• VIRGINIA BEACH
The first Town Hall produced by the Navy Exchange Service Command (NEXCOM), which took place virtually on the afternoon of Feb. 6, put the spotlight on the NEX’S recent accomplishments, and gave attendees a peak into where it is going in 2025 and into the future.
Once again hosted by Rich Honiball, NEXCOM’s executive vice president, global chief merchandising and marketing officer (EVP, CMMO), the 90-minute session covered an array of topics that impact the NEX and military resale in general.
“You can learn a lot being a military retailer, and how families are away from each other and stay connected,” Honiball reflected. “Oftentimes, we don’t get a chance to connect with you in person the way that we would like to, so this Town Hall meeting is a good connection.”
NOTES AND QUOTES
Honiball discussed a myriad of topics during the presentation. Here is what he had to say, in his own words.
SALES PERFORMANCE
“Being that our fiscal year just ended, we are scrambling in a lot of different directions … fourth-quarter results have generally not come in yet, but for those stores where the numbers have come out, we are down about 1.5 percent in retail transactions.
“But the major reason that sales are down is not due to traffic, but the customer is buying a little bit less. They are delaying larger ticket purchases, they are trading down.
“They are trading down in categories that are more surprising. Especially Gen-Z in general, they tend to be a little less brand loyal.
“For those of you who are representing more significant and established brands, I would encourage you that this is an opportunity with the U.S. Navy and exchanges in general … our particular patrons tend to be more brand loyal, a significant number of active duty are Gen-Z, and your brands properly positioned and properly filled can be a wonderful ‘anchor’ to growing that brand loyalty.
“But you do have this changing economic situation that is happening. When you look at those retailers that are not doing well, to the left, department stores, big-box retailers, home improvement stores, and even when you look at CVS, Walgreens — and this is through the third quarter — you have to differentiate between their prescription businesses and their regular retail.
“Store that are doing well — Walmart, Costco, Amazon — off-price is having its moment, which you would expect it to, because people are looking for savings, and Shein and Temu and even TikTok are adding $100 million in sales just on Black Friday alone.
“So when you look at overall retail sales, a big part of that decrease is due to Shein and Temu. That may change with some of the mandates that are coming through, so we remain agile.”
NEXCOM RETAIL
“In 2024, many outside retailers raised their prices in response to inflation, rising costs, and other challenges. …
“I am reminded of this … the Apollo 13 mission was on course and trajectory 3 percent of the time; 97 percent of the team was making major and minor adjustments based on the unknown, the unfactored, or any number of things. They safely landed on the moon, and brought our astronauts home.
“It is a good reminder that the plan is very good, but on Day One or Day Two you can blow it to heck, and if you are agile, you plan for contingencies, you hopefully remain on course.
“So, how we thought the year was going to turn out — where we thought inflation was going to be, where spending was going to be — it is not the way it turned out at the beginning, so we took a more conservative approach.
“Especially on budget household items, we held back on raising prices, if we took a cost increase we might take a couple of months to put a retail increase in, so we did lose margin in the first half as a result of that.
“On NEXt Level Rewards, when we upgraded the system and the program, we saw a significant spike in redemptions, which is a good thing in the long term … in the short term, we had not balanced the promotional dollars.
“On True Blue Deals, we went from being 80-to-90-percent funded to under 70-percent funded, because the program did better than expected, and we had items in there that we didn’t necessarily have full coverage on.
“Teams made tremendous adjustments, so that we could recover in the back half. We made inventory adjustments throughout … looking at the preliminary numbers, we are within 1 percent of our inventory target for the year, which is something that I wasn’t sure that we would be able to do.
“In some cases, we have certain brands and certain categories with fill rates that were struggling … in an area like pet, we experienced much more of a decrease than what industry did … we had challenges in fill rates in certain brands and categories, and that has impacted business and impacted inventory levels, but in some cases, we might be over-inventoried.
“Still, to be within 1 percent of the target, all things in, I couldn’t be more proud … and that is with improving in-stocks in OCONUS.”
2025 PROGNOSIS
“On the first day of the fiscal year, I sent out a notice to the team that with the tariffs being announced, I wanted to put a hold on accepting cost increases on retail prices because the situation was going to be fluid.
“One of the things that I don’t want to do is knee-jerk on increases from, most importantly, a patron perspective, because they are really gong to feel the brunt of it … we do operate a little differently than the outside world, because we do have that part of the mission, and we didn’t want to create more work for the teams here.
“We are going to take a cautious approach in accepting cost increases, and passing those along through retail increases to our patrons.
“I would say, even beyond the 30 days out and looking at several months, I am asking for higher-level signoff, I am working to doing them, and we are really going to depend on you to work and find solutions and efficiencies, because the landscape is going to shift.
“Again, it shifted 97 percent of the time when we put a man on the moon, and I would expect that it is going to go that way here as well. …
“We have not closed any stores … we have consolidated some, we expanded our Micro Markets, we ribbon-cutted our ‘Store of the Future’ and the new 24/7 concept, but outside retail has closed about 7,000 stores.
“That is the highest level since 2020, and that was a couple of thousand higher than predicted. The prediction in 2025 is 15,000 retail stores or more, and that is a lot of locations.
“If a company is trying to remain a going concern, and trying to save expenses, they are looking at profitability, and they are not looking at their patrons.
“We look at patrons. I have had that direction from Adm. Bianchi from the day I started. Patrons are first, profit second, and we continue to do that.
“What all of this means is that there are going to be areas that are underserved in certain categories, and that means that we are much more critical.
“We are firmly at a time when it is not about a store, it is not about a website, it is about integrated, or unified, commerce.
“That is a key part of our strategy, and you will see that as we go through.
“And on the convenience side, with people returning to the office, and returning to the base, we cannot be out of stock in essentials, in food, in beverages.
“The time is now. I know the teams right now are looking at stock levels, and looking at how quickly we can react. We don’t know what the patterns are going to be; you can’t just pull 2019 because bases have shifted, missions have shifted.
“Part of it is ‘what do we think it will be,’ and they are hard at work doing that, and part of it will be ‘how we react in a admirable way,’ and that is one of those that I cannot stress enough.
“Our supply chain is complex, so when something happens in the world, and people turn left instead of right, and it takes a certain amount of time to get goods from here to there, that is when you will immediately steer off course, and we need to be as flexible as possible to respond and support those patrons when they are in a store and looking for those comforts of home, we have to be ready.
“And we need your support. The more essential an item, the more critical this support is.”
MADE-IN-USA/VETERANS-OWNED PRODUCTS
“I will tell you that we do and we try. We try to look for opportunities.
“It is not because of a requirement or a quota, but we are always on the lookout for products that are made in the USA or that are made by veterans-owned businesses.
“We have had veterans contact us that they have an item. Oftentimes, it is a single product, and given the type of operation we have, it is very difficult for us to display a single product.
“The fact that we have optimized our inventory and our space and we have gained efficiencies, I can’t turn around and create an inefficiency.
“We once had a really cool shirt offered to us, but we found that it becomes impossible for us to buy, manage and sell a single item like this that is developed.
“In other cases, we have added products, and they have done well.
“And for Made-In-USA brands, we are always on the look for those. How do we distribute it, how do we manage it? What is the cost differential?
“If Made-In-the USA is 1.5 or three times the cost of something that is made elsewhere, it sounds good, but if the patron, who is military, doesn’t buy it, then we buy it, we feel good about it, but it doesn’t turn into sales, and then we have to liquidate it.
“I am not going to say that we get it right every time, but I am also not going to say that we don’t keep looking. We have found some great opportunities, and we will continue to do so.”
THE ANCHOR
“We are in two important years. This year, we are celebrating the 250th birthday of the United States Navy. This is a wonderful time to recognize the greatest Navy in the world, and much like our counterparts at the MCCS/MCX, we have a lot of good things going on.
“Then next year, we will be celebrating our 80th anniversary of our establishment; we were around earlier, but NEXCOM became official in 1946.
“Those are two really good years, and not necessarily two years that we are looking at changing course, but really just reaffirming the direction that we are heading in and how we can take our successes and move a little bit more ‘flank speed.’
“This is actually something that was developed pre-pandemic when we were looking at strengthening the brand message, and as we started to plan 2025, we brought it back out.
“The anchor is our symbol and our logo, and it is more than a nod to our naval heritage; it is a reminder of where we have come from, and how we remain steadfast in our mission, no matter how the world revolves around us.
“Since 1946, the Navy Exchange has been an essential part of the military community created to serve those who serve. Our purpose has always been clear: to take care of our own by providing goods and services, and support that enhances the lives of military families. …
“Today, the anchor continues to symbolize our unwavering commitment to the mission we share with the Navy: enhancing quality of life, strengthening readiness, and ensuring that those who serve are supported every step of the way.
“It is something that we proudly do, and I will tell you that when there is a lot going on, I am proud of the team that remains focused on the mission in front of us and as we move forward, that will be the key to our success.
“On the 250th, you are going to see it build up a head of steam, with an increased web presence and in the store, and the drumbeat is just going to get louder and louder and louder.
“We are proud to be part of the U.S. Navy, so this is a very important program to us.”
MORE THAN A STORE
“In spite of what is going on … if you look at global events, you look at retail you look at government, we are grounded by the mission. Our teams are extraordinarily passionate. I could not be more proud to be part of it.
“We are more than just a store; we are a place to eat, or fuel, or a place to stay. At times, we are a home away from home … we are a resource that the fleet can avail themselves of.
“I don’t want to be Walmart, I don’t want to be Costco, I don’t want to be Amazon, I want to be the Navy Exchange. I don’t want to look like those stores; I want to be the Navy Exchange.
“I want people to come into the Navy Exchange, and I want them to feel that it is theirs. They are home, we are their home away from home. We are their escape, that is what matters to us.
“Nothing makes me happier than to go in to one of our stores on a Saturday and see a young Sailor catching a deep breath. That is what means something.”
VIEW NEXCOM SLIDES FEBRUARY 2025 VENDOR TOWN HALL HERE
Edited by Larry Lapka
