Serving Those Who Serve

Stateside or internationally, military exchanges provide conveniences of home to U.S. Armed Forces members

Today, there are more than 2 million men and women serving in the U.S. Armed Forces, both civilian and military. They serve in cities and towns across the United States, as well as more than 100 countries spanning the globe. In all, there are five branches of the U.S. Armed Forces — Air Force, Army, Coast Guard, Marines Corps and the Navy — and each has its own mission. One thing they have in common, however, is serving those who serve.

An important aspect of serving their members is providing them access to the comforts and conveniences of home. To this end, the different branches operate retail “exchanges” whose store portfolios range from convenience stores to big-box outlets.

Military stores routinely land on the annual Convenience Store News Top 20 Growth Chains list, and this year was no different. According to the statistics from TDLinx, a service of Nielsen, the military ranked No. 2 this year for adding a total 133 c-stores between Jan. 1 and Dec. 31, 2012. That was up from the No. 9 spot the previous year. In addition, military stores took the No. 21 spot on the 2013 CSNews Top 100 Convenience Stores list — up from No. 23 in 2012. They also captured the No. 10 spot among company-operated chains.

Each branch runs its c-stores under the umbrella of an exchange, which includes other retail outlets as well. There are approximately 636 c-stores in the military portfolio currently. The lineup includes Marine Marts, CGXpress stores, NEXCOM mini marts and AAFES Express locations.

MARINE CORPS EXCHANGE (MCX)

The first Marine Corps Exchange was approved by Theodore Roosevelt, then the acting Secretary of the Navy, in 1897. That first location opened at Marine Barracks in Boston and today, the MCX count stands at 129 stores overall, with the convenience stores known as Marine Marts. Depending on the demographic of the specific location, Marine Marts may be classified as traditional stores, troop stores, family stores or hyper Marine Marts, explained Anita Roberson, head of merchandising, Semper Fit and Exchange Services Division.

“This will drive how we assort the stores with product,” she said.

Overall, the MCX inventory mix features a wide range of branded merchandise in traditional c-store categories, found in stores “outside the gate.” In addition to branded products, the stores carry a private label clothing line, 1775, according to Roberson.

The MCX also offers services ranging from wireless service to barbershops to optical stores. Services vary by location based on the needs of the demographic at that site or command.

“We consistently work to provide our international bases an assortment that marries to our domestic locations,” said Roberson. “Whether our Marines are at Camp Lejeune [N.C.] or at Iwakuni [Japan], we want them to have the brands, products and services they desire and expect no matter where they are in the world.”

In fiscal year 2012, the MCX rang up $714.6 million in sales, excluding fuel and service bays. Food, tobacco, non-alcoholic beverages, computers and military uniforms were the top five categories purchased. Many sites offer fuel, with sales totaling $269 million comparatively.

As one of the top categories, food plays a prominent role in MCX stores. There are six food courts located within main exchange buildings and they are mostly nationally branded restaurant outlets, including Taco Bell, KFC, Subway and Carl’s Jr.

Within the Marine Marts, there are in-house branded concepts offering subs and salads, pizza, burgers and gourmet coffee. There are also four directly licensed Starbucks locations, with two located within the main exchanges of Twenty-Nine Palms in California and Marine Corps Base Quantico in Virginia, according to Roberson.

In addition, food trucks offering regional brands are fixtures in front of exchange facilities at Marine Corps Air Station Miramar and Camp Pendleton, both in California.

For the past several years, the Marine Corps has been renovating its MCX stores as part of a capitalization and rebranding master plan. Roberson reported the efforts are paying off as the renovated MCX main exchanges are showing year-over-year increases.

“Our Marine Mart master plan has been developed to prioritize these remodels to ensure they get the attention they deserve, and remodels are underway. We are anxiously anticipating the fresh face of the Marine Marts with several openings this year and more starting construction in 2014,” she said.

The MCX is also working to transform its supply chain, Roberson noted. “Providing our organization the capability of managing inventory more efficiently will positively impact sales and margin — ultimately providing a better in-store experience with better merchandise availability and faster merchandise movement to the selling floor,” she stated.

THE COAST GUARD EXCHANGE (CGX)

The Coast Guard Exchange began life in 1950 when the Coast Guard Exchange Manual was published and prescribed “the rules and instructions for the establishment and operation of Coast Guard Exchanges, Exchange Activities, and Morale Funds at Coast Guard units.”

Over the decades, the CGX has undergone several changes and in the 1980s, under the Coast Guard realignment, the Coast Guard Exchange System was established for the service-wide system of retail activities.

Throughout the last decade, CGX centralized many of its components. Functions once handled at the store level, such as buying and human resources, were moved to headquarters in order to streamline processes and increase the efficiency of the organization, according to Mike Griffin, deputy director of operations for CGX.

Most recently in 2009, the USCG Community Services Command (CSC) was established as operating “parent” of the CGX. At that time, all operations including buying, human resources and finance moved to new centralized CSC offices in Chesapeake, Va.

CGX has 67 locations in its portfolio. Its stores range from 20 large, full-line CGX main stores with a merchandise assortment similar to department stores, to its three CGX Marketplace stores with a mix of grocery and discount items. Convenience stores, though, make up the bulk of the portfolio at 40 CGXpress sites. These retail outlets can be found on Coast Guard bases throughout the United States and Puerto Rico.

“Some of our stores are in pretty remote locations and are difficult to access. For example, we have a large store in Kodiak, Alaska, which is an island and the weather can be harsh,” Griffin said. “If you’ve ever seen ‘Coast Guard Alaska’ on TV, you’ve seen some of the conditions where our folks work. On the other hand, Hawaii and Puerto Rico are tropical locations. We really have it all.”

In addition to merchandise traditionally found in c-stores — like food, drinks, candy and snacks — CGX locations sell a mix of name-brand small electronics such as iPods, tablets and cameras. Being military stores the outlets also sell uniforms and insignia. CGX stores stock Coast Guard logo apparel and gifts as well.

Many stores are co-located with barbershops and dry cleaning pick-up. The CGX’s flagship store in Chesapeake, Va., recently opened a discount ticket counter that sells military-discount tickets for events and attractions.

The CGX stores take advantage of their geographical locations to offer merchandise that reflects the region. For example, an exchange may sell lobster pots in New England or beach towels in Miami.

“On the other hand, many of our stores are in remote locations and can even be hard to get to. Sometimes, it’s even difficult to get the products to our stores that our customers want to buy,” Griffin said. “For example, members of the Coast Guard are physically fit and are often looking for fresh and healthy choices of the foods and snacks we sell. We often struggle to find distributors that are willing to work with us to provide fresh produce and the kinds of grab-and-go snacks that our customers want. We’re on the lookout for vendors and suppliers that can help deliver these fresh products to our stores.”

The CGX rang up $163 million in annual sales in 2012, with tobacco, spirits, beer, electronics and computers comprising the top categories. Eleven stores sell gas, including two each in Alabama and California, and one each in Alaska, Hawaii, Massachusetts, North Carolina, Oregon, Virginia and Puerto Rico. The exchange also has contract partners that operate Subway-branded foodservice at three locations. In addition, it has local operators for two coffee shops and four remodeled stores now feature a coffee bar, Griffin said.

As for future plans, the Coast Guard Exchange plans to open a CGX location in the U.S. Coast Guard’s new headquarters campus in Washington, D.C., in January. It will also open two new retail outlets in Texas next year, replacing its existing stores in Galveston and Houston that were severely damaged a few years ago by Hurricane Ike.

In addition, a healthy choice initiative, “Fit Forward,” is underway at all locations. Plans include using the “Fit Forward” brand to identify healthy options in the exchanges and to promote healthy fitness activities. In-store signage will make it easy for customers to find healthy options in food, snacks, beverages, fitness apparel and equipment in the CGX.

NAVY EXCHANGE SERVICE COMMAND (NEXCOM)

Navy retail outlets trace their origins back to ship stores in the 1800s. Today’s Navy Exchange Service Command took root in Virginia Beach, Va., in 1993. It oversees 100 Navy Exchange (NEX) facilities and nearly 300 stores worldwide, 40 Navy Lodges, Ships Stores Program, the Uniform Program Management Office, the Navy Clothing Textile and Research Facility, and the Telecommunications Program Office.

NEXCOM’s parent command is the Naval Supply Systems Command. NEX facilities and Navy Lodges operate primarily as a non-appropriated fund (NAF) business instrumentality. NEX revenues generated are used to support Navy Morale, Welfare and Recreation (MWR) programs. In fiscal year 2012, $2.8 billion in sales were generated, with $45.9 million in dividends provided to MWR programs.

NEX has 301 facilities across the globe, including 157 convenience stores — or mini marts as NEXCOM calls them. The c-store portfolio includes 130 locations in the United States and 27 on overseas military bases. Annual mini-mart sales in fiscal year 2012 hit $376 million, not including gas. Forty-two locations sell gas.

The top five categories in the mini marts during the past fiscal year were tobacco, wines/spirits, beer/soft beverages, food/snacks and health/beauty. More than the average convenience store, NEXCOM mini marts also offer uniforms, dry cleaning, and barber and flower shops. The store mix is customized to support local command requirements.

Although limited, some locations do feature branded foodservice. “Our focus going forward will be to expand our grab-and-go offerings at all locations,” said Joe Marchese of NEXCOM’s mini mart program. “The goal will be to add healthy options, which fit in with our ‘A Better You’ initiative.” These items also support existing programs currently in place and aligned to the Navy’s healthy initiatives. Examples of such items are salads, sushi, fruit, yogurt, select sandwiches and beverages.

NEXCOM is continually upgrading and enhancing its facilities. It has identified more than 140 locations that will be remodeled within the next three years. These remodels will address areas of construction, equipment and branding elements to support its current programs.

“Our strategy is to utilize segmentation to define commodities/assortments to better serve our customer,” Marchese explained.

ARMY & AIR FORCE EXCHANGE SERVICE (AAFES)

Like the Navy, the Army & Air Force Exchange Service dates back to the 1800s when the first formal exchanges opened as canteens — the first one in 1880 at Vancouver Barracks in Washington State. Canteens soon spread throughout the West, from North Dakota to Texas, and became known as post exchanges. On July 25, 1895, the War Department issued General Order No. 46, which directed post commanders across the country to set up an exchange wherever practicable. Thus, initial post exchanges grew to what is known today as AAFES.

Fast forward to 2013 and AAFES operates 850 convenience/specialty stores (Troop Stores, Service Stations, Expresses, Class Six liquor stores), 131 main stores, 174 military clothing facilities and 72 theaters. In addition, AAFES has more than 1,590 quick-service restaurants, including Taco Bell, Burger King and Starbucks. In total, AAFES has more than 2,817 facilities worldwide in more than 30 countries, 50 states and five U.S. territories.

Specifically, its Express c-stores cater to on-the-go shoppers. The inventory mix ranges from fountain drinks, coffee, pastries and deli sandwiches, to soda, beer and wine, to household cleaning and cosmetics items. Many Express stores also sell gas. In fact, the top five sales categories for AAFES are gas, tobacco, electronics, computer hardware and food.

“Each Express is a little different in size, assortment and customer base, but the focus on convenience remains the same,” said an AAFES spokesperson.

Overseas, AAFES operates seven bakeries and water plants that provide baked goods and bottled water to support the military serving abroad. AAFES also produces 3 million loaves of bread per year to support commissaries; morale, welfare and recreation operations; dining facilities; ships; and embassies.

By the numbers, AAFES is the 43rd largest retail organization in the United States with annual revenues of $9.2 billion and more than 40,000 civilian and military personnel employees. Approximately two-thirds of its earnings are paid to Army Installation Management Command and Air Force Services programs.

In addition, over the past 10 years, AAFES has contributed more than $2.4 billion to quality-of-life improvements including youth services, Armed Forces Recreation Centers, arts and crafts, aquatic centers, golf courses and more.

Currently, Express stores are being restructured to further meet customers’ needs by creating destination value to drive customer loyalty. AAFES is focusing on gross profit/turning, grab-and-go and beverage assortments, and stocking a wider variety of healthy options.

“The Exchange is committed to offering customers quality products and services at competitive prices, while offering great benefits like no sales tax and price-matching,” the spokesperson said.