Off-base Approach

The largest military exchange facility in Coast Guard history opened last fall in a strip mall location that once housed a Circuit City store. Its size alone (43,000 sq. ft.) was enough to make this location unique. But it is also the first Coast Guard exchange to be located in a mainstream retail setting. This provides accessibility to the largest shopping pool in Coast Guard, creating significant incremental selling opportunities — as well as a whole new set of loss prevention challenges.

Like any retail operation, military exchanges are vulnerable to some degree of shrink through theft. But because the people who patronize exchange stores are all either members of the military, their families or other select governmental employees, they are, in essence, authorized pre-screened shoppers. And, in most instances, there are greeters at the door checking customers’ status or eligibility before letting them shop.

The exchange at Greenbrier shopping mall in Chesapeake, Va., is so large, and in a location that attracts so much traffic, that ineligible people, including members of organized crime rings, could sneak in, increasing the risk of external theft.

Jim Palmer, director of loss prevention for the Coast Guard Community Services Command, which oversees the Coast Guard Exchange System (CGES) & Morale, Well-Being and Recreation (MWR) Program, was well aware of all this as the Coast Guard was developing the operational plan for the Chesapeake exchange. His team took steps to protect their assets and the profits, which are used to fund MWR programs.

An exchange draws from a customer base located within driving distance of a military station, which means that average sales per unit are relatively low by typical retail standards. But the Chesapeake Coast Guard exchange is located in a community where military retail sales exceed $400 million at existing exchanges – and that does not include the monies that military personnel spend at traditional retailers.

Better exposure
Since exchange customers, on average, buy goods for 20 percent less than what shoppers pay in privately owned retail stores, the Chesapeake exchange is expected to generate most of its revenues by attracting military customers who had been shopping for specialty goods at traditional retailers.

“We are now going to where our customers live without being co-located on a base,” Palmer says. “This is the first time that an exchange will be situated in a location of this size with exposure to so many potential customers.”

While the Coast Guard declined to provide sales projections, its second-largest exchange — an 18,000-sq.-ft. facility in Aguadilla, Puerto Rico, generates $16.5 million in annual sales. At more than twice the size, the Chesapeake exchange is easily expected to outperform Aguadilla in its first year and to reach break-even in about two years, Palmer says.

Palmer was hired in 2008 to develop the Coast Guard’s first internal LP program. In addition to a greeter checking IDs as customers enter, Chesapeake’s full-time, dedicated LP team includes associates who walk through the store, observing customers and helping them as needed.

The facility also has the latest generation surveillance cameras that are monitored in real time, as well as a wide variety of exception reporting applications to alert management to irregularities at POS.

Associates keep watch
All managers and department supervisors are equipped with two-way radios “so everyone can communicate,” Palmer says. “And everyone can be aware of what needs to be done, whether that’s getting help to a customer who needs service or speaking to someone who may have slipped an item into his backpack. The hope is that people who may be tempted to steal will put the item back and leave thinking, ‘Wow, it’s really tough to steal in a Coast Guard exchange.’”

Palmer is sensitive to the needs of customers and has invested in training programs that teach all floor associates the importance of being pro-active and tactful in deterring theft.

He and management have created an LP awareness program, replicated in the other exchanges, that includes monthly and quarterly newsletters, a business abuse line and best practice audits oriented toward increasing sales through superior customer service while deterring shrink through diligence and awareness.

“Behavior mirrors behavior,” Palmer says, “which means that it all comes down to your approach. There are a lot fewer injuries if you use a subtle approach that reduces tension.” At Coast Guard exchanges, “apprehension is the last resort.

“At the end of the day, we are not here only to catch people stealing,” Palmer says. “Instead, we believe that heightened awareness equals decreased opportunity to shoplift, and that equals increased profits.”