Army and Air Force Exchange Service

Roots

Soldiers take a break at a post exchange in this 1914 photo.

For more than 100 years before the post exchange system was created, traveling merchants known as sutlers provided American soldiers with goods and services during times of war. Sutlers served troops at Army camps as far back as the French and Indian and Revolutionary wars.^[7]

Complaints of sutlers charging premiums for substandard merchandise were widespread during the Civil War, and in 1867 the War Department created the post trader system. While intended to prevent the unscrupulous practices of sutlers, the post trader system still subjected troops to over-inflated prices and was rife with bribery and corruption.^[8]

On Nov. 29, 1880, Col. Henry A. Morrow, seeking to quell disciplinary problems resulting from troops visiting disreputable places of amusement in nearby towns, established the first American military canteen at Vancouver Barracks. There, troops were provided newspapers and magazines, played billiards and cards, and could obtain light food and drink without leaving post.

The idea was so successful that other posts began establishing canteens across the frontier, providing troops with not only a place to socialize but obtain daily necessities at affordable prices. In 1889, the War Department issued General Orders No. 10, authorizing commanding generals to establish canteens at army posts. Like the modern-day exchange system, these canteens were largely financially self-sustaining.^[9]

In February 1882, the secretary of war ordered that canteens be henceforth referred to as “post exchanges.” This change was due to the popular association of the word “canteen” with the bawdy, immoral behavior alleged to occur in the canteens of foreign armies. By 1895, post traders had been almost entirely replaced on Army posts by post exchanges.^[10]

Early developments

On July 25, 1895, the War Department issued General Orders No. 46, directing commanders at every post to establish a post exchange “wherever practicable.” Post exchanges served two missions: first, “to supply the troops at reasonable prices with the articles of ordinary use, wear, and consumption, not supplied by the Government, and to afford them a means of rational recreation and amusement,” and second, “provide the means for improving the messes” through exchange profits.^[11]

For the first 45 years of the exchange system, exchanges operated independently under the direction of each post’s commanding officer, meaning there was little uniformity between exchange locations. While the War Department did not centrally control exchange operations, it did hold commanding officers accountable for their financial assets. Exchanges were also subject to annual checks by the Inspector General’s office.

With the outbreak of World War I and subsequent expansion of the U.S. Army, it became clear that the existing post exchange system was not equipped to accommodate such a large-scale effort. Gen. John J. Pershing enlisted the help of civilian service organizations to provide canteen service overseas, though they proved to lack the equipment and experience necessary to fully meet the needs of downrange troops.^[12]

Centralization

During the mobilization efforts leading up to World War II, the War Department increasingly looked for ways to upgrade its antiquated post exchange system. After completing a review of existing exchanges, Lt. Col. J. Edwin Grose concluded that the Army would need to “become the operator of an extensive chain store system with world wide [sic] branches” to sufficiently meet the demands of a large-scale war effort. In April 1941, an advisory committee of five prominent retail executives affirmed this notion, recommending the creation of a central organization to oversee exchange operations.

On June 6, 1941, the Army Exchange Service (AES) was created.^[13] On July 26, 1948, AES was renamed the Army & Air Force Exchange Service, to reflect AES’ responsibility to serve the Air Force, which was created in 1947.^[14]

Since its establishment, the Exchange has been involved in 14 major military operations (to include World War II, Korea, Vietnam, Grenada, Panama, the Balkans and Operations Enduring and Iraqi Freedom) as well as several dozen humanitarian and disaster relief contingencies.

Civilian leadership

Tom Shull, Director/CEO of the Army & Air Force Exchange Service

In 2012, Tom Shull became the Exchange's first civilian Director/CEO, having previously served as an executive with Wise Foods, Inc., Hanover Direct, Inc., Barneys New York and Meridian Ventures. A West Point graduate, Shull served as an infantry company commander and held assignments at the White House and National Security Council.^[15]

Under Shull's leadership, the Exchange has added merchandise from industry-leading brands such as Michael Kors and Disney to its assortment, reduced costs and made improvements to its website, ShopMyExchange.com. As of July 2017, the Exchange has established shipping centers inside 26 brick-and-mortar stores, reducing shipping costs and improving delivery times for customers.^[16] Shull also spearheaded the Exchange's efforts to bring first-run movies to installation theaters.^[4]

In 2015, Shull's emphasis on intensifying national brands, growing concessions and Express stores, strengthening the Exchange's web presence and reducing costs led the Exchange to record operating earnings of $402 million, every dollar of which was reinvested into the military community.^[17] This performance, which occurred despite military personnel downsizing of 13 percent since 2011^[16], represents an increase of three percentage points in terms of profitability, and is on par with or exceeds that of Walmart and Target.^[18]

Veterans online shopping benefit

On May 8, 2012, Shull drafted a memorandum to the Under Secretary of Defense for Personnel and Readiness proposing that military exchanges be allowed to extend online shopping privileges to honorably discharged veterans^[19].

Shull presented a business case for the veterans online shopping benefit to the Department of Defense’s Executive Resale Board in August 2014. Shull said the plan could generate more than $100 million for installation quality-of-life programs within three years^[20]. The Executive Resale Board voted unanimously to recommend the proposal in August 2016^[21].

On Jan. 13 2017, the Department of Defense announced that all honorably discharged veterans would be eligible to shop tax-free online military exchanges starting Nov. 11, 2017^[22]. The expanded benefit is expected to make online exchange privileges available to an estimated 17 million to 21 million veterans.^[4]

On June 5, 2017, military exchanges announced the launch of VetVerify.org, an online service where veterans can verify their eligibility to shop online exchanges. It was concurrently announced that some veterans who register would be selected to shop ahead of the Nov. 11 launch as beta testers.^[23] By November, VetVerify.org had verified more than 225,000 veterans^[5]