After Years of Decline, the Military's Commissary System Just Had Its Highest Sales Day Ever

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Commander, Fleet Activities Yokosuka (CFAY) commissary
Shoppers wait in line, practicing physical distancing, at the Commander, Fleet Activities Yokosuka (CFAY) commissary May 20, 2020. (U.S. Navy photo/Tyler R. Fraser)

Between an influx of veterans newly granted access to military resale stores and customers preparing for shutdowns during the novel coronavirus pandemic, Defense Department commissary stores saw a 26% increase in sales in the first quarter of 2020.

Now the DoD is trying to figure out how to retain these customers, looking at their shopping preferences and behaviors to guide future services and offerings at stores, DoD Chief Management Officer Lisa Hershman told Military.com.

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While a boost in customers was not unexpected this year, given that 4.1 million disabled veterans became eligible to shop at military stores on Jan. 1, the jump in patrons just before and during the pandemic was unprecedented: On March 13 -- the Friday before many states moved to stay-at-home orders -- the commissary system saw its highest single sales day ever, $34.5 million. While sales flattened slightly in February, according to Hershman, they climbed again in April, up 9% compared with the previous year.

Given the steady decline in commissary sales since 2012, down 25% last year from a peak of more than $6 billion, the current situation presents an opportunity for adaptation, Hershman said during an interview Thursday.

"It's wonderful to have folks returning to the commissaries and exchanges. I hate that it's because of the pandemic, but we are happy to see our military personnel and families," she said. "One thing I've been pushing on now is how do we keep close tabs on the voice of the customer. ... How do we make sure [they] keep coming back?"

As COVID-19 spread across the globe, the Army, Navy, Air Force and Marine Corps exercised precautions on military installations, with some allowing only essential personnel, residents or those with DoD identification cards to enter. But the commissaries remained open, having been designated as "mission critical" by the DoD.

Store managers worked to ensure that facilities were cleaned and sanitized often, that employees wore face masks and took other precautions, including social distancing, to reduce the chance of infection, and installed plexiglass shields at many locations to protect both employees and customers.

Patronage across the 236-store system rose.

"What that did, in a very positive way, is it brought people back to the commissaries who maybe had not shopped there in a while and gave them an opportunity to have something closer and more convenient for them," Hershman said.

The challenge now is for the stores to keep those customers, offering programs that saw increased usage during the pandemic, like Click2Go, the Defense Commissary Agency's pilot program for online ordering and curbside pickup, and an "agent shopping program" in some overseas stores where communities were on lockdown.

Click2Go, a program that began last year at five installations -- Fort Belvoir, Fort Eustis, Oceana Naval Air Station and Marine Corps Base Quantico in Virginia, and Joint Base McGuire-Dix-Lakehurst, New Jersey -- saw a huge boost in sales during the pandemic, according to Hershman.

And DeCA plans to expand it to at least four to six more stores this year.

The increased use didn't occur without bumps, Hershman said. Like the commercial sector, which saw delays in being able to fill orders, Click2Go users sometimes weren't able to pick up their groceries for days after ordering.

But the delays didn't deter users, she added.

"We saw the need, we saw the demand, and everything we are seeing from industry is that there will be a higher percentage of people who will remain ordering their items online," Hershman said.

Another program that was popular and may be here to stay at some stores is the "agent shopping," program, which had volunteers taking customers' orders, shopping for them and taking the items to the checkout for customers to pay for by phone.

The program was immensely popular in locations where communities were on complete lockdown, with residents allowed out only for groceries, prescription medicines and medical appointments.

The boon at these stores comes as the Pentagon marches forward in an effort to merge its commissary system with the exchange systems of the military services.

Pentagon officials have argued that the merger between the Defense Commissary Agency, the Army and Air Force Exchange Service, the Navy Exchange Service Command and Marine Corps Exchange, would save money and reduce redundancies by streamlining the four systems' "back-office" operations.

But such a merger presents a multitude of challenges. The commissary system receives $1.2 billion in federal funding each year -- help that enables the stores to offer service members and families discounted groceries -- while profits from the exchanges support the services' extensive morale, welfare and recreation programs, including fitness centers, outdoor recreation, clubs, activities, libraries, youth programs, on-base restaurants and more.

The Government Accountability Office released a report earlier this year that cast doubt on the extent of the savings that the Pentagon would recoup as a result of the merger. The GAO said it was not able to verify the DoD's projected savings, estimated to be between $690 million and $1.3 billion in the first five years.

Instead, GAO analysts said that the DoD may have overestimated savings by discounting the expense of several factors, including the cost of building a new information technology infrastructure and headquarters for the expanded agency.

Echoing other defense officials on the benefits of the merger, however, Hershman said the reforms would produce efficiencies and eliminate waste of taxpayer dollars.

But, she said, the changes aren't only about cost savings.

"I believe you can't cut your way to prosperity. And so we are putting in the forefront that the customer experience should either stay the same or be improved," Hershman said.

The merger requires congressional approval, but it does not appear to be in the works this year.

A preliminary version of the House defense authorization bill calls only for the DoD to update its business case analysis on the consolidation. And the current Senate version makes little mention of commissaries or exchanges, mentioning them twice: in a provision about food and beverages provided by the DoD and in a request for a report on the responsibilities of the Pentagon's chief management officer -- Hershman's job -- which the Senate is seeking to abolish by 2022.

According to the Defense Commissary Agency, commissaries saved consumers an average of 24.2% on their grocery bills in the first quarter of calendar year 2020. Shoppers in overseas stores saw the most savings, 41.2% over comparable civilian markets, according to DeCA.

And commissaries consistently rank highly on a Consumer Reports survey of the nation's best supermarkets, tied at 5th place with the Costco, Publix and Fareway chains in 2019.

Still, some shoppers have told Military.com that they find prices at their local commissaries to be higher than some civilian supermarkets and big-box stores, especially in states that don't require sales tax for food items.

Commissaries charge a 5% surcharge to pay for the stores' construction, equipment and maintenance.

"As the commissary changed its business model pricing to be competitive within the local market, [our commissary in Hawaii] is practically second to Costco for savings on every food except meat, and this has now changed as well [during the pandemic]," a service member wrote Military.com. "Costco is where my family has now started shopping exclusively in Hawaii."

"The prices in both are no better. ... Seems to me military stores should have better prices or be compatible in most cases," said a retiree with 27 years of service.

Hershman said she welcomes feedback from customers because it gives store managers and administrators the chance to "focus on what we do need to change."

"If the view is that we are expensive, how do we modify our cost structure? How do we then relay that to the customer, maybe through pricing changes so that we ensure they keep coming for all the reasons that are important to them," she said.

Hershman said she isn't sure why customers decided to shop at commissaries during the pandemic. They may have been drawn to the prices, knowing they would be shopping to cover several weeks. They may have been drawn to a safety aspect -- trusting that the stores were being cautious and maintaining cleanliness.

Or, she said, maybe customers felt the need to connect with their military communities. According to Hershman, commissaries consistently are a place to see fellow co-workers and neighbors and save money.

"When I came on board a couple of years ago, we were going down this path where there was a lot of discussion about closing locations and privatizing them," Hershman said. "But once I got up to speed and familiar with the topic, [this] didn't seem to make any sense. Our military personnel, especially overseas, look to the commissaries and exchanges ... to connect to home."

-- Patricia Kime can be reached at Patricia.Kime@monster.com. Follow her on Twitter @patriciakime.

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