Online business tests traditional models.
Of the businesses around the world that once rode the crest of the dot-com wave, few survived, but for those who toughed it out, such as Amazon.com, the reward was well worth the wait. That model has proved inspirational to a number of Taiwanese entrepreneurs, so much so that they are willing to base their headquarters here as they try to reach out to consumers beyond the island's shores.
"Some dot-com companies are downsizing, but we are recruiting," says Jack You, chief executive officer of ezTravel. "There are many more things that we want to do, and we still see considerable room for development."
Established in 2000, ezTravel has rapidly emerged as Taiwan's largest online travel agency. With a workforce that has expanded from its initial 10 employees to a staff of 280, its annual sales have since registered robust growth. In 2004, the company pulled in NT$3.6 billion (US$114 million), compared with NT$1.8 billion (US$57 million) in 2002 and NT$300 million (US$9.5 million) in 2000.
This year, You believes sales will be as high as NT$7 billion (US$222 million). "The Internet has brought a lot of changes and innovations. It has also turned many seemingly unlikely things into possibilities," he says. "In particular, travel and the Internet produce great results."
Early Ideas
You was not satisfied with merely changing the business model; he decided to change some of the services on offer as well. Take group tours for example. Domestic travel agencies used to focus on group tours. You, who had worked in the industry for more than 20 years, realized that tailor-made itineraries, the main way of traveling in the West, would gradually gain popularity in Taiwan. But providing such packages, which called for complex combinations and flexible arrangements, would be too time-consuming for traditional agencies to afford.
"In 1998 and 1999, I buried myself in information technology (IT), searching for an answer," he says. "I found that dot coms were the best solution for promoting individual packages."
You left the traditional travel agency, despite earning NT$6 million (US$190,000) a year, and set up an online shop of his own.
Business soon picked up as his projection of changing trends began to take shape. In less than a year and a half, his company broke even.
You attributes this smooth transition to Taiwan's mature IT environment, which features booming hardware development and high Internet penetration.
"Taiwan has created a niche for developing e-commerce, given its solid IT infrastructure in both hardware and software," he says. "I feel lucky to be able to employ advanced IT technologies to innovate my company's business flow, products, services and operational scale as a whole."
Once the company broke even, success followed naturally. ezTravel now offers more than 100,000 travel products that cover tickets for airlines, buses, cruises, trains and theme parks, as well as car rental and hotel bookings, in addition to various group and individual tour packages.
Online ordering accounts for more than 80 percent of the company's overall sales, compared with 68 percent in 2003 and 57 percent in 2002. On an average day, it can attract 200,000 browsers and take in 5,000 purchase orders.
"Tourism is the most suitable industry to develop over the Internet," You says. "And e-commerce is the engine that has enabled Taiwan's travel industry to take off. For travel agencies, e-commerce is not an option, but a replacement for sales channels."
You says his company hired a local software company to produce programs strictly in line with its requirements, rather than purchasing ready-made packages.
"We cannot assume that everyone is computer-savvy. Thus, we needed an operational interface that was extremely user-friendly," he says. "What's important isn't how advanced a system is, but how well it can satisfy customer needs."
At present, the company has an in-house IT team of some 30 technicians, responsible for maintaining and upgrading services.
Apart from being equipped with an Oracle database, a Sun server and a pure Java platform, ezTravel also employs a supply chain online booking system, which enables customers to place orders, obtain confirmation and make payment directly, with no need to wait for a reply. For the time being, the travel agency has linked up with major airlines around the world, as well as some 300 local hotels and 1,500 hotels abroad.
Why It Works
Tung Chih-chao, a frequent user of ezTravel services, says online ordering is convenient, provides more options and is transparently priced.
"In the past, I had to visit several [traditional] travel agencies to compare their packages and pricing. And that took a lot of time," he says. "But now, I can collect all this information and plan online quickly. And I find ezTravel's Web site easier to operate. Also, its prices are cheaper, probably because of its greater buying power through its extensive alliances with airline and hotel operators."
You says it used to take about two years to cultivate a sales person who could yield NT$800,000 (US$25,397) in sales per month. But in his company, it takes less than two months to train a sales person to yield NT$7 million (US$220,000). He expects the corresponding productivity per employee to be further raised to NT$8 million (US$253,968) this year, considering his company's overall improvement.
"The Internet is especially effective for the travel industry, not only for operations, but for customer service as well," he says. "It has enabled me to create a business model that boasts high sales, profit margins and, more importantly, high customer satisfaction."
ezTravel is the first travel Web site that has set up bricks and mortar outlets where people can place their orders, get their tickets and make payments. "These service outlets can play a complementary role in logistics support," You says. "They can help out with the processing and delivery of paperwork. And for those who are not comfortable about paying online, they can go there to swipe their credit cards on the spot."
These outlets can also serve to strengthen the company's branding and name recognition, particularly in its initial operations, as some people hold greater stock in neighborhood outlets.
Nevertheless, You says since his company has made its mark by providing e-tickets for domestic air travel, traditional outlets are losing business. So he does not plan to build any new outlets.
After obtaining a solid foothold in Taiwan, You plans to expand his business beyond Taiwan proper to Chinese-speaking communities around the globe.
"Our current business model has proven workable," he says. "The same model can empower us to target Chinese living in different places who share similar traveling habits. We want to develop the business into the largest Chinese-language tourism Web site in the world."
You's longtime engagement in this sector does not seem to diminish his passion a bit. "I'm excited and hopeful all the time. I have many plans, and I'm confident that they will work out sooner or later."
Old Meets New
For many modern companies, e-commerce is a natural extension of the overall business plan, so it is no wonder that many traditional businesses are following suit. One example is Yu Jen Jai, a pastry shop founded in 1877 during the Qing period.
The pastry shop is known for its traditional hand-made Taiwanese cakes and cookies. The century-old bakery, located in Lugang, Changhua County has been a family-run business for five generations, and now it is up to Huang Yi-bin and his wife Wang Wen-min to keep the cake shop afloat.
The 39-year-old Huang knows the importance of keeping up with the latest trends when it comes to marketing and product development. During the late 1990s, when the domestic economy was in decline, a number of bakers relocated to China. But Huang felt obligated to stay. "Our store has been rooted in Taiwan for more than 120 years," he says.
In 2000, after conducting demographic surveys of his customers, Huang launched a series of reforms. First of all, he found that a majority of his store's customers were over the age of 40. Also, many of them were tourists. Huang decided he needed to make some changes to attract younger consumers.
In addition to developing products that appeal to those below 40, Huang thought the best way to attract the kind of consumers that could revive his business was to market his products on the Internet.
In the mid-1990s, the Huangs thought of promoting e-commerce, but abandoned the idea, citing the low penetration of the Internet and the difficulty of coordinating deliveries. In 2000, however, they saw how quickly the Internet had caught on, and how that in turn had made setting up a delivery operation all the easier.
"Our products are made daily and are best a few days out of the oven. They are also soft and fragile. So, delivering them in good shape into the hands of customers is a major concern," Wang says. "Thanks to the rapid development of the home delivery sector, which offers around-the-clock service, we are now able to sell our products islandwide."
Online business accounts for 20 to 30 percent of Yu Jen Jai's overall revenue, and the Huangs are upbeat about its potential, given the growing acceptance of online shopping among Taiwanese consumers.
Huang plans to expand the Web site by adding information about the town's history, culture, changes over the past decades and places of interest, as well as local artists and their work. "We expect our Web site to be more than a shopping venue. I want to contribute something to my town's development," he says. "This will also help upgrade our brand image in a broader sense."
Meanwhile, Yu Jen Jai offers 24-hour telephone and fax services. The couple has opened three branches in Taichung, operating 24 hours a day. They are also considering setting up shops in well-known department stores and malls.
Huang says traditional stores still retain their advantages, adding that "seeing is believing" is still a more common approach than shopping on the Internet. "Online trading and legacy outlets have brought us more business opportunities and consolidated our development in Taiwan," he says. "I'm fortunate our business worked out this way."