E-Commerce

From Getting Attention to Getting Paid

E-commerce is a marketplace on the internet where buying and selling transactions are carried out. Like a traditional marketplace, there is a place – one or more websites – where this happens. E-commerce also means being able to select, book and pay in ‘real time’ – so the system has to know that the product is available to buy at that moment. Systems can talk to each other in real time to enable this.

Africa faces a massive challenge in the worlds e-commerce marketplace. In the majority of African countries- ecommerce is neither possible nor legal. Basic banking regulations block online payments, and along with it, block business, growth and development. It is vital that Governments and the financial sector across Africa enact e-commerce laws and facilitation for the benefit of their economies, their tourism sector and their future. 

There are however solutions for companies that do wish to begin using e-commerce. In countries where E- commerce is legal, such as South Africa, e-commerce solutions have been established that are thriving and now offer services to businesses in other countries. Alternatively, business can partner with offshore e-commerce providers via specific tourism solutions that they house in their own site.

These solutions are usually targeted towards smaller businesses which do not have an in-house e-commerce system- and work like this:
• The customer enters their credit card details on a page of the merchant’s website (a hotel, for example)
• The website encrypts the information before it is sent from the customer’s browser to the hotel’s website server, usually using Secure Sockets Layer (SSL) encryption
• The hotel’s web server forwards the transaction to their payment gateway service, such as Worldpay. This gateway service has provided the credit card form that the buyer has filled in
• The gateway forwards the transaction information to the hotel’s bank (the acquiring bank)
• The acquiring bank then forwards the information to the bank that issued the credit card to the customer (the issuing bank) for authorisation
• The issuing bank sends a response back to the payment gateway (via the acquiring bank) with a response code to approve or decline the transaction
• The payment gateway forwards it to the website, where it is interpreted and a response is sent to the customer, on the website and usually also via an email
• The process should take only a few seconds. The banks settle up with each other separately, at the end of their settlement periods.

An additional payment method is PayPal (owned by eBay). PayPal users sign up with PayPal to send, receive and hold money online. Their PayPal account can be linked to their bank account, and it can be in a number of currencies. However, Paypal does not currently allow users from most African countries and many other emerging destinations.

As in pre-internet days, there is constant competition online between those who sell direct and those who are intermediaries. Most tourism businesses will opt to do both. Like the display in a walk-in shop, any e-commerce offer needs to be put in front of enough of the right potential customers. So it is vital to consider how much distribution can be achieved, beyond whatever your own website can provide, and at what cost.

Direct Sale
The first channel of distribution is when the merchant (a hotel, for example) acts as their own e-commerce direct seller. Every large business, and a rapidly increasing number of small businesses, now do this. The options may include:

• Using one of the many commercially-available booking systems that specialise in your kind of tourism business
• Subscribing to one of the commercial networks that provide e-commerce systems to buy or rent, such as Guestlink or Frontdesk
• Joining the local, regional or national tourist office e-commerce system, if one is offered. This may itself utilise one of the commercial networks
• Selling via intermediaries

The issues for businesses are:
Are the bookings worth the commission cost?
How can your inventory be delivered automatically to such resellers?

Via resellers who sell online direct to the public
Thanks to the internet, the distinction between tour operators and agents is blurred. Examples of resellers that tourism busineses may want to sell through are eBookers in Europe, Orbitz in the USA, Expedia, Opodo, Lastminute, Superbreak in the UK, and Wotif in Australia and New Zealand. There will be different market leaders in each of your target markets. These offers are often summarised in price comparison websites such as Kayak. In the UK, Travel Supermarket users can compare prices of more than 3,000 B&Bs in the UK from over 20 accommodation websites including SME specialist eviivo (which runs Frontdesk), as well as  eBookers and Opodo.

The more specialist retail travel agents sell fully independent tours (FITs), whether bespoke or pre-packaged. Their sales outlets may include websites and walk-in shops. They may also have a central call centre, or distribute calls from a central telephone number to their shops. They buy their stock direct from hotels and carriers, and from wholesalers.

Via wholesalers who sell to specialist retail travel agents
Wholesaler websites give retail travel agents an easy view of a large number of supplier websites’ content, and allow the agent to pick and mix to assemble the FIT. Examples are www.travelcog.com and www.agents.octopustravel.com   Online agents now sell local services that were previously only bought direct by the visitor locally, so there is a need for small businesses to gain diistribution via them. These wholesalers generally deal with any suitable business that will give them an allocation of their inventory.

Via the Global distribution systems
The global distribution systems (GDS) are Amadeus, Sabre, Galileo and Worldspan. These are the linked computer systems that, before the internet arrived, allowed over 450 airlines, 50 major car rental companies and ‘only’ 37,000 hotels to be booked by around half a million travel agents anywhere in the world. The hotels they sell are mostly those of the major chains. Costs for the travel suppliers in maintaining their ICT links to the GDSs are high, and so is commission on bookings to the GDS and the agent. They remain very strong for business travel – for example, the new Silverjet low-cost business-class airline expects 60% of bookings from agents via the GDS.
GDS distribution is highly significant for medium-size hotels and for groups of smaller hotels that have a common reservation system. Also, they help to power much of the content of the global website brands, especially those they own: Sabre owns Travelocity and LastMinute, for example, and Galileo’s parent Travelport also owns Expedia and Octopus. An example of the onward distribution they achieve is that Octopus is providing hotel accommodation, and call centre back-up, on the 40 websites of Singapore Airlines. Because most of the GDS product is in big hotels, there is a market gap for e-commerce services sold through the GDS that offer a good choice of small, lower-cost accommodation bookable online in real time.