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Editorial Comment — June 2015

The In-Store of the Future

“Get the patrons back in the stores!” Why are these words so important now?

They speak to the importance of keeping all the patrons resale has today and building with new generations of patrons entering their prime shopping years — when they are raising families and when they retire — two life stages when they need savings more than at any other time in their lives. There are many reasons for the recent declines in sales: troop reductions, tobacco and alcohol restrictions, military transformation/ restationing, contingency and Europe drawdowns, and so on. No one should expect sales to be at 2010 levels — looking back to 2001 before the troop buildup gives a truer picture.

With all that's going on, it's actually remarkable how loyal and resilient military shoppers have been — as have the organizations and people that serve them — and that sales scored about on par with the military population — or in some cases better, depending on category, segment or geographical area.

But riding the roller coaster of military and dependent population fluctuations is not a smart survival plan, whether for sales or the system, and neither is depending on e-commerce. Many in the marketplace are concerned that not enough is being done in some areas to maximize the sales floor or to rebuild store traffic with new generations of customers, and regain old ones.

There is, however, a path to building business if resale is open to maximizing its relationships with military resale's long-time industry partners.

In-store is still, for all intents and purposes, where almost all transactions take place. It's also the place where add-on sales are right at patrons' fingertips, and where customers are exposed to the best-marketed impulse purchases. This is where military resale's industry partners excel.

Patrons want what they've always had in commissaries and exchanges — so give them the promotions that drive traffic, the in-aisle displays that scream savings, and reenergize commissary and exchange broker and manufacturer demos and special events. It's also imperative to provide assortments that closely mirror the best civilian stores. Today, if a product is not available, customers will go elsewhere to buy it. If a patron favorite is squeezed out of the assortment because it's a slowermover, that's a direct invitation to send your customer to another store. Your assortment must compare favorably with outside the gate. Variety and newness and old favorites are all important parts of the retail equation.

For the sake of the servicemember, the families, the military, the entire resale system and the industry that supports it, exchanges and commissaries must reach out and promote to all the patrons they already have and the patrons they must soon rely on. Surely, between everyone's point-of-sale and CRM information, by now there is enough historical knowledge and fresh data to fully “understand” the details of who the customers are and how to reach them.

Resale — exchange systems, DeCA, industry ... share that knowledge! Working together, the individual segments of resale become stronger, more dynamic, more diverse and more appealing. Open the doors of communication again, and encourage a freer dialogue among category managers and manufacturers ... and leverage the expertise and merchandising and marketing power of the military broker community. Promote and devise more sweepstakes, contests, and giveaways than ever before! Now is the time to reinvigorate old relationships and encourage new customers.

The present generation of patrons is resale's lifeblood. The next generations of patrons are the foundation of its future.

The BCG Buzz

By now, everyone has probably heard that each of the military resale systems has received a draft of the Boston Consulting Group (BCG) report — the one required by Congress before any substantive changes can be made to the commissary system — and has been asked to review it to identify any factual errors or omissions.

After seeing the MCRMC, RAND and BENS reports and their recommendations, we caution BCG to rely on the expertise and knowledge of the resale systems in its review — not just the data they may have submitted earlier in the process, but their institutional competencies and current analyses as well.

Some considerations are especially, if not potentially catastrophically, significant:

1. Any negative impact on any of the exchanges could cause their credit ratings to drop, even put them in “technical default,” or result in a loss of backing from their banks and trigger climbing interest rates. Other third-order impacts include their funding of and by MWR programs, and their respective service branches' financial backing.

2. Merging the exchanges and the Defense Commissary Agency — although a merged entity would theoretically become “one team,” each individual part has a specific role to fulfill for its respective service branches' patrons, its military support mission, and its responsibility to be successful in its business endeavors on behalf of its own patrons and its employees. It is completely unfair and damaging to the exchange business models to expect them to make up any appropriated-fund shortfall to help operate commissaries.

3. Perhaps DeCA should be allowed to use “unexecuted” funds from the past few years (which one might reasonably assume have been put into a bucket account for future use) to cover some of the funding for 2016 and 2017, while the agency reduces operating costs so it can perform its mission with lower APF (under $1 billion for 2019, and around $800 million for 2020).

4. Loss of employment or reduction in wages for many within the systems, military spouses and other family members, would wreak havoc on military family readiness. Do the analysts conducting these studies ever pause to consider the effects of reduced funding on the organizations' employees? A majority of resale system employees have a military family connection of one sort or another, and it is this military community from which the military largely draws its future recruits. Failing to honor, or worse yet dishonoring, commitments in this community would imperil the future of recruiting even more than it already is.

5. We understand that BCG's forte is supposed to be business strategy, but we can't help wondering if the group has also been asked to help DCMO review the entire Department to see where it can merge offices to cut Pentagon expenses. Surely there are many DoD functions that can be streamlined before servicemember benefits need be sacrificed.

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