Wednesday, 28 November 2012

Fighting for inventory – It’s not only your customers that need to trust you but suppliers

To run a successful online travel marketplace you need two skills. On top of the obvious - knowing how to sell to the consumer, you also need to be even better at fighting for inventory.

To get an idea of how difficult sourcing the right inventory has been for major established online travel companies, type in Expedia to the search bar. We have been covering the battle for travel inventory for years now. You will see almost a decade’s worth of stories looking at how Expedia, one the world’s largest online travel distributors has fought an on-going battle to control inventory with their suppliers, hotels, airlines and other travel suppliers.

As collaborative marketplaces such as Whipcar, AirBnB , Wimdu to AiXunQi (a start-up aiming at linking Chinese travellers to Chinese speaking experience providers) continue to proliferate in our industry, I predict an ever fiercer battle for inventory.

None fiercer will be the battle for the inventory of suppliers of ‘on-trip’ experiences.  Tours and activity suppliers are happy to give you their inventory in order to sell pre-trip. However as an ex Zambezi river guide I know first-hand they won’t be keen to hand over inventory on the day, the time when people are most likely to decide whether or not to do a bungee jump, eat sushi or have a facial. Why should they?  - It’s a closed off market where the distribution system of flyers, signs, pretty young things and concierges already works really well.

Of course, what’s going to drive all this mobile commerce? Until now, online savvy travel suppliers and intermediaries have strived to sell at point of sale; now, we can do it on trip. It’s a huge amount of cash up for grabs and it’s going to go to the travel organisations that travellers trust, like and enjoy doing business with.

It’s going to be fascinating to discover how this battle for supply develops, especially when its independent entrepreneurs -who are often not big corporates - need to be courted.  Below are a few of the issues I feel the providers of marketplaces need to plan for:

Trust is Key: Right now the movement is going through what could be described as a global education program. Uneducated often means distrustful.  As suppliers and customers learn to provide and buy through marketplaces, you can become more closed.  Openness now however is key to finding inventory.

Money Counts: In the long term your suppliers will become more sophisticated. If you are not delivering them customers or are charging too high a rate for the service, you will lose inventory to your competition.

Ancillary Revenues Work! Ryan Air one of the biggest and most profitable European Airlines does not make money from flying people around. In fact, if it relied on that service it would be going bust. They stay incredibly profitable and continue to grow through the advertising of non-core products on their website. If you have a focussed bunch of people looking for a service or a product it means you have a targeted a crucially profitable market. This could allow you to subsidise the other side of your market ensuring your supply is good.

Adding Value: To be of value, every marketplace has to add value, be it through cheaper deals, safety through insurance or ease in language translation.

As a result, whilst making sure your customers hold a healthy business relationship with you, investing in maintaining a good relationship with the suppliers of your inventory is paramount. Whilst it may be painful spending time and money to allow people to make money through your market, if you don’t own the inventory, you are in a vulnerable position.