Skift Analysis: Amazon’s Travel Strategy Comes Into Focus
Photo Credit: Amazon previously tried selling hotel stays via weekend getaways but is now trying anew with flights in India. Skift
Skift Take
The same rules that apply to run-of-the-mill travel sellers do not necessarily apply to Amazon. While cash back on flights in India may seem loss-generating and unsustainable, for Amazon it could be a winning strategy.
So why would Amazon choose to reenter the travel industry through a seemingly loss-generating proposition, hawking already low-margin airline tickets via a Cleartrip partnership in the domestic Indian market?
It sounds crazy, but Skift Research believes that airline tickets are a sensible entry point for a new Amazon foray into travel.
Flights is a fairly commoditized product with far fewer suppliers to tangle with — hundreds of airlines worldwide versus hundreds of thousands of hotels, for example. But the challenge of selling airfares is that it is a low-margin offering, typically the least profitable product for online travel agencies.
In its most recent fiscal year, MakeMyTrip, India’s largest booking site, earned an aggregate commission of 7.3 percent on the airline tickets it sold. That is before up-front cash discounts, a common travel marketing tactic in India.
Given that margin, there is already little room to maneuver, and this conundrum is compounded by the f
