Civilian CEO moves to modernize military’s retail business

The first civilian to run the military’s $10-billion-a-year retail business is working to bring the enterprise into the modern age.

The CEO of the Dallas-based Army & Air Force Exchange Service, Tom Shull, is the first retailer to hold the post. It had been held by military officers on a two-year basis for 117 years. Shull, 61, was named to the position last year and his tenure doesn’t have a time limit.

There had been many complaints about the service in the comments section of Military Times. Readers were unhappy with prices and a limited selection of clothing sizes.

“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 increasingly competing with the likes of Wal-Mart Stores Inc., Best Buy Co., Dick’s Sporting Goods Inc. and Cabela’s Inc.

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 Inc. or Office Depot Inc.

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. 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 site’s firewall to make browsing easier.

His work seems to be having an effect. According to the American Consumer Satisfaction Index from year-end 2012, AAFES’ website satisfaction rose nine points, to 77, the industry average. Overall, service quality moved up one point to 83, above the industry average of 78.

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.

In the business world, he was an executive at Wise Foods Inc., Hanover Direct Inc., Barneys New York and, most recently, Meridian Ventures.

Shull used 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 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.”

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 in Texas 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 fund military family programs such as child development, fitness centers and playgrounds.

The pay grade for Shull’s annual salary is $120,000 to $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.

Halkias writes for the Dallas Morning News.