FALLING COMMISSARY SALES ARE RAISING RISKS TO SHOPPING BENEFIT
Sales at on-base grocery stores have fallen six percent in the past year, 21.3 percent since 2012, putting the shopping benefit at greater risk, say commissary executives.
The worry is that falling sales leave commissaries open to criticism that they’re losing relevancy as a military perk, or becoming too costly for taxpayers to support, given the fierce competition for customers from commercial grocers.
The Defense Department’s top two executives overseeing commissaries – one responsible for all military resale policies and the other for day-to-day operation of 237 commissaries worldwide – have conceded in separate interviews that falling sales are alarming and must be reversed.
But both also said they are confident current actions to transform commissaries into “business-like” operations can succeed -- in preserving current patron savings, lowering taxpayer support and improving shopper satisfaction.
The transformative steps include: phasing in variable pricing to replace the tradition of selling base groceries at cost-plus-a-five-percent surcharge; offering commissary label goods to deepen discounts; and, in time, adopting at least for new hires the more flexible wage schedule used in military exchanges, which run on-base department and convenience stores at a profit.
Leading commissary operations since November has been retired Navy Rear Admiral Robert J. Bianchi. He is interim director of the Defense Commissary Agency (DeCA) while remaining chief executive officer of the Navy Exchange Service Command (NexCom).
“I have been charged with instituting reforms and procedures [to] drive down expenses, allow us to still offer the benefit at the prescribed level [of savings] Congress is looking for and, hopefully, offset those expenses by running the commissary more like a business,” said Bianchi.
The first obstacle in his way, he suggested in an hour-long interview, is a “significant” drop in commissary sales, from $6.1 billion in fiscal 2012 to $4.8 billion in 2017. The sales slide has continued into fiscal 2018 though at a slower rate.
Resale experts agree it’s a worrisome trend particularly in an industry that keeps profit margins razor thin in their battle to keep customers.
“I’m very concerned” with falling sales, said Stephanie Barna, acting assistant secretary of defense for manpower and reserve affairs.
“Any drop, particularly a drop of the magnitude you’re just described, there’s not a day that goes by that we’re not talking about ‘How do we counter that?’”
It was Barna who persuaded Bianchi to take on his demanding dual-hat assignment during the most challenging period commissaries have faced. The special hiring authority she used so Bianchi could apply to commissaries his profit-and-lost acumen from years’ running exchanges will expire in early June.
So sometime sooner than that, said Barna, Bianchi or a “Bianchi clone” will become full time DeCA director. DeCA is headquartered at Fort Lee, Va. NexCom is in Virginia Beach, Va., where, Barna said, Bianchi and family have deep roots in community, a factor he must weigh in deciding if he wants the DeCA job fulltime.
“I couldn’t be happier with what Rob Bianchi is doing,” Barna said. After only 90 days “I see a difference in the way the commissary team is approaching the business. Rob is a businessman at core…classically educated” with a master’s in business from Harvard and “an incredible amount of experience managing a vast business enterprise.”
Bianchi said he is encouraged that the rate of monthly sales decline has slowed compared to last year, the result he believes of a variety of actions to improve the shopping experience with fuller shelves, more customer friendly hours and a workforce now more focused on patron needs.
Click here to read more...