The Commissary: Relevant And Responsive To Today's Customers
By Tom Philpott
Winter 2006-07
Patrick B. Nixon, 59, is the first career grocer to take charge of military grocery stores with his appointment as director of the Defense Commissary Agency (DeCA) last June. He had been acting director since 2004 and has worked in commissary operations for more than 20 years. As a young Marine, he served 21 months in Vietnam with the 1st Marine Division.
Nixon shared his vision for DeCA, with its 268 stores operating in 14 countries, with “Military Update” columnist Tom Philpott. This interview for Military Money has been edited for space and clarity.
MM: Will you be the first in a long line of civilian executives, rather than star-ranked officers, to lead the Defense Commissary Agency?
Nixon: I don’t see why not. It sends a positive message to an agency made up mostly of civilians that you can go from the backroom of a commissary to the director’s chair of the boardroom. It better serves the agency too from a strategic planning standpoint, that someone can serve as director long enough to lay out a vision and see it implemented.
Also, given the current military environment, in my view a general officer is better used in a military command with a large military workforce. At one time, DeCA had upwards of 2,000 military personnel. Now only six of 18,000 employees are military.
MM: What would you say to a commissary patron who fears a civilian director is just a first step toward privatizing the benefit?
Nixon: If they had brought someone in from outside, there might be a reason for concern. But to bring someone in who has a history of strengthening the benefit, of trying to make it more efficient and effective and increasing its value, well… I wouldn’t change from a horse to a cow overnight.
MM: Over the years, there have been a lot of studies on privatization of commissaries…
Nixon: If he’s not familiar with our business model, a retailer can come in thinking this is a regular supermarket. It isn’t. It’s tailored toward subsistence and household items, the core items a family needs. Convenience items, however, are sold for profit at the exchange.
Seventeen of our stores do 20 percent of the business on the top end and 150 of our stores do 20 percent of the business on the bottom end. It’s the sales volume of the large stores, primarily in the United States, that give us the buying power to sustain our discounts worldwide.
MM: How are commissaries doing today?
Nixon: Sales have gone up consistently over the last few years and costs have gone down. Everything we do is to increase value to patrons and reduce costs to taxpayers. Our theme, I tell our employees, is to be relevant, recognized and responsive.
Young enlisted today are all volunteers and, increasingly, are married. It’s important that the commissary remain relevant to young shoppers. Single or married, they are still stressed financially. They still need a benefit that, for a family of four, saves them $2,700 a year. Relevant also means having brand-name American products available to them anywhere in the world.
We also want to be the nutritional leader of the supermarket industry. I can’t think of a shopping group that should be more nutritionally focused than our military. We don’t want to force them to shop healthy, but we want to give them all the information they need to make that decision.
We also realize the importance of time to our shoppers, so we’re designing stores of the future to have a convenience side as well as the pantry loading that commissaries traditionally provide.
Commissaries were a little behind the supermarket industry through the 1970s. We didn’t put scanners in until the mid-1980s. I don’t think we added delis and bakeries until long after supermarkets had. That formula has flipped now to where commissaries are much more on the forefront of the supermarket industry.
MM: Can you provide examples of commissaries on the cutting edge?
Nixon: Checkout counters is one area. We put self-checkout counters in 50 of our largest outlets. In three of our largest commissaries in Europe, 12 percent of daily sales and 30 percent of daily transactions are self-checkout… We’re going to be putting in long-belt, self-checkout counters for patrons with large orders as well.
MM: Is commissary patronage rising or falling?
Nixon: Usage has gone up several percentage points due to more Guard and Reserve shoppers since their shopping benefit was extended. But customer transactions overall are down slightly. We attribute that to a dynamic felt throughout the industry: the price of fuel. Total sale per transaction is up but the number of transactions is down. Folks are shopping less – about one trip less per week – but they are buying more when they do shop.
MM: What’s the greatest threat to the benefit today?
Nixon: It’s pressure on the Defense Department budget. Everybody is under the gun as we put together our fiscal 2008 to 2013 budgets. The services are so stressed that some day-to-day operating expenses have rolled over into [wartime] supplemental funding.
The other issue is the viability of our five-percent surcharge on commissary items. It funds our capital investment program. As new requirements arise, either because of base realignments or troop re-stationing or rising construction costs, dollars just aren’t going as far.
MM: Unlike exchanges, commissaries are subsidized with tax dollars. How successful has DeCA been recently in holding down costs?
Nixon: The commissary subsidy is $1.18 billion for fiscal 2006. Measured in constant dollars, that’s down $400 million since 2000. We eliminated 3,000 positions through re-engineering. This year, we will close two of our regional offices, in Virginia Beach and San Antonio, and move those support functions here to Fort Lee [Va.]. We will continue to look for opportunities to become efficient.
The drawdown in Europe is going to close a lot of our smaller, higher-cost operations. We’re relocating those troops to larger bases where it’s more efficient to operate. The difficulty for us is that some of those bases scheduled to receive returning troops – like Fort Bliss, Fort Carson and Fort Riley – are going to require new commissary construction before the bulk of troops get there.
MM: You say commissary shoppers save an average of 30 percent. How are the savings calculated? Do price comparisons include superstores like Wal-Mart?
Nixon: What we do is match prices with product codes to make sure we’re matching product to product. Retailers traditionally report cost information to the IRI [Information Resources Inc.] database so we can compare promotional activity and pricing around the country.
Wal-Mart used to participate with IRI but pulled out several years ago. They didn’t want their pricing information made public. We still apply a Wal-Mart factor to reduce our own savings estimate. This year, we reduced it by 2.42 percent to take into account the impact of Wal-Mart. Our model still showed savings of over 32 percent in commissaries.
MM: Final thoughts?
Nixon: I hope you sense my enthusiasm about the commissary system. It’s my life. Making it better for the most important patron in the world is what we’re here for.
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Tom Philpott writes “Military Update,” a syndicated weekly news column for daily newspapers near military bases. It can be read online each week at www.fra.org.