Allowing 18.8 million honorably discharged veterans to shop online through military exchange services, which also operate brick-and-mortar department stores and concessions on base, could boost store profits enough to pump more than $100 million back into base quality-of-life programs.
That’s part of the “business case” made by the Army and Air Force Exchange Service to the Department of Defense’s Executive Resale Board this month where Navy officials still raised concerns over the idea.
Thomas Shull, chief executive officer of AAFES, proposed to Defense officials several months ago that veterans be allowed to shop online through exchange service websites and, in that way, gain the same discounts on thousands of department-store items that on-base shoppers enjoy.
AAFES already is working with an outside contractor to modernize and expand its website for online shopping of current patrons, which include active duty, Reserve and Guard members, military retirees and families.
Senior policy officials who oversee Navy and Marine Corps exchange services, however, have challenged the idea, fearing “benefit creep” for veterans beyond online shopping into other military support programs. They also believe hurdles to implementing online shopping for all veterans will be higher than AAFES predicts, particularly in finding a foolproof way to verify veteran status and the character of their discharges.
Defense officials, meanwhile, have signaled they want unanimous support of service branches before they will embrace such a dramatic expansion of discount shopping, even if only online. The Executive Resale Board, which resolves disagreements between elements of the military resale system, recently asked Shull to present a business case for opening online shopping to any veteran with an honorable discharge.
Board members representing every service are reviewing that report with comments due back Aug. 29. The board’s next scheduled meeting, however, isn’t until Nov. 4.
Here are other points it makes in favor of a veterans online shopping benefit, what Shull’s team now refers to as the “VOSB”:
Benefit deserved: Many service members forced to leave the military in the next 12 to 18 months in a force drawdown will have deployed multiple times to Iraq and Afghanistan but won’t have a chance to serve full, 20-year careers, the report notes. The offer of online discount shopping through exchanges “is a modest way to show appreciation.”
Also, offering veterans online discounts would “encourage ongoing involvement in the military community and sends a clear message to future recruits that our nation values and appreciates every individual’s service.”
Lean times for exchanges: Because of the drawdown and falling exchange patronage, store profits and exchange “dividends” to support morale, welfare and recreational activities on base “will decrease materially.” Service members and families will feel the impact on support programs.
From 2011 to 2013, AAFES total sales fell 10.1 percent. If AAFES had not taken aggressive steps to cut overhead, earnings would have fallen sharply along with dividends to quality of life programs. Though AAFES expects to come close to its target of $300 million in revenues in 2014, erosion of the customer base continues and could reduce store earnings to less than $100 million by 2017.
“Unlike commercial enterprises,” bases exchanges “can sell only within a finite and shrinking customer base,” the report says. Exchanges need to expand patronage to veterans and AAFES is well prepared to do so.
Veterans would shop: Given the value that military retirees place on exchange shopping, spending an average of $668 there annually, the 90 percent of nonretiree veterans who can’t shop on base could be expected to take advantage of shopping discounts even if available only online.
The report projects total exchange sales increasing across of wide range of possibility, from a low of $226 million annually to a high of $1.13 billion. This would generate $60 million to $108 million annually in added dividends to support MWR and quality of life programs, without any increase in taxpayer support of base stores, according to AAFES’ analysis.
The report discusses possible pros and cons of online shopping for veterans and finds only one “true” con – inaction by the department.