Wednesday, February 28, 2001

Strong Growth in eCommerce for Travel Industry

The travel industry and the Internet make a prosperous pair. According to IDC, online sales of airline tickets, car rentals, and hotel reservations make the travel industry one of the strongest ecommerce markets in existence today.

"The ease of substituting one remote channel for another and the lack of need for physical fulfillment make the travel industry ideal for ecommerce," said Joshua Friedman, senior research analyst for IDC's eTravel program.

The airline industry represents the largest segment of the etravel industry. IDC estimates U.S. online airline ticket sales alone soared past $7 billion last year and will climb to much higher altitudes in the next few years. U.S. online hotel and motel sales were well above $2 billion in 2000, and U.S. online car rentals will pass the billion-dollar mark this year.

The biggest factor in stimulating online travel sales will be Web sites designed to meet consumer needs. "The travel industry must improve its understanding of the consumers' booking habits and change their sites to address consumer sales," Friedman said.

IDC believes strong sales in one segment of the etravel industry will ultimately lead to stronger sales in the other segments.

"There is a synergy among online travel industry components," Friedman said. "Car rental, airline, and hotel online sales will all feed off each other."

Reverse eLogistics May Offer Big Returns
Returning products bought online is proving frustrating for consumers and etailers alike. Their frustrations, though, are creating a golden opportunity for service providers who can help simplify the process. According to IDC, a new type of service provider is emerging to deal with ereturn management - the recovery of products sold online, including the proper care, packaging, and method of accounting for goods that have been returned or exchanged.

"Consumers complain of inadequate information about how to return products purchased online, the high cost of shipping these returns, and slow or missing credit refunds. Meanwhile, etailers are grappling with the logistics of processing returns, controlling the cost of accepting returned goods, and issuing refunds and credits," said Romala Ravi, a senior analyst with IDC's eLogistics research program. "These difficulties create a great opportunity for service providers who can address these issues."

According to IDC, new business models have emerged with new service providers trying to cash in on the opportunity. These service providers try to simplify the return process for the consumers by ensuring consumers don't have to go out of their way to return the product. Service providers do this by making the drop-off options more convenient or by enabling customers to print return shipping labels from the comfort of their homes.

"By making the return management process less cumbersome, service providers can improve customer satisfaction with etailers," Ravi said.

eTailers are becoming increasingly willing to seek help from service providers with their reverse elogistics. IDC forecasts demand for ereturn management outsourcing will soar from $1.2 billion in 2000 to almost $7.5 billion by 2004.

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