Farelogix rolls out SaaS version of airline merchandising platform
Farelogix has created a SaaS version of their enterprise-level merchandising software for airlines, claiming the “world’s first Merchandising as a Service” model.
FLX Merchandise-Xpress is targeted squarely at low-to-mid-tier airlines that cannot afford the steeper upfront and ongoing costs to the enterprise-level merchandising product for airlines.
“Removing barriers to entry in airline merchandising” is how the company sells it, as they hope that the Xpress product will be somewhat of a feeder to the enterprise-level version. By removing some of the bells-and-whistles, the product allows airlines to start benefiting from a more comprehensive technological approach to merchandising – rather than tackling it piecemeal via hardcoding or ignoring it altogether.
The product can be slotted into current workflows, is PCI-compliant, and brings ancillaries such as bags, premium seating, WiFi access, early boarding, and psuedo-personalization via frequent flier numbers.
The limitations are that the “MaaS” product doesn’t allow for deeper personalization, dynamic offers, CRM integration or any sort of fare classes or other fare families.
By bringing said airlines into the fold, Farelogix is banking on the additional revenue created by the product to reveal the value in merchandising – and thus not only prove the value but also create enough revenue to legitimize the next step upgrade into enterprise.
And the revenue here is significant. Tnooz reported last year that ancillary share of the business was set to be 6% of revenue in 2013. Here’s how Farelogix sees it.
Tnooz spoke with Farelogix CEO Jim Davidson about the new product’s goals, NDC and what airlines need to do to thrive.
This is a SaaS version of a pricey enterprise product. Why this product, why now?
All of our investment goes into providing tech tools that allow airlines to engages with their customers and create more loyalty and thus more revenue. One of our platforms is the merchandising platform. Every airline went through this stage. Low-cost carriers were born on this idea of merchandising, versus the full-service airlines which sells fares with full amenities.
There’s a gravitational pull to the middle, where airlines are saying that I can break apart my product and invest in different pieces and create value for consumers. They started out in a bad way – such as bag fees – but have moved into more specific amenities such as line jumping, upgraded food and more space, etc.
In 2009, we invested into an enterprise-level merchandising system – rules engine, pricing engine and a database that captures information and sells it around. We’ve been selling that as an enterprise platform for 3 years now, to folks like United and Air Canada, so we’ve been getting good traction. But you’ve got to be a decent sized airline to implement. It’s a significant annual fee, as an enterprise-level software.
Last year, more mid-tier airlines were interested in rolling this system out. They really didn’t have the expertise in merchandising. From that, we thought to create a service version of our merchandising platform. It has the basic features, such as seats, bags and other amenities.
What’s special about this product?
Xpress is “merchandise as a service,” and has about 60% of the functionality of enterprise that doesn’t require deep integration with the CRM. It’s basically personalization based on a FF number. If you want fare families and bundles, that’s more dynamic and requires the enterprise-level.
We’ve created the basics and made it financially feasible to get into the game.
What about the GDS and other players offering up their own merchandising capabilities? How will this all shake out?
We are focused on distribution technologies, mostly for airlines. Distribution is much more modern than it was 10-12 years ago.
Distribution is about giving airlines the ability to create customer engagement and sell their brand – and lately it’s about merchandising. We believe its more than just a fare and a schedule, but allowing the consumer to have more decision-making abilities with more options and more choices. We believe that turns into happy customers and more revenue – that’s the DNA of distribution.
The jury is still out on the GDS-side of the business in merchandising out to agents. Scale is the issue.
An airline may figure out how to do seats with Amadeus, and then go look at Sabre and its a whole different process. As a technologist, if you can’t somehow re-use across your networks, the costs go up dramatically. And not just the initial costs, but what if you want to change things?
The NDC process manages that, so there’s one interface if they want content from an airline. There are no surprises, and that keeps the cost down and generally allows you to scale.
I certainly applaud the investment in the merchandising, the problem is that everyone is doing it differently and the airlines are scratching their heads. If you’re first in line, this works, but if you’re tenth in line, you won’t see if for a long time. On the PSS side, that would apply to all the airlines that are hosted in that particular system so the output would be more consistent and scalable for the airlines that are hosted.
The challenge with the GDS is the traditional thinking in the non-traditional application. I have to give Travelport credit here, because we see this as two things. The first thing is to connect to it, like [Travelport’s] Universal API, but more importantly is to deliver it to the end user. Whether its a travel agent’s desktop or through a corporate booking tool. They’ve invested in tools on that end that will bring the rich content to them.
The GDS were originally the efficient networks to travel agents, and then became the creators of the pricing and the fares, and now you see them going back to the role as an efficient conduit to the network of travel agencies. As a matter of fact, that’s even more valuable if they can efficiently connect to the information at scale and take that to 90,000 travel agencies – there’s huge value there, and revenue can grow. No one will blink an eye at the distribution fees paid to GDS. When you have the majority of market share, you defend that against change and not look at where you can increase value.
How does this all fit into the whole NDC debate?
I think NDC is a big deal. Yet, it’s yesterday’s news. What happened last year was that there was a lot of consternation and conflict over something that ended up being good for everybody. Yes, there’s a standard and having a standard is good.
Now the disagreement is who’s standard – that’s an evolutionary process and I don’t really care.
The idea is that if an airline wants to be the source for the content, and have people come to them, there’s a standard way to do that. And not all airlines will do that, but the reason to do that is an airline wants to have a varied product that may not be extractable. So you come to the airline and you get it. That methodology is very sound.
If you talk to any airline, and ask them if they would do what they do currently if they were starting over again today, they would never have different standards. It would be a consistent product via APIs and distribution. IATA defined the end-state, so if you were going to define an end-state, this would be it. This is the way to get it to the channels, as it’s harder to have others manufacture content to it.
The conversations are well beyond that, whether you call it NDC1 or NDC2, the standard will evolve just like the ticketing standard, the baggage standard and other things. We probably went through a year of fighting each other, spending money that didn’t need to be spent.
This is a four-way win for airlines, GDS, agents, consumers.
The only people who are against NDC are the airlines that are implementing it so they see it as a competitive advantage, and at least one person at Amadeus.
The more airlines that do this, the better the airlines become and the happier the customers become. It’s all tied in together. NDC becomes the delivery channel for this enriched content.
So you’re bullish on ancillaries as a stable, consistent revenue stream for airlines?
Ancillary revenues are increasing year-over-year, while passenger traffic is mostly flat, people are buying “true ancillaries,” or things beyond bag fees. Customers like having choices, and that’s the key realization.
The choice concept seems to resonate quite well with consumers. To me, this is the first time in a long time that you have the pie of customer satisfaction and revenue actually growing – a lot could be attributed to breaking the airline product apart and selling in chunks.
Nick Vivion is a writer and strategist. He was a Tnooz reporter and global events lead between August 2012 and July 2015. He was the launch co-founder of Booty's, a global street food restaurant in New Orleans and was recently AVP Operations, North America, at Zomato.