA’s executive director of Store Operations. “She’s brought great insight to the position and helped our commissaries in the East provide the highest level of service to our patrons.

“She’s returning to the West, where she once served as DeCA West’s director of operations,” he added. “I know she will bring the same high level of energy, dedication and decision-making to the West Area that she has incorporated into every job she’s held with DeCA.”...

DeCA Fiscal 2016 Sales Hit $5.25 Billion

• FORT LEE — With the Defense Commissary Agency (DeCA) embarking on a transformation of its business model, commissary patrons conducted more than 86 million transactions in their local stores, both in CONUS and overseas during fiscal 2016, pushing total sales past the $5.25-billion mark for the recently concluded fiscal year.

Final figures for fiscal 2016 showed total sales of $5,251,419,621 across DeCA’s network of 238 stores and 19 assorted other retail operations such as central distribution centers, NEXMarts and Coast Guard Exchange (CGX) produce market sections. The total fell 4.69-percent short of the $5,509,880,017 in sales that were generated during the prior fiscal year.

The shortfall was accentuated by oft-repeated estimates on the part of DeCA executives that sales were expected to rise by 3 percent for the year; and also did not reach the 1-percent increase forecast by the President’s fiscal 2016 budget commissary sales estimate of $5.5685 billion.

The $5.25 billion figure represented the fourth straight fiscal year of sales decline since 2012, when sales reached their last peak of $6.09 billion, based on sales generated by the agency’s then 247 commissaries.

Prior to this, DeCA fiscal year-end sales were last close to this low-water mark in 2004 — early in what was to become a 10-year sales upswing with only one down year — when the worldwide network of 273 stores generated $5.24 billion in sales. ...

Carson Joins BCG as Senior Advisor, Strengthening DoD, DeCA Ties

• BETHESDA, MD. — On Oct. 11, the Boston Consulting Group (BCG) announced that Brad Carson, former acting under secretary of defense for personnel and readiness (USD, P&R), who left his post as Pentagon personnel chief last spring, was named senior advisor of BCG’s global Public Sector practice, based here inside the Beltway in the nation’s capital.

In choosing Carson for this position, BCG adds a 20- year veteran of public service to its burgeoning defense sector executive roster. The global management consulting firm that continues to be directly involved in the transformation of the Defense Commissary Agency (DeCA), as well as supplying the research, recommendations and report that are foundational to DeCA’s current transformation initiatives.

From April 2015 to the spring of 2016, Carson served as the acting USD P&R, overseeing several areas, including human resources and military readiness and training. He resigned on March 14 while he was awaiting formal approval from the Senate. Peter Levine subsequently took on the acting role while a permanent under secretary is still being pursued.

Previous to this, Carson had served as under secretary of the Army and general counsel of the Army. Earlier in his career he was twice elected as a Democrat to the House of Representatives from Oklahoma. He also deployed to Iraq as a Navy intelligence officer.

According to BCG, in his new position, Carson “will support consulting teams and clients around the world on a wide range of organizational and operational issues, particularly affordable and effective government,” and also support the organization’s aerospace and defense work. ...

Commissary Coupon Redemptions and SNAP Dip, Coupon Value Increases

• FORT LEE — Fiscal 2016 coupon figures provided by the Defense Commissary Agency (DeCA) show that the decline in coupon redemptions in its stores continued during the recently concluded fiscal year, at about three times the pace of its overall sales declines. SNAP transactions — also known as food stamp usage — in commissaries also fell by close to 100,000 transactions, a double-digit decline versus the prior year, although time-limits on food assistance may have affected some recipients. Meanwhile, the average savings per coupon redeemed increased slightly, and the Commissary Rewards Cards redemption rate doubled.

DeCA reported that it redeemed 64.24 million paper and non-Commissary- Rewards-card digital coupons during the fiscal year, which ended on Sept. 30, a 13.19-percent decrease from the previous year’s nearly 74 million figure. DeCA’s fiscal year-to-date sales through August were down 4.6 percent.

For the sixth straight year, the number of coupons redeemed in commissaries declined, representing a dropoff of more than 50 percent since 2010 from the high of 129.35 million coupons redeemed during that year.

However, for the first time, the average savings per coupon reached the $1 plateau, and the Commissary Rewards Card redemption rate doubled to almost 12 percent. ...

Cardin to Act as E-Commerce SVP as Engroff Retires

• DALLAS — The Army & Air Force Exchange Service (AAFES) told E and C News that Karen Cardin is acting as its senior vice president (SVP) of e- Commerce following the Oct. 28 retirement of longtime Merchandising Directorate (MD) executive John Engroff. Cardin will wear two hats as both merchandising vice president (VP) and e-Commerce SVP until a permanent replacement for Engroff is named. ...

NEXCOM Names Kaufman Command Counsel

• VIRGINIA BEACH — The Navy Exchange Service Command (NEXCOM) named Alan G. Kaufman as its command counsel, effective in October. He succeeded Tim Murphy in this position.

According to NEXCOM, in his new position, Kaufman leads a team that provides legal advice and representation to the exchange service in a variety of practice areas including commercial and business law; civilian personnel law (CPL); government contracts; ethics and standards of conduct, international transaction and host nation laws/Status of Forces Agreement (SOFA)-related issues; real estate and leasing; fiscal law; general and administrative law; litigation and litigation support; as well as information access, which includes network security and access issues, the Freedom of Information Act (FOIA) and the Privacy Act (PA). ...

DeCA EBS Rollout Key to 2017 Plans

• FORT LEE — On Sept. 20, the Defense Commissary Agency (DeCA) announced the remainder of its Enterprise Business Solution (EBS) Increment 1 deployment schedule, which, among other things, will change the way suppliers can submit product and pricing information to the agency. Once it is fully deployed, DeCA anticipates that EBS will provide the agency with robust reporting and data capabilities, replacing an older manual process that was cumbersome and time consuming. ...


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Big Game, Super Sales


The lead-up to Super Bowl 51, scheduled for Sunday, Feb. 5, 2017, at NRG Stadium in Houston, Texas, is a period Army & Air Force Exchange Service (AAFES) buyers, store personnel and suppliers are devoting significant time and energy toward maximizing the sales they can generate during patrons’ window of interest, especially in destination categories, such as beverages and snacks.

Exchange buyers — including Vicki Venables, handling beer and wine, Dragana Ilic, responsible for non-alcoholic beverages, and Melissa Kitchen, overseeing snacks — aim to make this a successful period for all sizes of Exchange stores.

Venables said that through late October, the Exchange was still in the planning stages and finalizing details for the Big Game. “However, the promotional plans for Super Bowl 2017 will be similar to prior years.” The buyer noted, “Assortment offerings will continue to provide savings to customers on their favorite beverages and snacks with creative displays to help generate excitement in the stores leading up to the Big Game.” ...




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