Words from the Director/CEO: How Exchange Teams Strengthened the Benefit in 2023

Team,

Congratulations on another amazing year of serving those who serve! Throughout 2023, you went above and beyond for our Nation’s Soldiers, Airmen, Guardians and the broader military community.

As a result, the Exchange is expected to exceed sales and earnings targets for FY 2023 (final results will be available after the third-party audit is finished this spring), allowing higher-than-planned dividends for critical Quality-of-Life programs that are essential to military recruiting, readiness and resiliency.Despite historic inflationary challenges, as well as the continued impact of the mandated minimum wage requirement, Team Exchange persevered to secure extraordinary results. Through it all, it was your unwavering focus on controlling costs that really made the difference.

Early in the fiscal year, the Exchange announced a Voluntary Separation Incentive Pay/ Involuntary Early Retirement to help right-size HQs personnel. 277 associates took advantage of this offer, creating nearly $15 million in savings and allowing the Exchange to streamline operations to better navigate the challenging economic landscape ahead.

With momentum on our side, Team Exchange moved out to score big wins on critical strategic priorities to increase efficiencies and enhance the customer experience:

Self-checkout

Authorized shoppers are completing their visits by using self-checkout at 90% of Exchanges worldwide, with more than 1,500 kiosks in PXs, BXs and Expresses. More than 56 million transactions have been processed since launch less than two years ago at Fort Moore. Self-checkout reduces wait times, helps manage customer traffic at peak times and frees up associates to assist customers throughout the store.

Self-checkout accepts MILITARY STAR_®, debit or bank-issued credit cards. Future enhancements will include the use of cash, coupons and gift cards.

MILITARY STAR expansion

The Exchange Credit Program is developing and integrating its partnership with Discover Financial Services (owner of the Discover card). This collaboration, which was finalized in March, will allow the MILITARY STAR card to provide tap-to-pay, secure EMV (simpler, quicker and more secure checkout) and mobile wallet options while significantly expanding integration and acceptance.  A new MILITARY STAR card design has been approved, and the teams are preparing the go-to-market plans for customers and the field. With this expansion, card holders will be able to use MILITARY STAR at significantly more retailers and merchants across an installation, including additional restaurants, entertainment venues, gas stations and much more.

Bringing in the big brand names

In May, the Exchange announced its partnership with The Home Depot, which arrived with major-appliance showrooms at PXs and BXs in CONUS, Hawaii and Puerto Rico. This was a landmark in the Exchange’s commitment to intensifying name brands in its stores, bringing a new level of service to military families.

The Home Depot provides a good illustration of the Exchange’s drop-ship program. To shop all The Home Depot major appliances, authorized customers visit ShopMyExchange.com and are transferred seamlessly to a microsite, which looks and feels like The Home Depot’s website, showing real-time pricing, product availability and delivery scheduling. All purchases are tax-free with 1% discount on top of The Home Depot’s lowest price. Once customers are ready to check out, they are transitioned back to ShopMyExchange.com, where they can use their MILITARY STAR card and receive six-month 0% interest financing. Orders are fulfilled by The Home Depot, and purchases of more than $396 are delivered and installed by The Home Depot for free.

In August, the Exchange further expanded its name-brand assortment with the launch of Curated by Sunglass Hut at the Fort Cavazos and Joint Base-San Antonio Exchanges. Curated by Sunglass Hut features sunglasses from Costa del Mar, Arnette, Armani Exchange, ESS, Gucci, Haven, Coach, Maui Jim, Michael Kors, Dolce and Gabbana and more.

The Exchange continues to bolster its fitness-gear selection with such additions as Hoka running shoes and of men’s and women’s footwear from On, a performance running brand, which launched at 50 stores in October and on ShopMyExchange.com.

ShopMyExchange.com expansion

The Exchange buying team, in conjunction with the ecommerce team, continues to aggressively expand the Exchange’s drop-ship selection, allowing more tax-free e-commerce orders to ship direct from third-party vendors. A total of 275 suppliers were added to ShopMyExchange.com in 2023, with more than 2.5 million new items added for the year.

The result of this work is already evident, including a partnership with the additions of The Home Depot and Sunglass Hut. These expanded online offerings are giving shoppers tax-free access to a much wider assortment. Other new brands introduced expanded our categories for designed handbags, children’s apparel, household goods and furniture.

The e-commerce and Information Technology teams improved functionality and navigation with an upgraded ShopMyExchange.com search engine that debuted in July to provide faster and more relevant results.

More convenience at Expresses

On Nov. 1, the Exchange ushered in a new era of convenience with the unveiling of a $12.7 million Express at Joint Base San Antonio-Randolph. The 12,900-square-foot convenience store features a Burger King with a two-lane drive-thru; Hunt Brothers Pizza; Chopz; Eddie Peppers Tacos to Go; a Snack Avenue with coffee bar, drink station and heat-and-eat meals; better-for-you snacks; and three self-checkout kiosks. A 16-pump gas station dispensing Valero fuel 24/7 replaced a decades-old eight-pump kiosk. The JBSA-Randolph Express also offers in-store mobile ordering through a touch-screen device to order from the quick-serve restaurants onsite.

More than 20 Expresses were upgraded in 2023, increasing dining options, self-checkout kiosks, expanded Snack Avenue assortments, new layouts, updated graphics and more.

Serving up more tastes of home

The Exchange opened nearly 35 name-brand restaurants in 2023, including a first: Moe’s Southwest Grill, which has more than 600 locations across the United States, joined the Exchange lineup as a concession at Schofield Barracks in Hawaii, where it offers burritos, quesadillas, tacos and more.

The Exchange expanded its lineup of quick-serve restaurants at Expresses, adding more than 40 QSRs at 30 locations in 2023. The new locations saw more than $5 million in orders for the year. These included the addition of Hot Stuff Kitchen, a grab-and-go concept serving breakfast sandwiches, burritos, chicken sandwiches, wraps, tenders and more. Since the first Hot Stuff Kitchen opened in July at Fort Cavazos, more than a half-dozen Expresses have added the quick-serve restaurant.

The Exchange reached a milestone with another QSR, Hunt Brothers Pizza, which opened its 100^th Exchange location late in the year at the Tyndall AFB Express. A celebration of that landmark is scheduled to coincide with the opening of an upgraded Express in March. The QSR program, which also includes Chopz and Eddie Peppers, brought in $40 million overall in 2023, a 28% increase over the previous year.

Since DoorDash launched at Exchange restaurants in April 2021, more than 1.9 million orders have been placed, accounting for more than $36 million in sales. More than 775,000 orders were placed in FY 23. Sales in FY23 exceeded $16 million, an increase of $2.5 million above FY22 with no new installations added to the service in 2023. DoorDash is now available at nearly 45 Expresses, where the program had about 57,000 orders during the year.

The Services and Food Directorate aggressively expanded the number of unattended retail units to provide 24/7 convenience and flexibility. The markets are fully automated self-serve stores that offer better-for-you food options, such as salads, fresh fruit and vegetables, protein bars, hot and cold beverages and more. More than 200 markets were added in FY 23, for a total of more than 400 across nearly 80 installations. More than 85 are planned for 2024.

Reinvesting in communities

The Exchange’s Real Estate Directorate completed more than $105 million of work on facility projects in 2023. Highlights included:

• More than 25 Express upgrades, as well as the new Express at Randolph Air Force Base.
• A new 4,000-square-foot Express and troop store at Camp Parks in Northern California. The new location replaced a smaller troop store, and includes a wider assortment of food and beverages, a Hunt Brothers Pizza, barbershop, PRIMO water refill station and in-store pickup for ShopMyExchange.com orders. Construction on the $2.9 million project was completed roughly eight months after plans for it were finalized in late 2022.
• Shopping center image upgrades at Fort Wainwright and Davis-Monthan Air Force Base, each totaling more than $10 million. An upgrade of the Kadena Air Base shopping center was done in-house by the Facilities Management Office, saving more than $5 million in contracted project costs.

In January, RE broke ground on a $15.7 million shopping-center renovation at Laughlin Air Force Base. The project includes a new 5,000-square-foot Express convenience store inside the shopping center. The renovation of the 42-year-old building will include new finishes, fixtures, equipment, Exchange branding elements throughout the mall and a new, insulated roof.

Intensifying telecom and healthcare services

Military communities at select installations have been enjoying improved wireless service—a significant Quality-of-Life improvement—thanks to new cell towers from the Exchange. One of the most significant cell-tower additions is at U.S. Army Garrison Hawaii’s Helemano Military Reservation, a remote location offering military housing for about 2,000 service members and families stationed at Schofield Barracks and Wheeler Army Airfield. At year-end, the Exchange had 31 cell towers and more than 200 small cells, with more to be added in 2024.

The Exchange is expanding supplemental healthcare services for all authorized patrons, building on a nearly 40-year legacy. In 2023, the Exchange added four dental offices, a durable medical equipment shop and a chiropractic clinic. The organization now has almost 300 health-and-wellness locations worldwide.

Family Serving Family!

Because of the work of terrific teammates like you, the Exchange is a vital part of the military community. Thank you for all you do to keep the Exchange benefit ready and resilient for our heroes who serve, have served and will serve.

It is truly an honor to serve those who serve with you.

Onward and upward,

Tom