Top Execs Answer Questions from GMs

Passion for the Exchange brand and for serving those who serve was the theme at the Monday morning opening of the 2016 MSM/GM conference. More than 600 main store managers, general managers and others from around the world attended the conference in Frisco, Texas. EVP/Chief Merchandising Officer Ana Middleton, sporting her Exchange brand faux tattoo, challenged attendees to be “passionate about our brand” as she kicked-off the event. Ana then turned the mic over to Director/CEO Tom Shull, and the excitement began.

“In 2015, the Exchange made history with record earnings of $402 million.” The crowd applauded as Shull announced the number before the executive team ascended the stage for the question-and-answer session. Deputy Director Mike Immler, President/COO Mike Howard, and Senior Enlisted Advisor Chief Master Sgt. Sean Applegate joined Shull to answer questions from attendees. Featuring topics ranging from merger possibilities, customer experience, associate shopping privileges and retirement funds, the Q&A session was an information packed hour.

It’s not a business, it’s a labor of love.

Director/CEO Tom Shull

Shull began the Q&A by speaking about a topic passionate to him, veteran online shopping benefit (VOSB.) VOSB is Shull’s goal of achievement before he leaves the Exchange. The Exchange is currently working through Pentagon policy groups, and Shull described the process as slow and challenging.

“I know we will make this (VOSB) happen, and I am not leaving until it’s done,” said Shull. “This represents approximately $1 billion in business and $200 million in earnings. From this, we would give back $150 million in dividends a year. Most important, it will keep the lives of Soldiers, Airmen and their families at the highest quality as possible.” Shull explained that although the process was frustrating, it will be well worth it to the 18 million veterans who it will affect.

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Q: Is the customer service focus moving to the background for the next few years?

Mike Howard: It’s not just about productivity, it’s also about having associates in the place at the right time. We made adjustments last year in the Kronos system to get associates into departments, like Be Fit, where customers expect service. In stores where we implemented this, sales went up which compensated for the extra hours. Associates want to give great customer service, and now we are giving them the hours to do that. 

It’s also important to hire the right people and develop them so that they become merchants, not just sales associates. They need to engage with the customer and give them a great customer experience.

Q: What is the status of shopping privileges for Exchange associates for the commissary and alcohol and tobacco?

Mike Immler: Certain categories of customers have different privileges; some, as in the case of active-duty troops, have unlimited Exchange privileges; they can buy whatever they want to buy. Others, like Exchange associates, have limited Exchange privileges. Exchange associates cannot use the commissary because the commissaries are tax-funded. If Exchange associates were granted the privilege of shopping at the commissaries, the stores would need to expand, which would involve more tax money. I do not see Exchange associates getting commissary privileges in the near future, if ever.

Tom Shull: Installation commanders are really now coming to terms with the fact that budgets are going down significantly. There is a groundswell of support for civilians who work on the installations to have shopping privileges. It makes perfect sense that they are able to shop and would increase the dividends substantially, providing benefits to those who serve, although they’re not serving in uniform.

Q: This is an election year, and our budget is critical to our contributions to MWR. What impact will this have on the Exchange and associates?

Chief Master Sgt. Applegate: I don’t see the upcoming presidential elections as having any impact on the Department of Defense and Exchange budgets, although the belt tightening will continue. For instance, the installation budget for Fort Gordon, Ga., has gone down by 55 percent. Hopefully, we can get a president who will invest back in the military.

Q: Is there any new information about merging the Exchange and other services or DeCA?

Tom Shull: According to an analysis performed by Exchange senior managers about three years ago, merging the military exchange systems would be fiscally unsound. I’m faithful to whatever the facts are and the facts of the matter are that (merging the exchanges) would require an 85-year payback and cost $750 million in cash to fund the restructuring. We’ve been faithful with that analysis and will continue to be strong in our opposition to a merger. It makes no sense from a business aspect. This is our best customer brand. They (the other exchange services) deserve their own brand and their own recognition for their services.

The Army & Air Force Exchange Service does not compete with the Navy, Marines and Coast Guard. We cooperate. We (at the Exchange) have the best brand in the world, let’s keep it that way.

Q: How secure is the associate retirement plan?

Mike Howard: The retirement system is well funded with $3.6 billion in the pension plans and $1.6 billion in the post-retirement medical funds. We have enough money to take care of our retirees for 20 years. The Exchange put $250 million into the pension plan last year. The pension plan is so diverse in its investment strategies that it was able to ride out the 2008 economic downturn and make more money with less risk.

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When the Q&A session concluded, Shull stated that these are challenging times, but he admires what associates achieve every day even in difficult situations. “Be mindful of how much of a difference you make every day and how your teammates make a difference everyday,” he said. “It’s not a business, it’s a labor of love. I couldn’t be more impressed with these teams. Throughout my retail career, I’ve been associated with many teams—and you’ve set new standards.”

All sessions and presentations can be found on the Exchange Portal.

Videos from the question-and-answer panel, plus all the sessions will be released at a later date.

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