The Military Resale System

History

On June 17, 1776, the Continental Congress adopted Articles of War, which included all of the British Army regulations, including those which allowed civilians to sell provisions to soldiers. Thus began America's effort to care for and supply our troops through their personal resources.

These merchants, known as sutlers, would follow the Continental Army, making as much money as possible supplying soldiers with "basic" items, such as fruits, vegetables, candy, tobacco, soap, shoes and boots. Bumboats provided the same service for sailors and Marines aboard ships.

The quality of the products was inferior and the prices were expensive. However, these services were a necessary evil due to sparse rations provided by the military.

This abusive practice remained until July 1, 1867, when a law passed by Congress went into effect that abolished sutlers and established Sales Commissaries to provide "sutlery" items for sale to men of all ranks.
Since that time, the military resale system has evolved into a global enterprise supporting our men and women in uniform and their families, at bases at home and abroad, including areas of conflict like Iraq and Afghanistan, by providing quality, brand-name products at low prices. In 2009, the commissaries and exchanges reported over $17.6 billion in sales at 255 commissary and 550 exchange locations world-wide.

The value and savings provided by the military commissaries and exchanges are a non-pay compensation benefit for military families. The commissaries, for example, provide over 30% savings on groceries and household goods. For a family of four, that is an average savings of $4,400 per year. The exchanges provide savings ranging from 20-27%. Additionally, in 2009, the exchanges distributed $345 million of profit as dividends to support Morale, Welfare, and Recreation programs for military families.

Having become one of the top benefits for today's military families, military resale supports retention and military readiness, while holding down taxpayer costs.

Governance

The military resale system is governed by Title 10, Section 147 of the U.S. Code. The law establishes the organization and oversight of the systems, directs operations, and places limits on the types of merchandise that can be sold.
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The Commissaries

The Defense Commissary Agency (DeCA), through its commissary stores, sells groceries and household goods to active-duty, Guard, reserve, and retired service families.

According to Department of Defense Instruction ( DODI 1330.17, Oct. 8, 2008), "the commissary program is an integral element of the military pay and benefits package for Active Duty personnel. An income benefit is provided through savings on purchases of food and household items necessary to subsist and maintain the household of the military member." The instruction further states, "the Defense commissary system enhances the quality of life of members of the uniformed services, retired members, and their dependents and supports military readiness, recruitment, and retention."

The commissary sells products at cost and collects a 5% surcharge on transactions at the register. The surcharge, mandated by Congress, pays for new stores and renovation of existing facilities. Since the collection of the surcharge began, $5 billion has been collected and invested on the part of military families to improve commissary facilities world-wide. Commissary operations and employee salaries are funded by Congress through an annual appropriation.

The commissary benefit is a good return on investment for the American taxpayer. With an annual appropriation of approximately $1.3 billion, the commissary provides a savings of $2.6 billion, or roughly 30%, over commercial grocery stores. That's a 2-to-1 return on investment.

DeCA also provides jobs for military dependents, which make up nearly half of its workforce. This too is an added benefit that helps supports military readiness, recruitment and retention.

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The Exchanges

The exchanges are different from commissaries in what they sell and how they operate. Although they may sell some food items, they are not grocery stores, rather they are similar to department stores, selling items such as TVs and other electronics, appliances, sporting goods, linens, clothing and shoes, and jewelry to name a few.

Some exchanges are more like convenience stores selling fuel, snack foods, alcohol and tobacco products. The exchange systems also operate or contract on-base concessions, such fast-food and dine-in restaurants. They also operate on-base retail-type outlets like hotels, dry cleaners, and optical stores. Further, they operate the uniform shops where military personnel purchase uniforms and acoutrements.

Military exchanges, unlike commissaries, are not generally supported by appropriated dollars. Known as Non-Appropriated Fund Activities, they operate on a profit basis. Prices of products sold must cover the operations of the systems with profits generated being used to pay for construction and maintenance of facilities, employee salaries, and upgrades to IT systems, for instance.

Remaining profits are returned back to military families in the form of a dividend that is provided to MWR programs. The dividend covers expenses of MWR programs that would otherwise be paid with taxpayer dollars or not provided at all due to lack of funds.

On average, the exchanges, even operating on a profit basis, generate savings ranging from 20 to 27% for their patrons.

There are three Department of Defense exchanges - the Army Air Force Exchange System (AAFES), Navy Exchange Command (NEX), and Marine Corps Exchange (MCX). The Coast Guard has the Coast Guard Exchange (CGX) while the Veterans Administration has the Veteran's Canteen Service (VCS).

Exchanges are more than just brick and mortar stores. They are deployable assets, following our military wherever they may go - Iraq, Afghanistan, Haiti, and on board ships - to support the quality of life of service members on the front lines of operations around the world. Operating in quonset huts and cargo containers, in tents and ship stores, the exchanges provide items, such as hygiene products, books and magazines, snack foods and drinks to service members that otherwise would have to have the items mailed to them by family members in the United States. The exchanges save our troops and their families money and time on the products they need while forward deployed.