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Editorial Comment — May 2013

Online: Off Point? ...


As online shopping grabs an increasing share of publicity in the military resale market, if not yet quite so large a share of wallet, it might be time to take a step back and ask a few questions that have been smoldering in some of the minds in the marketplace: in particular "Why?" "Why now?" and of course, "How much?"

It is important to encourage and develop potential new avenues of satisfying customer demand. It is also prudent to thoroughly consider the dangers and pitfalls of inadvertently reducing foot traffic in the brick-and-mortar world that still constitutes by far the largest part of the market.

As for why, it's no secret that certain categories — electronics, books, music, clothing and footwear — have made their sales presence felt online while simultaneously taking a bite out of in-store sales. (All that notwithstanding, exchange apparel sales have seen some remarkably robust results; and exchange patrons continue to spend hundreds of millions of in-store dollars on electronics.)

Outside the gate, what this all adds up to is overall Web penetration of between 5.4 and 8 percent, depending on whose figures you trust.

Around a quarter of that online selling is currently gobbled up by Amazon.com, while at last glance, top retailer Walmart was bringing in a mere 2 percent of its sales online.

Meanwhile, in military resale, AAFES Chief Executive Officer Mike Howard cites a hefty $1-billion online sales goal, or 12.5 percent of the exchange service's approximately $8 billion in direct sales. NEXCOM Senior Vice President/Chief Merchandising Officer Tess Paquette tells E and C News that Navy exchanges could eventually — when the online environment fully matures — reel in 5 to 10 percent of their business online, depending on what categories they decide to offer.

Grocery shopping, however, continues to buck the online marketing trend. Currently, supermarket industry online sales reportedly hover at the 1-to-2 percent level.

Shoppers still seem very much to want to touch, see and smell their perishable purchases. And it shouldn't be that much of a surprise if military patrons on tight budgets, retirees on fixed incomes, and full-nesters putting kids through college are steering well clear of pricy civilian online non-sale groceries (with added delivery fees and fuel surcharges).

Commissary and exchange patrons still overwhelmingly embrace the in-store experience for products that they can touch and feel — especially meat, produce and other consumables they will eat or drink, or feed to their pets. For these and numerous other categories, most patrons prefer to shop brick-and-mortar stores; they know the savings on the basics of daily nutrition and personal care and other categories are there for them on every item, every day.

While exchanges and commissaries need to be ready to protect and develop their share of online business, reaching out especially to shoppers who live far from a base (thereby developing incremental sales), many in the marketplace worry that overemphasizing online shopping would cannibalize in-store sales and in the process take an unintended but damaging bite out of impulse shopping.

Most shoppers have shared the experience of going into a store intending to buy only a gallon of milk or a loaf of bread, but emerging half an hour later with a full shopping cart of bargains, the visit ultimately turning into a fill-in trip they hadn't realized they needed. The impulse purchase, convenient and efficient, is where some of the best bargains, the most interesting new product try-outs and the fun part of shopping converge.

Creating enjoyment in the shopping experience will draw patrons into the store and make them want to stay longer, says NEXCOM's Paquette, and that's the way to grow sales.

The military resale experience — the array of sampling programs, cooking demos, cosmetics makeovers and other events, along with a raft of contests and giveaways available only in the in-store military channel — is unparalleled anywhere else in retail. Online shopping is still light years from touching it.

Beyond that, a few more attributes help make the commissary and exchange focal points of the on-base community. Beginning with the geography of the store itself, from perimeter to center store, with deals, coupons, buy-one/get-one (BOGO) offers and on-the-shelf specials, off-shelf displays, dump bins and endcap promotions at every turn in aisle after aisle, with kiosks and store-in-store in every department, the in-store experience is designed to further shopping enjoyment. Then there are the in-person celebrity appearances, the industry-sponsored special events, and the family-friendly "retailtainment" that exchanges and commissaries do so well — many store managers and merchandisers and vendor and broker partners are simply masters at it.

Very little of it can be duplicated online.

And that brings us to the question, "Why now?" In this time of furloughs and drastic budget cuts, when the very existence of the military resale system is at threat level red, it seems that to focus too closely on the relatively small segment of potential sales online, in a quest for relevance, is something of a distraction from more pressing concerns, and leads to the question of whether something other than market forces is at work.

Is e-commerce seen as a way to reduce appropriated funding to the detriment of staffing on the floor? Online certainly has its place, but for now it is still but a small fraction of the whole, for which patron service should not be sacrificed.

While shopping with an app may be an increasing part of the military resale future, at this point around 98 percent of the $19 billion in on-base direct sales still require the same attention and face-to-face interaction as ever. The in-store segment continues to drive the lion's share of sales — and even the most extreme predictions don't see that changing for many years to come.

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