INTERNET Overstock.com adds travel to product list

The company will sell some of the 500,000 airline seats that fly empty each day.
ASSOCIATED PRESS
With millions of bargain hunters scouring its virtual shelves in search of luggage, cameras and travel guides, Overstock.com's customers include more than a few travelers.
So the Salt Lake City-based company, which markets other company's excess inventory over the Internet, believes it makes sense to add travel itself to Overstock.com's long list of products.
Soon it will be offering discounted airfares, hotel rooms and rental cars, and hoping to snag a portion of the lucrative online travel market.
In making the move, Overstock.com joins several other Internet retailers and portals that sell travel in addition to consumer products. None yet poses a significant threat to industry leaders Expedia.com Inc., Orbitz LLC and Travelocity.com.
"It's hard, if not impossible, for nontravel brands to compete in travel," Forrester Research analyst Henry Harteveldt said.
"It doesn't mean you don't want to have partnerships where partnerships make sense," Harteveldt added, "For example, eBay and Priceline." Both companies sell products through auctions, Harteveldt said, making it a reasonable fit in which eBay adds to its revenue stream and Priceline benefits from having another sales channel.
Overstock.com chief executive Patrick Byrne says his venture makes similar sense given the company's core business model.
"Our whole business revolves around tracking down surplus and making it available to the consumer at substantial savings," Byrne said, adding that every day half a million airline seats fly empty and 1.5 million hotel rooms are unoccupied.
Last-minute deals
Overstock.com will specialize in last-minute deals marketed on behalf of third-parties, known as consolidators, which negotiate with suppliers for extremely cheap "distressed" inventory that they then mark up for a profit. The site also will have access to plane tickets, rooms and rental cars available through the Worldspan reservation system, the same technology used by Expedia, Orbitz and traditional travel agents.
"The look and feel will be a lot like other travel sites," Byrne said.
Cross-selling
The twist is that Overstock.com, which had 5.4 million unique visitors in August, will attempt to cross-sell travelers brand-name apparel, sporting goods and camping gear for their trips at sharply reduced prices. "The whole idea is to become the one-stop shop," Byrne said.
Although that simple strategy sounds good in theory, the reality is more complex.
The average online shopper -- a savvy bargain hunter by definition -- checks three sites before buying an airline ticket or hotel room, studies have shown. That shows how price sensitive they are and how difficult it is for any one travel supplier to garner loyalty.
That said, Harteveldt and other analysts believe that the online travel sector is entering a period in which it will be possible to build customer allegiance. Although competitive pricing will still be important, another driver will be the extra features and services sites offer.
So while Expedia, Orbitz and Travelocity seek the competitive edge through better technology, Overstock.com is betting that some consumers will be thankful to have a single site to browse for airline tickets as well as a new coat.
In addition to eBay's deal with Priceline.com, Amazon.com partners with Hotwire.com and both Yahoo! Inc. and AOL have contracts with Travelocity.
No illusions
As a late comer to the online travel segment, Byrne has no illusions about Overstock.com's becoming a dominant player anytime soon, if ever.
"I wish we had done this earlier," he conceded.
Still, the gambit could pay off if Overstock.com grabs just a small fraction of the market.
In 2002, $28.4 billion worth of travel was bought from the Internet, according to PhoCusWright. Of that amount, Expedia took in 36 percent, Travelocity 24 percent and Orbitz 13 percent. Hotels.com, Hotwire and Priceline collectively had 20 percent, while the remaining 7 percent went to "other" companies.
Overstock.com, which spent roughly $500,000 to develop its so-called Travel Store, won't be nearly as extensive as the industry's biggest players. However, Overstock.com's $2.95 fee per ticket will be 40 percent less than its competitors'.
For inventory that comes from the Worldspan system, the booking fee is the only revenue Overstock.com will receive. For travel sold on behalf of consolidators, Overstock.com will get a percentage of the profit, besides the transaction fees.