By  on February 28, 1994

NEW YORK -- For decades, the U.S. military has been a huge customer for all types of companies -- including several major accessories firms -- but with all the budget cutbacks in the works, it looks like the party may be over for many.

So far, however, vendors such as Timex Corp., Liz Claiborne Accessories, Swarovski Jewelry U.S. and others that sell to military exchange stores have not felt much of a pinch. Distribution in these channels is still growing for some and holding steady for others.

"We haven't had any impact from base closings yet," said Rich Kramer, manager of national accounts for Timex, Middlebury, Conn. "In fact, our business with military exchanges has been growing steadily for about the last five years, with particularly healthy increases last year."

Timex, which has been selling to the military for about 30 years, has been taking a new marketing tack to keep its business there pumped up, Kramer noted.

"The exchanges have always done well with certain types of our watches, such as the sport digitals, but we've also started selling them more fashion and promotional items," he said. "We're finding that the exchanges are becoming much more competitive with outside retailers and are looking to offer wider ranges of merchandise."

A more merchant-like approach in some branches of the military is also proving beneficial for Liz Claiborne Accessories, according to Carol Hochman, president.

Although her company has been working with the Army and Navy for about 13 years, Hochman said, it's only in the last few years that these branches have come more in line with the times.

"The Navy decided to start running its exchanges like real businesses, as profitable stores rather than just service posts for its personnel," she noted. "It hired several top-level merchants to run things, and that has turned out to be a very good thing."

Hochman, who said military sales have grown into a solid business for her company, added that the Army has also changed its philosophy toward retailing recently.

"About two years ago, the Army decided to downplay merchandise in the better-price category," she said. "Between that and the base closings that were going on then, our business took a decent-sized hit."Since then, however, the Army has started bringing back better-priced goods, so we're seeing growth there again," Hochman added.

Steven Levi, director of military and duty-free sales for Swarovski, pointed out that different branches of the armed services go for different price points. Since each exchange has its own buyer, the selection of merchandise each location stocks can vary widely.

"One Marine exchange we sell to in Arlington, Va., does as much as $4,000 to $5,000 a month in our jewelry," Levi said.

"We also do well in parts of the country such as Florida and California, where there are lots of retired military people who have discretionary income," he added.

Currently, Swarovski is looking to deepen its business with the Marines and the Navy and plans a 21 percent increase in its military sales this year. Levi said the downsized military budget is not posing a problem for his firm.

"A lot of the bases being closed are smaller ones with small exchanges that don't offer us major volume potential, or ones in areas with multiple bases, in which case people end up shopping at the base exchanges that are still open," he said.

Swarovski, as well as most other firms, deals with the military through brokers who handle ordering and inventory management at the individual exchanges. Because a broker typically handles multiple lines of varied merchandise -- from electronic equipment to sporting goods to jewelry -- this system of selling is not always as efficient as dealing with department stores or other retailers.

Still, Levi added, "it's just not cost-effective for us to put our own corporate people into these accounts" since exchanges generally stock huge numbers of units and are therefore labor-intensive.

Some firms newer to the military business are banking on opportunities even as the budget crunch intensifies.

"We see it as presenting marvelous potential," said Jeff Jones, vice president of international operations for the jewelry company Victoria Creations.

After working with the Army, Air Force and Navy for two years, Victoria Creations has set up distribution systems to bases in the U.S. and U.S. bases overseas."Right now, we're doing close to $2 million annual wholesale volume with the military, and we are in about 90 percent of the Army, Air Force and Navy exchanges," Jones said. "And we're looking to develop our business further, particularly in areas such as our licensed Givenchy line, which we see as having major potential overseas."

"Even with the military downsizing, we still see it as a viable source of business for us," Jones added. "The cutbacks may even work in our favor in some cases, since some of the exchanges are being combined into large superstores instead of standing alone as smaller locations with less traffic."

Still, some who have been doing military business for decades are a little more cautious about business during the budget chopping.

"I see our military volume shrinking slightly," said Norman Salik, vice president of marketing for the eyewear division of Bausch & Lomb, which has been selling its goods to the Armed Forces since the Forties.

"Right now, it's between 3 and 4 percent of our total volume, but in the next few years, I see that potentially going down to between 2.5 to 3 percent," Salik said.

"It remains to be seen," he added. "The military has always represented a steady area of our business, but with the world changing the way it is, what will happen is anyone's guess."

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