How the US Navy is redesigning its 300+ retail stores on bases worldwide

There’s Old Navy, the Gap chain founded in 1994 and named after a now-closed bar in Paris, and then there’s the older Navy, founded in 1775 as George Washington was leading the American Revolution effort against the redcoats.

The two may seem to share little in common, besides the fact that one commissions cargo ships and the other is an unrelenting purveyor of cargo shorts. But something else binds them: They’re both in the retail business.

The Navy operates more than 300 Navy Exchange (NEX) retail stores on 92 naval bases worldwide, ranging from self-checkout convenience stores as small as 200 square feet to sprawling department stores that are 200,000 square feet.

In 2022, sales at NEX stores totaled $2.3 billion, with an operating profit of $39.2 million, much of which ($29.2 million) went back to support the Navy community through its Morale, Welfare, and Recreation programs.

Active-duty, retirees, and their families are among those eligible to shop at the stores. The draw for shoppers (the Navy prefers “patrons”), along with the convenience of being on-base, is that there’s no sales tax, and beyond the tax savings, NEX claims, prices on average are more than 20% lower than at other stores.

But Rich Honiball, EVP and global chief merchandising and marketing officer for the Navy Exchange Service Command (NEXCOM), which oversees NEX, said the stores can’t thrive on those attributes alone.

“Thirty years ago, it was really convenient because everybody lived on base,” but now “more families…live off base,” Honiball told Retail Brew. So today, “it’s about creating a sense of excitement, a sense of community, a sense of belonging, [and] being able to allow patrons to check more off their list.”

NEX tapped The Lionesque Group, part of MG2, in 2020 to redesign its Oceana base store in Virginia Beach, Virginia, department by department. As you’d expect from the armed forces, the redesigns are being battle-tested in the Oceana store, and deployed in Navy stores around the globe.

Shipshape: For Melissa Gonzalez, an MG2 principal and founder of The Lionesque Group, that means helping to create something that would encourage driving past Targets and Best Buys to shop on-base.

When first visiting the Oceana store, Gonzalez occasionally encountered products stacked “up to the ceiling,” she said, which seemed strictly “functional: How much product can we get on the floor that can be bought by somebody at the cheapest price?”

So working with Honiball, she set about to zhuzh it up

“The mindset,” Gonzalez told Retail Brew, is, “‘Let’s not think of ourselves as the military store; let’s think of ourselves as a retail destination.’”

One of the first departments that Gonzalez and her firm tackled was beauty and, fittingly, it got a makeover.

• The products had been arranged by brand but were rearranged by regimen instead.
• New end caps feature educational tips and how-tos.
• A flexible space in the new beauty department hosts special events and live streaming.

The beauty department redesign was introduced in the Oceana store in 2022 and in the store on the Pensacola Navy base in Florida earlier this year. Honiball said the post-redesign sales bumps have been dramatic:

• Sales in the Oceana beauty department increased over 10% YTD over the same time frame last year; in Pensacola, where it was remodeled early this year, sales increased 6% over the past year.
• Sales for Oceana’s redesigned essentials department (includes personal care, health care, household supplies, pet, and baby) are up almost 20% YTD over last year.

“The way that the departments are structured and organized elevates the product, elevates the experience, and makes it easier for the customer to find what they’re looking for,” Honiball said.

Anchors aweigh: As Lionesque redesigns the Oceana NEX store section by section, Gonzalez said some elements carry over from department to department, including fixtures that are modular, enabling the stores to easily reconfigure displays, as well as redesigning signage.

She also said rather than trying to cram more merchandise onto the floor, they dedicated more space for “storytelling.” With hair dryers, for example, the store took an aspect of online shopping that shoppers appreciate—being able to click a few products and see how they compare side-by-side—and recreated it IRL.

“This is what this blower does versus this one versus that one,” Gonzalez explained. “So you kind of can do comparative shopping while standing in the aisle just like you would do online.”

Honiball said the redesign is consistently improving sales across departments, both in the Oceana store and in other stores where they’re introduced.

“I am absolutely blown away,” he said. “Some of it is kind of Retail 101, but you don’t have a 1,600 or 1,800 basis-point increase without a significant part of it being a redesign and a rethinking of the store.”