Finding a million ways to say 'I miss you'

DSN Retailing Today, Oct 25, 2004 by Debbie Howell

Serving the unique needs of active military members who rarely get to set down roots and the desires of military retirees able to spend more money at their leisure poses a constant challenge to AAFES in assorting its stores with hardlines goods. Tailoring merchandise to a specific store's customer base and geography or climate comes into play in hardware, outdoor living, automotive parts, sporting goods, toys and office supplies. As such, merchandise at an AAFES store with a heavy retiree base may skew heavier into high-end and do-it-yourself goods, such as golf and upscale grills, while items sold at a contingency store for troops in Iraq may focus on basic, high-demand items, such as insect repellent, foot lockers and batteries.

"Every store has a core stock assortment," said Jacquie Waelde, vp of hardlines. "But because we have such a diverse market ... we can't target just a niche. We have to spread it out."

That means selling the basics found at a mass retailer along with higher-end items sold in department stores at some AAFES locations. Worldwide, AAFES generates about $737 million annually in the hardlines category as defined by DSN Retailing Today.

Performance in some hardlines segments has been spotty, affected by troop assignments in Iraq. Sales in sporting goods and automotive supplies were both down last year. In contrast, AAFES reported strong sales growth of 9% in toys and office supplies/stationary, along with modest gains in outdoor living and hardware segments.

Sporting goods, which generates annual sales of $210 million, benefits mainly from affluent military retirees with desires to hunt, fish, camp or golf. Among active military, fitness segment sales are strong because of demands to stay in top physical condition. The assortment in a BX or PX store will include categories typically found at a discount store, including team sports, fitness and recreation. Waelde said strong sellers are knives, camping/survival gear and camouflage items. Camping and fishing assortments are tailored to locale, such as whether a store is located near saltwater or fresh water fishing destinations.

In office supplies, which generated $151 million last year, the core sales driver is greeting cards sent by active military to loved ones at home. Cards with sayings such as "I Miss You" and "I Love You," are big sellers. Another strong growth segment is scrap booking supplies, Waelde said, while computer supplies fall under the separate "Power Zone" department of electronics and home entertainment.

Outdoor living, a $126 million category, is another segment that primarily targets retirees. For that reason, the assortment may include more high-end items such as upscale grills, Husqvarna riding mowers and elaborate fountains. Waelde described the assortment as typical of a scaled-down garden section at Wal-Mart or Home Depot, including plants, chemicals, patio furniture, pool supplies and garden tools. In the fall, this department converts to a seasonal space for trim-a-tree goods. The focus in garden is on name brands, except for charcoal and lighter fluid found in Exchange Select, an AAFES private label mainly in consumables and HBA.

While active military are generally not big home improvement fans due to their mobility, power tools are a strong seller. The hardware selection includes name brands, such as Black & Decker and Craftsman, the latter sold in partnership with Sears. Sears also permits AAFES to sell Kenmore appliances. Lower pricing than rivals may account for strength in tool sales, Waelde said. As opposed to home centers and discounters, AAFES does not offer its own brand of tools.

"Power tools are probably the mainstay of that area. We also do a big business in light bulbs and batteries," she said of this $92.4 million category at AAFES.

The rest of the hardware assortment is basic convenience items similar to those found at a mass retailer. A small paint program is also offered in stores, while hot "gadgets" are a segment buyers have found some success with, such as laser levels.

Automotive supplies generated $82 million last year and resemble the basic assortments found at discount chains. Core items are motor oil, antifreeze and gas treatment. With limited space ranging from 64 square feet to 1,008 square feet, the selection that includes tires and batteries isn't as broad as that of automotive specialists that delve into niches. In partnership with Goodyear and Firestone, AAFES also operates a dozen car-care centers in the United States that carry a broader assortment of repair parts and limited services, such as lube and oil changes.

"In a main store, it's typically a convenience-type assortment. Our customer is probably more do-it-yourself than the average customer, so we will try to have a range of waxes, cleaners and oil-changing products," said Pat Pettit, vp of specialty stores and consumables.

The final hardlines category, toys, is its smallest with $75.5 million in annual sales. What's interesting about toys, however, is that this category grew 9% last year at a time with specialty toy retailers were struggling. Waelde credited better execution in moving seasonal merchandise and expansion of its popular "Soldier Bear" private label as contributors. Worldwide, AAFES targets about 700,000 school-age children. Many items are tailored with military themes, such as action figures, building blocks and Monopoly games. Collectibles are another factor driving sales in some cases, such as Steiff Teddy Bears sold at European stores.