InformationWeek.com

Welcome Guest. | Log In| Register | Membership Benefits

December 13, 1999

E-Business 100
AAFES: Worldwide Supplier

Illustration by James O'Brien hen is a retailer not a retailer? When it's a nonprofit organization that supplies goods and services to active and retired military personnel from more than 10,000 centers in every state as well as in 25 countries. With 1998 revenue of $7.2 billion, the Army and Air Force Exchange Service (AAFES) is the eighth-largest retailer in the world, offering everything from PCs to school lunches for children of overseas military personnel--much of it online.

AAFES may be a noncombat organization, but it's seen a lot of action in its century of service. The organization's dedication to providing a vast range of efficient services for its far-flung customers and its success with online sales has earned AAFES the No. 4 ranking among InformationWeek's E-Business 100 list.

AAFES realized early on that the strength and scope of the Internet was a perfect distribution method for its retail and financial services, and it migrated its Sears-sized catalog service to the Web in 1996. It successfully helped its computer-savvy customers move to the Internet by printing its Web address on sales receipts, on shopping bags, and in the catalog. To provide incentives for repeat business, the Web-site design is updated every week. In addition, new services--such as a recent automated E-mail service reminding customers to buy gifts for upcoming birthdays or holidays--is implemented every six months. "We've had orders from as far away as Korea and Russia," says Luis Merced, senior VP of IS.

Sales from Internet orders have more than doubled each year, with 31% of this year's total sales, excluding the upcoming holiday season, coming over the Internet. The service's total 1998 E-business sales were just over $8.4 million.

Another side of the E-commerce strategy is establishing what Merced calls a "point of presence" in its 1,423 brick-and-mortar stores. AAFES is test marketing in-store catalog kiosks to extend the benefits of E-commerce to customers without Internet access. With the kiosks, the exchange service will offer product information and demonstrations, advertising, UPC-code scanners to check prices, and services such as money orders or pickup of products on layaway.

Besides its retail activities, the organization offers financial services, including credit cards, to military personnel. Since 1998, customers have been able to access account information via the Internet. They can also use the specialized Web site to review their statements online, pay electronically through their checking account, and receive E-mail confirmation of payments.

Internally, AAFES has cut costs and improved the productivity of its 50,000 employees by using E-business solutions. An intranet chat room offers employee training, reviews personnel records and paychecks, and posts company manuals. "Before, retail-store managers could receive sales flyers only one week before the scheduled start of the sales. Now they have four to five weeks to prepare," Merced says.

Besides helping employees, AAFES in 1998 was an early adopter of extranet technology for its vendors. Each vendor has a member number to log on to the AAFES Web site to review its account status. "It's awesome," says Cathy Thomas, a credit analyst at Kayser-Roth Corp., a manufacturer of brand-name hosiery such as Calvin Klein and Timberland. "I wish all the department and variety stores we work with were on the Internet. It's much smoother and faster."

The vendor interfaces were based on existing applications created to migrate business data from legacy systems to the Web-centric front end, avoiding the need for expensive and lengthy systems implementations. Merced treated the Web as simply another interface to AAFES's existing enterprise.

Using this strategy, AAFES leveraged its legacy data stored in mainframe IMS databases from nearly all of its core business assets, including its billing, inventory-control, and ordering systems. "Even with the Army and Air Force shrinking due to cutbacks, we haven't lost any sales," Merced says. AAFES is one nonprofit retailer that means business.

Return to the "E-Business 100 homepage"

Back to This Week's Issue
Send Us Your Feedback
Top of the Page