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Chapter 2 E-commerce fundamentals 91

6 Profile
This is the ability of the company to generate favourable publicity and to create awareness
within its target market.

These six criteria can be compared with the other elements of business and revenue model
which we discussed earlier in this chapter.

Case Study 2.2 lastminute.com – an international dot-com survivor

This case illustrates the fortunes of lastminute.com, a Although the turnover and gross profit of last-
start-up which used the Internet to introduce an innovative minute.com did improve until the point of takeover, it did
service. The case describes the service and its growth. not achieve profitability in all markets (it did in the UK for
Success factors in achieving growth and threats to growth its travel business). It did make great steps in reducing
throughout the history of the company are described. its customer acquisition costs which were £7.30 prior to
lastminute.com was a European innovation, since at takeover (£5.69 in the UK) in its final financial report as
launch, no equivalent site existed in the USA. Its busi- an independent company. Note ‘customer acquisition
ness model is based on commission from selling costs’ are calculated in the financial report as all external
‘distressed inventories’ which will have no value if they media spend divided by the number of unique
are not sold immediately. This includes hotel rooms, customers. This is effectively media spend per customer,
airline and theatre tickets. In the first half of 2005, the not customer acquisition costs. Since this figure includes
breakdown of product sales (total transaction value on repeat customers it would be expected that this number
which lastminute gain commission) was as follows: would fall naturally in more mature markets.
In 2005, lastminute had relationships with 13,600
Hotels £96 million
suppliers including Lufthansa, Air France, Alitalia, bmi
Holidays £163 million
british midland, United Airlines, Virgin Atlantic Airways,
Flights £158 million
Starwood Hotels and Resorts Worldwide, The Savoy
Car hire £71 million
Group, Sol Melia, Six Continents, JMC, Disneyland Paris,
Non-travel, e.g. theatre tickets £24 million
Kempinski Hotels, English National Ballet, The Royal Albert
Total £512 million
Hall, The Way Ahead Box Office and Conran Restaurants.
lastminute explain TTV as follows: Total transaction In terms of its brand, lastminute says:
value (‘TTV’) does not represent statutory turnover.
lastminute.com seeks to differentiate itself by gener-
Where lastminute.com acts as agent or cash collector,
ating some of the lowest prices for many travel and
TTV represents the price at which products or services entertainment deals, and by packaging and delivering
products and services, such as restaurant reservations,
have been sold across the Group’s various platforms. In
other cases, for example the reservation of restaurant
entertainment tickets and gifts, in convenient, novel and
tables, a flat fee is earned, irrespective of the value of
distinctive ways. It also aims to inspire its customers to
products or services provided. In such cases TTV repre-
try something different. Since 1998 the company
sents the flat fee commission earned. Where last-
believes that it has developed a distinctive brand, which
minute.com acts as principal, TTV represents the price
communicates spontaneity and a sense of adventure,
at which goods or services are sold across the Group’s
attracting a loyal community of registered subscribers.
various platforms.
Turnover for H1 2005 was £222 million with gross At 30 September 2001, there were over 4 million regis-
profit of £83 million. For the Group as a whole, the tered subscribers, with a total transaction value on the
number of active customers increased in the half year to site of £124 million. Of these subscribers, there have
1.69 million compared with 0.99 million in the first half of only been 536,000 customers since inception. However,
2004 (71 per cent growth). There were over 10 million lastminute.com is working hard at increasing the
e-mail subscribers and 7 million cumulative customers, conversion rate of new subscribers to customers. This
although not all were active customers. Active customers increased from 5.5% to 13.9% between 2000 and 2001.
purchased 3.6 million items in the half-year, an increase The preferences of users for the type of service required
of 49 per cent over the previous year. This gives an are held on a database and then matched against the
average order value of £142 (512 divided by 3.6). offers of suppliers to the site. The choice of suppliers is