Building a Better Benefit — Our Six Keys to Success
2017 is shaping up to be a disruptive year for retail. Macy’s is closing 68 stores, Sears is working to sell its storied Craftsman brand to stave off bankruptcy, Neiman Marcus is showing –8% comp stores growth, and The Limited is shuttering all of its stores.
As seen by the fact the Exchange’s earnings continue to exceed expectations and our balance sheet couldn’t be stronger, our strategic priorities have served the organization well over the past four years. The recent changes in the retail landscape require us to update these plans to ensure we are well-positioned to protect and preserve the benefit we have been privileged to provide our Nation’s military for the past 121 years.
The following six strategic priorities focus on growth and efficiency to allow the Exchange to continue to thrive. All of us play a part in achieving these objectives.
1. Execute the Veterans Online Shopping Benefit
Jan. 11, 2017, will go down as an important date in the Exchange’s history as the Undersecretary of Defense for Personnel and Readiness formally concurred with the Veterans Online Shopping Benefit!
This program extends a lifetime online exchange shopping benefit to approximately 15 million honorably discharged veterans. We expect to welcome our Nation’s veterans home to their military family as we begin to service them online this Veterans Day. Until Nov. 11, every aspect of the business will be engaged in ensuring a successful rollout.
2. Increase Military Star penetration in concessions and fulfill National Defense Authorization Act 2017 requirement to implement program at the Defense Commissary Agency
The Exchange Credit Program and IT are developing new payment systems to allow for MILITARY STAR card acceptance at commissaries, Army MWR facilities and Exchange concessions. We expect this effort to result in greater customer convenience and increased earnings as we continue to focus on MILITARY STAR card growth in all Exchange businesses.
3. Continue fiscal focus to maximize return on invested capital
Retail evolution is driving space optimization as big box retailers find ways to operate in smaller footprints without sacrificing service and convenience to the customer. Couple this with our Ship-from-Store initiative and we have a new class of store with department and convenience store categories side by side in addition to e-commerce fulfillment capability.
Inventory levels through December 2016 were down approximately $115 million versus December FY 15. While this seems like a substantial amount, there is still opportunity to optimize our inventory investment dollars. Ship-from-Store will drive inventory productivity across the enterprise even as we increase inventory levels in key categories and brands to meet greater demand as a result of the Veterans Online Shopping Benefit. Retail demand forecasting and vendor portfolio optimization will drive investment into the products that matter while simultaneously highlighting non-productive inventory in our distribution centers and stores to target effective exit strategies.
Periodic reviews of staffing and planned goals will be ongoing to ensure we stay the course to deliver the Exchange benefit smartly.
4. Implement marketing insights to increase sales and capture customer lifetime value
The Exchange will take significant steps to improve its Customer Relationship Management capability in 2017. Actions are underway to establish a Customer Hub that is a single source of all customer purchasing data including customers’ propensity to buy certain product and service categories. The Exchange is better leveraging customer data to augment customer insights. Combined, these efforts allow the Exchange to improve all aspects of engagement including communication, outreach and marketing.
5. Create a secure, digitally integrated infrastructure to support the Exchange’s corporate growth strategies
The “new” ShopmyExchange.com launched in September 2014. In March 2016, we brought the site “in house” in order to improve stability and scalability in preparation for approval to offer a Veterans Online Shopping Benefit. During this time, the e-commerce team focused on driving process efficiencies – the first of which was the Ship-from-Store launch in July 2016. The shipping algorithm used for Ship-from-Store focuses on fulfilling orders from the facility closest to the customer. In doing this, we are able to drive down shipping costs. Negotiating with bulk delivery providers for better costs and service (based on volume) is another key initiative to drive profitability.
Beyond e-commerce, business and technology initiatives will modernize and integrate our systems and processes to lay the foundation for the digital future of our business. Near real-time inventory as well as information hubs for customer and product data will form the core of digitally integrated retail. The Logistics Enhanced Distribution program enables a more responsive supply chain while the Point of Sale program takes a big step toward the creation of a “boundaryless” retail experience. As these new capabilities are deployed, we will be steadfast in our efforts to protect the data of the best customers in the world to maintain and grow their trust.
Thank you for all you do each day to identify and implement efficiency and income opportunities into your stores, distribution and contact centers, restaurants and offices. As you prepare for the coming year, please consider incorporating our “successful six” objectives into your personal goals for 2017.
6. Increase sales and profitability per square foot in concessions
The Exchange’s Services team is pursuing new business opportunities and further growing existing offerings with a concentration on optimized sales and profitability per square foot.
More than 115 concession name brand businesses are projected to open in Exchange malls this year. Chipotle, Muscle Maker Grill, Claire’s, Haggar, dental clinics, vision care and car washes are a few of the businesses under expansion. Two initiatives driving growth in this area include the Concession Point of Sale and the Property & Asset Management projects. Both will improve data capture, analysis and information availability and further automate Services programs.
We have the plan and people in place to deliver unparalleled value and support to our Nation’s military. Thank you for all you do each day to identify and implement efficiency and income opportunities into your stores, distribution and contact centers, restaurants and offices. As you prepare for the coming year, please consider incorporating our “successful six” objectives into your personal goals for 2017.
Understanding we are teammates and you often are an Exchange customer, your commitment to ensuring we exceed the expectations of those we serve is deeply appreciated. Our mission is personal to us all. It remains an honor to serve alongside you.
Onward and upward!
