Mil­i­tary re­tailer to let in more vets

Any­one hon­or­ably dis­charged can soon use ex­change on­line

Northwest Arkansas Democrat-Gazette - - BUSINESS & FARM - THE AS­SO­CI­ATED PRESS JOSH FUNK

OFFUTT AIR FORCE BASE, Neb. — All hon­or­ably dis­charged U.S. mil­i­tary veter­ans, no mat­ter their branch of ser­vice, will be el­i­gi­ble start­ing later this year to shop tax-free on­line at the Army & Air Force Ex­change Ser­vice site with the same dis­counts they en­joyed on base while in the mil­i­tary.

It’s the lat­est way in which the or­ga­ni­za­tion is try­ing to keep its cus­tomers as the armed forces shrink and air­men and sol­diers buy more for de­liv­ery.

Adding 13 mil­lion po­ten­tial new cus­tomers will give ex­tra am­mu­ni­tion to the group that runs the stores on U.S. Army and Air Force bases world­wide as it fights Ama­zon and other re­tail­ers for veter­ans’ on­line shop­ping dol­lars.

Since hir­ing its first civil­ian chief ex­ec­u­tive of­fi­cer five years ago, the Ex­change has up­graded the brands at base stores to in­clude items such as Dis­ney toys, Michael Kors fash­ions and other top brands. Like pri­vate stores, it’s also im­posed tighter cost con­trols, re­duced the num­ber of em­ploy­ees and im­proved people’s ex­pe­ri­ence on the web­site.

“The in­tent is to re­ally beat Ama­zon at their game be­cause we have lo­ca­tions lit­er­ally on the in­stal­la­tions,” said CEO Tom Shull. “We’re lean­ing to­ward not just ship-from-store but pick-up-from-store and even­tu­ally de­liver-from-store.”

The Ex­change is adding ship­ping cen­ters within its stores to al­low it to send prod­ucts di­rectly from those lo­ca­tions more cheaply and quickly. Twenty-six stores now ship or­ders, and that will ex­pand to 55 by the end of the year.

Within the next three years, Shull said, the goal is to de­liver some­thing on base within two hours of when it is or­dered. That’s pos­si­ble partly be­cause the Ex­changes are al­ready on base, cleared by se­cu­rity.

The Ex­change de­liv­ers most or­ders on the sec­ond day now. Shull said ship­ping from stores will make a big dif­fer­ence in re­gions around bases, which are of­ten in more ru­ral ar­eas.

Ex­pand­ing on­line shop­ping to all hon­or­ably dis­charged veter­ans is ex­pected to add about $200 mil­lion an­nu­ally within three years to the $8.3 bil­lion in sales the Ex­changes gen­er­ated last year.

Adding those shop­pers, what Shull called “the foun­da­tion of our growth,” is crit­i­cal to help off­set the 13 per­cent de­cline in the num­ber of ac­tive-duty Army and Air Force mem­bers since 2011 when the Ex­change gen­er­ated $10.3 bil­lion rev­enue.

“It’s a mod­est ben­e­fit, but it can save you thou­sands of dol­lars a year,” said Shull, a grad­u­ate of the U.S. Mil­i­tary Academy who served in the Army for a decade be­fore start­ing a re­tail ca­reer at chains in­clud­ing Macy’s.

For­mer Marine For­rest Cor­nelius was among the first to sign up at the ver­i­fi­ca­tion web­site when it started in June, and he got a chance to start shop­ping early to test it out. The 51-year-old was im­pressed by the site and a deal he found on Ray-Ban sunglasses.

“The big­gest thing is price. They’re al­ways go­ing to be a lit­tle bit cheaper,” said Cor­nelius, who lives in Dal­las.

But com­pet­ing on price in to­day’s re­tail en­vi­ron­ment is in­creas­ingly dif­fi­cult, said Ed­ward Jones an­a­lyst Brian Yar­brough. Just look at how much trou­ble Wal-Mart has com­pet­ing with Ama­zon, he said, be­cause Wal-Mart has the fixed costs as­so­ci­ated with its stores.

“To think you’re go­ing to com­pete on price, you’re go­ing to have a hard time there,” he said.

Un­der Shull’s lead­er­ship, the Ex­change stores have traded their in­dus­trial feel and reliance on off-brand mer­chan­dise for a more mod­ern look fea­tur­ing well­known la­bels.

Two-thirds of the main Ex­change store at Offutt Air Force Base re­sem­bles any de­part­ment store, with prom­i­nent dis­plays of name-brand cos­met­ics, Nike fit­ness gear and Carter’s clothes for kids. The rest is filled with the kind of elec­tron­ics, ap­pli­ances, house­wares and toys found at a Wal-Mart or Sears store, with ma­jor brands in ev­ery sec­tion.

The Ex­changes don’t pay rent for their mil­i­tary base lo­ca­tions, and the govern­ment trans­ports some of their sup­plies and goods to far-flung lo­ca­tions, but oth­er­wise they op­er­ate mostly like an in­de­pen­dent re­tailer. Roughly two-thirds of the em­ploy­ees are fam­ily mem­bers of sol­diers or air­men.

The Ex­change, which is part of the De­fense De­part­ment, re­ported earn­ings of $384 mil­lion last year. That’s a sharp con­trast from five years ago when Shull ar­rived to pro­jec­tions of $180 mil­lion in losses.

Of last year’s profit, $225 mil­lion was re­turned to the de­fense de­part­ment to help pay for qual­ity-of-life pro­grams on bases such as child de­vel­op­ment and fit­ness cen­ters. Be­sides the main stores, the Ex­changes also op­er­ate more than 70 movie the­aters and bring in fran­chise restau­rants and other ven­dors for the shop­ping malls it op­er­ates on bases.

Shull feels those are good rea­sons for the new on­line shop­ping priv­i­leges to draw veter­ans to do their shop­ping there.

“Veter­ans value the cost sav­ings and what they can do to sup­port the mil­i­tary,” he said.

AP/NATI HARNIK

Staff Sgt. Alex Frank shops at the Army & Air Force Ex­change Ser­vice store on Ne­braska’s Offutt Air Force Base in May. All hon­or­ably dis­charged U.S. mil­i­tary veter­ans will be el­i­gi­ble later this year to shop tax-free at the Ex­change’s on­line site.

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