Charged with the growth of AAFES’ eCommerce business is the company’s Cyber Region. According to Cyber’s Senior Vice President Barry Gordon, it’s important for companies today to become involved in the eCommerce aspect of business because, as industry experts have noted, if you have a loyal Internet shopper who trusts your brand, that customer tends to spend 40 percent more in your stores than they used to.
AAFES is what Cyber Vice President Bob Carreras likes to refer to as a click and mortar company. While click refers to online shopping and mortar to physical store locations, customers have three choices – three avenues in which to shop; they can visit stores, order from the Exchange Catalog via phone, FAX or email, or visit the Internet store, which, notes Carreras, adds additional selection and convenience.
Gordon adds that retailing today is often described as a three-legged milking stool, with each leg representing brick and mortar, catalog, and online sales. All three give you balance, he notes. And because AAFES has all three legs, this opportunity will allow the company to maximize overall sales, or what the industry refers to as ‘convergence.’
It’s very important for AAFES to have a convergent strategy with respect to the Internet, Carreras says. The folks in the dot-com world who are struggling today, are doing so because they don’t have all three pieces of the total retail structure as we do. A convergent strategy, or selling through multiple channels, allows us to serve our customers better than if we just had a store, or just a catalog. Smart retailers understand that it takes a click and mortar approach. We can’t carry every available music CD in our store inventory. We just don’t have the space. So, how can we use all selling channels to satisfy the needs of our music customers? In the stores, we might sell the top 100 CDs, and online sell everything else. This keeps the sale in-house.
For Cyber Region, assuming the responsibilities of AAFES’ eCommerce business meant absorbing a number of existing AAFES business concerns and consolidating them under one umbrella.
We looked at the businesses that fit neatly into the same family and have absorbed them in to our Cyber operation, says Gordon. The Exchange Catalog is the foundation of Cyber and is a strong seller on the Internet. Customers see it as a wish book and order from it online. At the same time, they are also coming into stores because of what they see in the catalog. It’s textbook convergence.
Right now, there are many Internet companies trying to publish a catalog because they’ve realized which pieces of the milking stool they’re missing, says Gordon. At the same time, there are catalog companies building they’re own stores.
Another key component of Cyber is Exchange Credit, formerly known as DPP and recently rebranded as the Military Star card. The primary reason for the inclusion of the Star card is that credit is the (only) acceptable means to shop on the Internet. Take the Exchange Credit Program with its 1.8 million customers, says Gordon, and use it as a vehicle to increase our Internet sales, that’s the objective.
After looking at the Exchange Catalog and the Military Star card, Gordon says the region realized that there’s more to eCommerce than simply shopping on the Internet. It’s also a way of using communication, he says.
As a result, Cyber also oversees AAFES’ Telecommunications business. This gives Cyber the responsibility to forge Internet alliances, which, in turn, enabled AAFES to bring vendors into the AAFES Internet site and allow customers to click through to them without AAFES actually owning the inventory. The best example of that, says Carreras, is Books-a-Million. With BAMM, we essentially added over 100,000 SKUs to the stock assortment.
The Internet business has become a phenomenal success story for AAFES. In 1997, when its first store opened with a limited stock assortment, AAFES did around $500,000. The following year, sales went from half a million dollars to $8 million. The third year, sales tripled. Between 1998 and 1999, AAFES’ Internet business has increased more than 238 percent!. This has been the fastest growing business in AAFES the past three to four years, says Carreras. We’ve gone from $24 million in 1999 to rounding out the year 2000 at what we anticipate to be in the $49 million range.
Today, around 48 percent of AAFES’ orders arrive via the Internet while 52 percent are coming from mail order call-in. Gordon says that is a true indication that AAFES’ customers are more confident using the Internet; more secure in their feelings about using their credit card online.
Carreras says the reality is AAFES’ customers are shopping more and more online. Interestingly enough, he says, statistics have shown that AAFES’ military customers spend more time online than their civilian counterparts and the majority of them are more PC literate than their civilian counterparts. So, we’re just taking advantage of that fact, and expanding our AAFES BX/PX brand on the Internet he added.
Are we doing well? Absolutely! says Gordon. Two or three years ago, we had something like 33,000 online customers. Today, we have over 140,000 taking advantage of our direct marketing channel. The creation of the Cyber Region is indicative of the commitment that AAFES has made to growing eCommerce. Cyber Region is ready to take AAFES into the 21st century.
