Commissary sales, transactions continue worrisome slide
A steady fall in commissary sales and store transactions since 2012 suggests Congress and Defense Department officials picked a risky time to try to transform on-base grocery stores into more businesslike operations, a move intended to lower taxpayer support of the benefit while still preserving shopper savings.
Sales and transaction data gathered by the Defense Commissary Agency (DeCA) through the first five months of fiscal 2017 show a familiar pattern of worrisome declines, traceable only in part to the recent force drawdown.
From fiscal 2012 through 2016, annual commissary sales fell from $6.09 billion to $5.25 billion, a drop of $840 million or almost 14 percent. The pattern continued into the current fiscal year. If the slope through February holds for the year, annual sales will be near $5 billion, a fall of 17 percent in just five years.
Number of transactions, or shopper checkouts, fell from 97.8 million in fiscal 2012 to 86.7 million by 2016. That modestly more gradual 11 percent slide also continued into the current fiscal year.
Multiple factors are affecting sales and "we are trying hard to overcome them," explained Christopher Burns, DeCA's executive director for business transformation, in emailed responses to our questions about the falling sales.
Overall sales data for the U.S. grocery store industry, as found online, show sales have climbed modestly in recent years. Burns, however, pointed to a Commerce Department finding that in 2016 "restaurant spending and food away from home exceeded grocery store spending for the second straight year."
Commissary sales also have been impacted, perhaps disproportionately, by falling food prices nationwide, he suggested.
"During the last few quarters, grocery sales have been severely impacted by deflationary trends. According to first quarter Fiscal 2017 Bureau of Labor Statistics Report, the food at home index declined 2.17 percent. Milk (-1.85 percent), ground beef and veal (-6.56 percent) and egg (-34.26 percent) prices are all significantly lower."
Commercial retailers, Burns said, can use lower food prices to improve profit margins, lessening the direct effect on the total sales reported. But commissaries have had to continue to sell goods at cost, plus a 5 percent surcharge.
"For example, during the last few quarters, the shelf price for a dozen eggs fell by 53 percent in commissaries but only 34 percent in commercial grocery stores," Burns said.
That might explain in part why sales receipts in commissaries are impacted by deflation. But wouldn't lower prices for eggs or other products in commissaries also drive up transactions? That hasn't happened. DeCA transactions fell by almost 4 percent in 2013, more than 4 percent in 2014, by just over 1 percent in 2015 and by more than 2 percent last year.
Some other factors Burns cited for declining sales are undisputed including stiffening competition off base.
"More commercial supercenters and other major discount stores are selling groceries. There is also an increased competition from online shopping," he said.
Perhaps half of commissary shoppers are retirees, retiree spouses and survivors. That segment of the community held steady the last four years. Active-duty forces, however, fell from 1.43 million at the start of fiscal 2012 to 1.29 million last month, a 9 percent decline. Burns said DeCA's own research shows the smaller force might be having an outsized impact on commissary sales because the proportion of married members has fallen even more in the drawdown.
"From 2015 to 2016, the overall active-duty population decreased by less than 1 percent. The married active-duty population decreased 2.3 percent in the same period. We have more single soldiers, airmen, sailors and marines than before, in percentage terms. This is important because we know that single soldiers are less likely to shop at the commissary. They are on meal plans at the dining facilities and consume a lot of their meals at establishments on and off base."
Another factor is a shrinking number of service members who live on base, or reside off base but nearby. Burns said the number of active-duty members who reside within 5 miles of a military base decreased by 12.5 percent in 2014 alone.