0. 2017 ALA Commissary Roundtable
DeCA Transformation breakout session
April 27, 2017

1. Transformation initiatives
Savings methodology
Better reflect the savings patrons currently experience at their local commissaries
Category performance improvement
Optimize our assortment to offer the best products to our patrons at a low cost to our taxpayers.
Introduce private label products as a quality alternative to national brands that offer additional patron savings
Private label
Roll out variable pricing while maintaining the patron savings benefit
Variable pricing

2. Savings methodology

3. Savings methodology | Overview
As a pre-requisite to business changes, the 2016 and 2017 NDAAs require an updated savings baseline:
Provide a more regional, specific view
Better reflect actual patron shopping patterns
Monitor more frequently
Purpose of the baseline is to protect the patron benefit in future
New measurement does not change the actual dollars patrons save

4. Details on new methodology
Basket
Manual shop of ~1,000 items, to match purchase patterns, blended with full national data set (~38,000 items)
Includes private label products
Price comparison
Against 2-3 local stores in vicinity of each US Commissary, plus national benchmark. COLA used to adjust for OCONUS.
Geographic granularity
Regional (7 US regions + overseas)
Frequency
Quarterly

5. Category performance improvement

6. Category performance improvement | Overview
What is CPI?
A commercially proven practice of evaluating and improving assortment performance:
Analyzing the performance of the assortment
Entering into negotiations with suppliers to improve the assortment and reduce costs
Reallocating shelf space and planograms based on negotiation outcomes and customer needs
Evaluated and negotiated 7,000-8,000 items (20% of the assortment) in CONUS and OCONUS thus far
Why we are making the change
Over-assortment: too many types of similar products
Inefficient space allocation (e.g., not enough shelf space for popular, fast-moving items)
Opportunities to reduce costs

7. Private label

8. Private label | Overview
What is private label?
Private label is a store brand alternative to brand name products, sourced directly from a supplier by a retailer. Private label can offer equivalent quality to national brand items (often produced on same manufacturing lines), but sourced and sold much more cheaply.
Why are we making the change?
It's popular in the market – up to 20% of total store sales at retail
Our patrons want it – 60% of patrons say they'd be willing to try it
It's good for patron savings – quality products at a lower price
It will drive revenue for DeCA – to help offset operating costs

9. Private label | About the logo: Freedom's Choice
The Freedom’s Choice logo conveys attributes of patriotism, tradition and wholesomeness. An iconic blue star is stylized with intertwining leaves completes the star shape for a bold and highly recognizable mark. The star draws an immediate connection to the armed forces and the pride we all share along with our military families. The leaves have a natural and flowing appeal, softening the star shape and providing an organic aspect to the brand. The star icon combined with the traditional serif typography present an overall feeling of heritage and trust.

10. Private label | About the logo: HomeBase
HomeBase conveys attributes of strength, security and patriotism. There is a sense of ownership and pride for military members and their families that this is "our" brand. The logo uses a bold military inspired font with embossed shading stamped at the top of a shield with iconic stars below set against a bright blue color scheme. The five stars represent the branches of the armed forces with the center star being larger and more prominent to represent the "homebase". Overall the design is simple, yet strong and gives a sense of family and home, wherever that may be.

11. Variable Pricing

12. Variable pricing | Overview
Background
Benefits of variable pricing
Currently, DeCA sells products using a cost-plus approach
Variable pricing allows multiple factors to be considered
The NDAA 2017 has granted DeCA authority to introduce variable pricing
More consistent savings across the store
Lever to capture value from category performance improvement efforts
Flexibility to adjust prices based on customer preferences and competitive landscape
Variable pricing will maintain
patron savings at current levels

13. Variable pricing | Long term vision
Future pricing considerations
Customer preference
Local competitor
prices
Item relationships
Promo strategy

14. Transformation impacts on key stakeholders
Patrons
Maintained patron benefit – more consistent savings levels across the whole store
Enhanced choices, with high quality store-brand products available at lower prices
Better shopping experience: more relevant assortment, easier to navigate, fewer out of stocks
Taxpayers
Cost savings and reduced appropriations
Suppliers
Growth opportunities for suppliers offering competitive costs on popular products
Employees
More commercially-competitive business practices – training and support to evolve the business
Empowerment to drive supplier relationships, improve the assortment, improve the customer experience

15. We want your input
Questions?