The first civilian to run the military’s $10 billion-a-year retail business has his work cut out for him.
The CEO of the Dallas-based Army & Air Force Exchange Service, Tom Shull, is the first retailer to hold the post, which had been a two-year officer assignment for 117 years. Shull, 61, joined AAFES in June under a 2011 Defense Department “efficiency initiatives” program, and his tenure doesn’t have a time limit.
After his hiring was written up in Military Times, many of the reader comments were critical, touching on everything from AAFES’ size availability to prices.
“We’ve got to better understand the dynamics of our competitors and provide better value,” Shull said.
As troops head home from Iraq and Afghanistan and more families move near and onto U.S. military bases, Exchange stores are competing with the likes of Wal-Mart, Best Buy, Dick’s Sporting Goods and Cabela’s.
AAFES is the U.S. military’s largest retail enterprise, operating permanent and temporary malls, base Exchange stores, movie theaters, fast-food restaurants and convenience stores in 30 countries. If it were a private company, it would be as big as Bed Bath & Beyond or Office Depot.
Shull is using his military and business backgrounds to give AAFES facility upgrades, new merchandise and a better Web presence.
Until recently, for example, a Google search for “military uniform shopping” wouldn’t bring up the Exchange’s website.
Google’s little spiders couldn’t get past the firewall of ShopMyExchange.com to perform their search engine optimization duties. To see the merchandise, military family members had to sign in first.
“That’s not the way people shop,” Shull said. “We have to replicate an experience just like the rest of retail.”
Now the merchandise is outside the firewall to make browsing easier.
According to the American Consumer Satisfaction Index from year-end 2012, AAFES’ website satisfaction rose 9 points, to 77, the industry average. Overall, service quality moved up 1 point to 83, above the industry average of 78.
AAFES is planning a Web redesign to help push online sales up to $1 billion in four years from last year’s $220 million.
Last year, Shull also started shifting away from expensive printed catalogs. Two “big books” and 17 supplements a year are being replaced with four online buying guides.
Shull was raised in a military family and is a West Point graduate with a master’s degree from Harvard.
His Army experience includes a stint as an infantry company commander and assignments at the White House and National Security Council.
Shull has been CEO of Wise Foods Inc., Hanover Direct Inc., Barneys New York and, most recently, Meridian Ventures LLC.
Shull is using his contacts to upgrade the merchandise mix at Exchange stores with brands such as Fossil, Michael Kors and Polo Ralph Lauren. “We want to make a stronger national brand statement,” he said.
As a retailer, he has a better understanding of what suppliers can do for AAFES, one major wholesaler said.
“He’s made his organization more deliberate about their expectations of us,” said Jed Becker, president of Eurpac Service Inc., a Connecticut-based company that represents major brands such as Colgate-Palmolive and Frito-Lay.
Last summer, with federal budget cuts on the horizon, one of the first things Shull had to do was cut expenses.
He instituted a hiring freeze and offered voluntary early retirement to the retail enterprise’s 42,000 employees, knowing AAFES had to shrink by 1,000 jobs.
“We won’t have to have layoffs, and we aren’t cutting from the stores,” Shull said. “We don’t want to jeopardize their ability to provide good customer service.”
Make a difference
Dallas Market Center Executive Vice President Robbin Wells said AAFES has been one of the wholesale market’s largest buyers for many years. “They’re starting to try some new things,” she said. Last year, for example, AAFES buyers asked for help in setting up pop-up shops at Fort Hood for Christmas.
“They asked us for help finding vendors in certain price points and gift categories,” Wells said. “They haven’t always been this active.”
Profits from the retail operations also fund other military family programs such as child development, fitness centers and playgrounds.
That’s a huge difference from his previous jobs, Shull said. “As a retailer, I’ve been schooled in the art of making money for shareholders and private equity holders,” Shull said. “So it’s really exciting to be in an environment where what you do every day really makes a difference.”
Shull said he also enjoys dealing with a workforce that is “emotionally tied to its customers.”
The pay grade for his annual salary is between $120,000 and $180,000, well below the common salary of $1.5 million before bonuses and stock options for retail CEOs at a company the size of AAFES.
“There is no greater honor than to serve those who serve. No dollar amount can equal the pride I feel going to work at the Exchange,” Shull said.
Even after leaving the military in the 1980s, Shull wanted to leverage his civilian experience for the benefit of military families. “The Exchange is where I want to be. It humbles me to be on this team.”