Presidents Message & Washington Update 9/4/2020

Quotes of note:

We want an unfair share.”  AAFES President Ana Middleton referring to the need for manufacturers to up their allocations for military personnel and families due the extraordinary challenges associated with keeping the product pipeline robust during the pandemic.  

‘Any wounded warrior who wants a job gets a job.”  AAFES CEO Tom Shull at the August 25 ALA/AAFES Roundtable

“The pandemic has also reinforced the importance of those long-standing relationships with the industry partners.  Members of industry “were able on our behalf, in the tight supply chain environment, to lobby with their leadership and give the military channel first priority as stuff was coming off the line. That’s why we were able to be first in line for a lot of the orders…Having this network of commissaries and exchanges around the world is an insurance policy. Not only are we always out there operating, but when there are crises, we can just turn the dial up.  It’s not like we have to start from scratch. We have a functioning, operational system that delivers these benefits every day. The fact that we were able to provide this uninterrupted response is not insignificant.  My respect for all of our employees in both organizations, what they have done over the last six months and what they continue to do, I can’t even put into words. I recognize them as unsung heroes.”  Rear Admiral Rob Bianchi (USN-Ret.) NEXCOM CEO and former leader of DeCA reflecting on his dual-hatted experience.

“100% of what we make goes back to quality of life.  We do not make a profit—that is often a misconception. We are the ‘Army and Air Force Exchange Service.’ Yes, we are a service. We also provide goods at retail that are typically 20% below competitors. There is not only a benefit for the lower prices but also having access to goods that our Warfighters and their families typically wouldn’t have access to throughout the world. That is so important for quality of life”.  Tom Shull, CEO of the Army and Air Force Exchange Service at the ALA and AAFES on-line Roundtable. 

“It’s really the best of government coming together with the best of industry to serve the best people in the world.”  Steve Rossetti, ALA President at the ALA and AAFES on-line conference. 

Consolidation of resale agencies still being evaluated by Congress.  On December 4, the DoD rendered a report “Study to Determine the Feasibility of Consolidation of the Defense Resale Entities.”  The GAO (Congress’ audit branch) issued a report on April 30 of this year on consolidation of the military resale agencies.  This report was done at the request of the House and Senate Armed Services Committees.  

GAO raised serious questions as to the methodology on certain aspects of the consolidation review that was done by DoD’s  “Community Reform” task force, i.e., savings from COGs category management, headquarters relocations, and IT expenditures associated with the consolidation.  

DoD is standing by its estimates on savings of $1.4 billion to $2.1 billion in the first five years and $473 million to $753 million in recurring savings in year 6 and after.  

The COGs savings mentioned (and comprise 70-plus percent of the savings/revenue) are basically taking category management across the entire resale enterprise and moving to more dead net.  

Also noteworthy is the DoD is saying that the exchange comments to the original business case analysis developed by the Defense Community Reform task force are “internal deliberations” and DoD is not going to provide them.   

n  GAO said that DoD needed to reassess its approach to estimating savings for cost of goods sold.  DoD said that there were significant savings.

n   GAO said that DoD needed to reassess the methods used for estimating IT costs of consolidate.  DoD said that it “does not believe any changes to the IT costs will significantly impact the net benefit from consolidation”.

n  GAO said that DoD should develop arrange of cost estimates for relocating the Headquarters of the resale organizations.  DoD said that this was a “highly sensitive” decision and is best left to a later date should consolidation occur.

n  GAO said that the DoD should provide the written comments of the military departments and the resale organizations to Congress.  DoD said no because those deliberations were “internal”.  

The House of Representatives, in its version of the upcoming FY 2021 defense bill has asked for more analysis.  Section 633 of that bill calls on DoD to update the busines case to establish new baselines for cost of goods sold, technology, and headquarters relocations and end the updated business case to the military departments by April of 2021 and to Congress by June 1, 2021.  They also said that DoD can’t take any action to consolidate until the Senate and House notify the DoD of “receipt and acceptance of the updated BCA.” 

More to come but the key takeaway is Defense is pressing forward despite the GAO and Congressional headwinds.  DoD continues to squeeze the sponge on many Defense programs, including resale, to find dollars in what is shaping up to be a tighter defense budget going forward post-pandemic.  We’ve been raising questions about the COGs estimates and impact of drastic category reviews on patrons and sales as well as the costs and revenue estimates of “back of the house” consolidation.  This is going to heat up so stay tuned.    

Base access, store restrictions continue to plague commissaries and exchanges.  It’s a nagging problem for both commissaries and exchanges for years, and when the coronavirus pandemic hit earlier this year, it made things that much worse for these military stores and shoppers wanting to use them, ALA’s Larry Lapka reports.

The emergence of the pandemic was particularly difficult for retirees and veterans — perhaps among the most at-risk groups related to the pandemic — and their ability to get on base to do their shopping in their local military stores.

Numerous rules and restrictions have been put in place by base commanders to limit access to their respective bases, and when these were lessened or relaxed, retirees and veterans were often the groups that were thought to need the most protection, and thus, had their base access more limited than other groups.

And this stance was eerily ironic, as the pandemic hit when the American Logistics Association (ALA) was working with the resale agencies to boost access to military stores, including the January 1, 2020 launch of expanded privileges for disabled veterans and its work to allow the Defense Department’s civilian workers to have shopping privileges.

Although through the end of August many sites had loosened the tight restrictions they had implemented when the pandemic struck, other bases were more cautionary, and this had a major impact on store sales during this period.

The exchange services are generally reflecting sales downturns, and although at least some of this can be attributed to lessened gas sales, the fluctuations of access during the pandemic must also be taken into account.

Through July 2020, the Army & Air Force Exchange Service’s (AAFES) fiscal 2020 sales were $2.91 billion, a 10.1-percent decrease from the $3.23 billion it accrued a year earlier.

The Navy Exchange Service Command (NEXCOM) and Marine Corps Exchange (MCX) followed suit. NEXCOM’s fiscal 2020 sales through July were $1.03 billion, an 8.7-percent dip from the $1.13 billion it posted through July 2019. The MCX reported $381.09 million in sales through July 2020, a more than 9-percent drop-off from year-to-date fiscal 2019 sales of $410.67 million.

Only the Coast Guard Exchange (CGX) posted heightened sales, with its activity through July at $81.49 million, a 16.3-percent increase from the $76.65 million it posted a year earlier. This might be attributed to some of the larger CGX facilities operating in off-base sites in civilian areas, making patron access easier.

ALA publishes base access restriction lists with bases limiting access for retirees and disabled veterans, and “elderly” shoppers and limited hours for other patron categories. 

The Military Times reported yesterday that COVID has had a negative effect on some shoppers, especially the retiree and disabled veteran shopper population. As some bases have had to revert to Health Protection Condition Charlie, some of those installation officials have limited base access for retirees and the newly eligible disabled veterans. “In looking at the data, we see that some of the retiree and veteran traffic has declined,” Departing DeCA leader retired Admiral Rob Bianchi said. “I think it’s because they’ve had difficulty accessing the base for whatever reason, because [installation officials have had to throttle back on base access for health and safety conditions.” Some veterans and retirees may also have more health vulnerabilities to COVID, and they may be limiting their visits.

Admiral Rob Bianchi (USN-Ret.), outgoing DeCA leader, wants to make it clear: “The decision about whether you can through the gate to the commissary is not mine. We’re not restricting any [authorized shoppers] from shopping.” That’s up to local installation officials during this pandemic.

As of Jan. 1, a new group is eligible to shop, the Military Times reported, including all veterans with VA service-connected disability ratings; Purple Heart recipients; veterans who are former prisoners of war; and primary family caregivers of eligible veterans under the VA caregiver program. Even with a rocky start— to include some installation lockdowns in January with Iran tensions as well as COVID — this newly eligible disabled veterans’ group is definitely shopping in commissaries, Bianchi said.

Through the end of June, these customers had spent about $27 million in commissaries. “They’re not coming in as often, but they’re buying a lot when they come in,” he said. The average purchase for the disabled veteran population is about $72, compared to the general average of about $53 per shopping trip. “They’re clearly coming in and taking advantage of the benefit that they’ve earned. So, we’re happy about that,” Bianchi said.

ALA continues to press Congress and the Administration for increased patronage of on-base stores.  Two provisions are in the current Defense bill working its way through congress.  One would allow emergency and protection workers stationed on base to use commissaries and exchanges.  Another would allow first responders to use mobile exchanges during natural disasters.  ALA is also advocating for and working with policymakers to open up access to the commissaries and exchanges for all civilian employees of the DoD.  

ALA Annual Conference.  Not surprisingly, the ALA Annual Conference is going to be streamed on-line this year and is currently scheduled for October 19-21.  It had originally been scheduled for Norfolk Va. in October.  It is still going to be held in October, but the format will be on-line due to the pandemic.  All resale organizations and officials from Congress and the Administration are being invited to address the meeting.  We’ll have time set aside for a meeting of the members and an ALA Board session.  More to come.    

Click-to-Go roll-out plans.  DeCA officials have learned other things about their customers, too — for example, that they want the Click- 2-Go service at their commissary, allowing them to order their groceries online and pick them up at curbside. They had been slowly rolling out the service over the last year, and it’s now available at six commissaries. This service – where customers order online and pick up their groceries curbside at the commissary— has been popular during the pandemic and is now available at six commissaries. They’re adding the service at five more stores this year: Charleston AFB, S.C. in September; Minot AFB, North Dakota and Offutt AFB, Nebraska in October; and Jacksonville Naval Air Station, Fla., in December. The service was set to start at Fort Polk, La., this fall, but officials will determine the start date after conducting a hurricane damage assessment.  While many commercial grocers have adapted curbside solutions quickly during the pandemic, it’s not as easy for DeCA to deploy the service “overnight,” Bianchi said, because of technology requirements and changes, and the restrictions on travel during the pandemic. But officials expect to increase the number of Click 2 Go sites to 60 commissaries in the next two years.

Click to Go rollout at Forts Eustis and Oceana.  DeCA is seeking volunteer companies for the Eustis and Oceana events. Please let me know if you’ll be able to assist in putting gift bags together on Monday, September 21 or handing out gift bags to our Patrons on Tuesday, September 22. 

NEXCOM has been playing a number of key roles during the pandemic.   Negotiating with a vendor to quickly manufacture 550,000 masks to send to the fleet; setting up quarantine support programs at about 36 bases around the world; setting up a curbside pickup process at some Navy exchanges; keeping Navy Lodges and providing more than 40,000 room nights for quarantine as a safe harbor; negotiating with vendors to increase the bandwidth capabilities on installations as families were having to work and do online learning at home; continuing to provide thousands of school lunches when DoD schools shut down; providing more than 30,000 meals to sailors who were taken off the aircraft carrier Theodore Roosevelt as part of the recovery process, to locations on base on Guam and out in hotels.

The stars shined bright at the ALA/AAFES roundtable on August 25.  Industry got massive insights into this premiere retailer’s plans and programs.  What a remarkable system the military resale program is.  This was on display at the roundtable and AAFES turned out some of its best experts to brief industry on their challenges and achievements.  Thanks to CEO Tom Shull and the team including President Ana Middleton; Chris Burton, VP for hardlines; Martha Robuck, VP, Softlines; Eric Sidman, VP for consumables; Eric Boen, VP for Planning and Replenishment; Kyle Allison, VP for Omnichannel marketing; David Lemmons, VP for Ecommerce Operations; Sandi Lute, VP for Marketing Customer Engagement; data virtuoso Dr. James Skibo, SVP for Customer Relationship Management.; Alan French, SVP, Supply Chain; Morgan Meeks, VP, Transportation Operaitons; and Jeremy Boyd, VP, Supply Chain Optimization.

We’re pushing information out to members on the rich content of the event but here are some of the highlights:

  • Joint strategies abound among the military retailers and now is expanding to USAF Services and the Army’s Installation Management Command
  • AAFES has been challenged and has mastered a challenging pandemic environment, but is experiencing softness in many revenue categories and increased expenses (ALA is working to ensure policymakers recognize this and augment the Exchange with deserved appropriated funding)
  • Major efforts to optimize their logistics systems
  • Roll-out of a digital platform or “Digital Garrison” and incorporation of health services into the app…a first of its kind collaboration with the military installations
  • Major push on CRM and impressive advances in marketing programs.
  • Ramped up engagement with virtual partners.
  • 40 to 50 percent growth in social media engagements.
  • Curbside and BOPIS, ship from store ramp-ups
  • PAR leadership
  • Range.me supplier partnership ramping up
  • Update on the Product Information Manger or PIM program for supply workflow
  • Pandemic impact on footsteps and customer behavior
  • Pandemic impact on apparel and plans for mitigate it
  • Military retail and the commercial ocean in which it swims

What do the new recruits want?  Sandboxx, a leader in military digital media conducted a survey of new recruits to pulse the troops on-line habits.  Here are the results:  

  • Primary location for doing shopping:
    • Soldiers – Exchange (18%), Amazon (37%), Other- in-store (27%), Other- online (13%)
    • Sailors – Exchange (59%), Amazon (18%), Other- in-store (8%), Other- online (14%)
    • Marines – Exchange (59%), Amazon (12%), Other- in-store (18%), Other- online (12%)
    • Airmen – Exchange (31%), Amazon (19%), Other- in-store (31%), Other- online (19%)
    • Coast Guardsmen – Exchange (46%), Amazon (15%), Other- in-store (31%), Other- online (8%)
  • % that have an Amazon Prime subscription by branch:
    • Army – 58%
    • Navy – 45%
    • Marine Corps – 35%
    • Air Force – 50%
    • Coast Guard – 62%
  • Other insights:
    • 90% have a streaming subscription e.g. Netflix, Hulu
    • 7% have a grooming subscription e.g. Dollar Shave Club, Harry’s
    • 92% said they will delete TikTok if requested by their command
    • Instagram is the most popular social platform – 89% use it daily or weekly
    • 68% read military news such as Sandboxx News or Military Times at least monthly
    • 90.6% said that the military was better or on-par with what they expected it to be like
    • 37% play video games the same amount or more often since joining the military
    • 41% use social gaming platforms like Steam, Twitch or Discord

New ALA Board of Directors slate.  Ballots are going to be sent out for the new ALA Board of Directors.  The new slate includes:  Chair-Elect Ray Milo, S&K Sales; Secretary, Kurt Hall, Unilever; Treasurer, Joe Campagna, Kellogg Company; and new members, Stephanie Supplee, Coastal Pacific Food Distributors, Mike Goetzman, General Mills and JD Fenessy, Del Monte Foods.  ALA is a member organization represented by the Board.  Each year, members of industry step forward to volunteer their time to serve the membership either in various councils and working groups or the Board of Directors; a remarkable contribution to the industry considering their challenging day jobs.  

ALA welcomes Mr. Larry Lapka to our team.  Many of you know Larry and most of you have probably seen his by-line over the years as a top-notch veteran reporter who has covered the resale business for years, most recently with Exchange and Commissary News.   He’ll be covering the government and commercial side of the resale business and bringing you his tremendous insight into how the plumbing works in the resale trade.  ALA is ramping up its coverage of this business to promote sales and remind policymakers of the great contributions it makes to our military families.  With all the moving parts, accelerated information flow is key.   Look for his items in various ALA communications vehicles.  Glad to have you aboard Larry. 

DeCA August sales down 8.8 percent.  Sales in DeCA’s central region dropped nearly 19 percent.  It was a tough month with ongoing limitations on base access, stores shut for physical inventories, and some manufacturer allocations or scarce products to distributors and stores coming up short.  In a meeting last month with incoming DeCA Director Bill Moore, ALA pledged to throw all industry assets at checking the downward sales trend. 

Opening the gates to retirees and veterans in Europe.  The Army in Europe has worked with the German Government and gotten permission for retirees and veterans to use MWR facilities there.  Mark Neeter, a spokesman for Installations Command said that it stemmed from the authority in the 2019 National Defense Authorization Act to expand eligibility for veterans to shop at exchanges and commissaries beginning January 1, 2020.  ALA worked with Congress to provide this authority and it was introduced by the Congressman Dan Lipinsky and the late Congressman Walter Jones who introduced the Purple Heart and Disabled Veterans Act in 2018 and incorporated it into the FY 2019 National Defense Authorization Act.  Veterans living in Germany can get an access pass and veterans visiting Germany have to get a temporary installation pass.   

Amazing Amazon grocery innovation.  The new Amazon Fresh supermarket includes micro—fulfillment, contactless features, a curated assortment of premium and conventional products, highly personalized service, low-touch cashier less checkout, made to order foods.  They’re rolling it out in California first. 

Lidl expansion.  Discount grocer is accelerating U.S. growth with a $500 million investment in 50 new stores in the mid-Atlantic and South.  

Walmart ups e-com stakes.  Walmart-plus has launched to go up against Amazon prime.  $98 annually.  Walmart is investing billions in smartphone apps, supply chain overhauls, and curbside. 

Manufacturing broker pleads guilty.  A Brooklyn, NY, businessman appeared before a U.S. District Court judge in Providence, R.I., on Tuesday and admitted that he brokered the manufacturing of counterfeit clothing, apparel and gear manufactured in China and Pakistan that was shipped to wholesalers in the United States for distribution. Some of the counterfeit items were distributed to members of the United States military.

Bernard Klein, 39, admitted that he conspired with New York wholesaler Ramin Kohanbash, 50, and at least one other person, to arrange the mass production of goods in China and Pakistan that carried counterfeit markings and labels identical to genuine trademarks registered with the U.S. Patent and Trademark Office.

According to court documents, Klein was sent samples of genuine clothing, apparel, and gear by Kohanbash to be reproduced. Prior to the approval of mass production of the counterfeit goods, Klein emailed photographs of the goods, as well as hangtags and labels, to Kohanbash for approval. After making any changes ordered by Kohanbash, Klein facilitated the manufacturing of goods that contained counterfeit markings identical to genuine marks registered with the U.S. Patent and Trademark Office.

Best regards,

 

Stephen Rossetti

President

 

 

Pentagon News/Military News

 Top general says no role for military in presidential vote
(The Associated Press) The U.S. armed forces will have no role in carrying out the election process or resolving a disputed vote, the top U.S. military officer told Congress in comments released Friday.

US troops may have role in mass COVID-19 vaccination effort
(Military.com) U.S. military medical personnel or National Guard troops might assist in inoculating the public once a viable, safe vaccine is developed for COVID-19, senior government health officials said Friday.

Two of DoD’s biggest military contracts are now up for grabs
(Military.com) The race has begun for contractors hoping to snag two of the Defense Department’s most lucrative military contracts: the opportunity to manage Tricare, providing health services to more than 9 million service members, retirees and their families.
 

Military not selected to be among first groups to receive coronavirus vaccine
(Stars & Stripes) Service members might not be at the front of the line to receive the coronavirus vaccine when it is ready, unless they are health care workers or at high risk of contracting the disease, according to a document outlining the possible order of distribution.
 

 

INDUSTRY NEWS

Amazon training program targets vets, military spouses
Amazon and City University of Seattle have created a certification program to prepare military veterans who work at Amazon to move up in the company. The online program will also be open to military spouses employed by Amazon.

Best Buy beats its online sales record during the pandemic
Best Buy reported a 242% surge in second-quarter online sales as pandemic-driven work- and learn-from-home trends spurred demand for computers and other electronics. The retailer booked comparable online sales of $4.85 billion in the quarter, beating a record set last holiday season, and same-store sales grew 5% despite appointment-only rules that were in place at most stores for about half of the three-month period.
Full Story: Star Tribune (Minneapolis-St. Paul, Minn.) (tiered subscription model) (8/25)

 

 

RESALE NEWS:

Annual commissary customer service survey starts Aug. 24

tool to help us do that.” In addition to the annual CCSS, DeCA also employs ForeSee, a robust survey platform that gives …

 

Food safety month: Commissaries reinforce customers’ awareness of foodborne illnesses during September

 

org. -DeCA- About DeCA: The Defense Commissary Agency operates a worldwide chain of commissaries providing …

Wiesbaden Exchange Shopper Takes Home $10,000 Shopping Spree

 

Wiesbaden, won a $10,000 shopping spree courtesy of the Army & Air Force Exchange Service’s Subway Sip. Rip. Ultimate Trip …

Ribbon cutting opens newly constructed Single Enlisted Barracks

 

Watanabe. “And they’re located just across the street from our Commissary, NEX, Navy Lodge and future facilities which …

 

NEX Drive/Up Program Makes Life Easier for Customers

The Navy Exchange Service Command (NEXCOM) will roll out its new Drive/Up Program to select NEX locations Sept 3. The Drive/Up Program allows customers to safely pick up merchandise curbside.

“We have been working to create a buy online, pick up in store program to make shopping easier for our customers,” said Robert J. Bianchi, Chief Executive Officer, NEXCOM. “When the COVID-19 pandemic began with its stay-at-home orders and social distancing requirements, we knew we had to implement this program as soon as we could. We want our customers to feel safe while still being able to purchase the products they need for themselves and their families.”

To be eligible for the NEX Drive/Up service, customers must have an account on the NEX online store, myNavyExchange.com. Customers can purchase items listed in the NEX Everyday Essentials digital flier or the weekly Drive/Up Specials digital flier, both of which are available on myNavyExchange.com. Some products eligible for purchase include cleaning supplies, baby items including diapers, formula and wipes, personal and beauty care, health essentials, snacks and non-alcoholic beverages.

Orders are ready for pickup within 48 hours of being placed. Once the order is fulfilled at the store, a NEX White Glove associate will contact the customer for payment information. The order will be ready for customer pick up within 30 minutes of payment. Orders can be picked up Monday – Saturday 12 p. m. – 6 p. m. and Sunday 12 p.m. – 5 p. m.

Each participating NEX store has designated Drive/Up Service parking spots. Customers need to call the NEX to let them know they are parked at the store. Once the customer shows their Department of Defense ID to confirm the order, the NEX associate will place the customer’s items in the car.

The NEX Drive/Up Program is available at NEX Oceana, Little Creek and Norfolk, Va.; NEX San Diego; NEX Pearl Harbor; NEX Bethesda, Md.; NEX Jacksonville and Pensacola, Fla.; NEX Guam; and NEX Yokosuka, Japan.

 

NEX adjusts hours after 7 employees test positive for virus

 

In the past week, seven employees from Navy Exchange Guam have tested positive for COVID-19. As a result, effective Saturday, Aug…

Army & Air Force Exchange Service Named Best for Vets Employer for Seventh Consecutive Year

 

Since 1895, the Army & Air Force Exchange Service (Exchange) has gone where Soldiers, Airmen and their …

 

 Mark your Calendar

October 19-20, 2020                      ALA National (Virtual) Convention           

September 22-24, 2020                  ALA/DeCA  (Virtual) Joint Business Planning Workshop

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