E-commerce as a Growth Strategy: Yunnan Lucky Air Case Study

Introduction

Lucky Air is an airline based in Yunnan, China. It is small airline which is looking to implement growth strategies. The airline industry in China is heavily regulated; therefore, Lucky Air has to find creative, yet effective ways to gain some sort of competitive advantage. The airline industry in China is growing and there are several small airlines entering the market posing competition for Lucky Air. E-commerce is one of the strategies that the company has considered to be a growth strategy.

Lucky Air Challenges

The airline industry was much regulated which often stifles innovation and planning and makes it harder to find effective ways to reduce the costs of the company; however, the regulations did loosen slightly which invited more competitors which make the environment a bit tougher for Lucky Air and it increased the competitiveness for customers. Lucky Air also has to pay higher fuel prices in Yunnan, and they are forced to pay fuel costs in advance, this may leave the company short of working capital during the financial year or it may make it harder to pay other creditors, so the airline may be forced to run a line of credit with expensive overdrafts which may increase costs. Lucky Air pays 2-15% commission to ticket agents and 80% of their ticket sales go through agents; therefore, it is expensive for Lucky Air to acquire customers. Airlines are not permitted to lease aircraft directly from manufacturers, so they have to pay middlemen a premium in order to acquire aircraft, however this is a standardized issue for all the airlines leasing aircraft.

Cost Centered Business Strategy

The regulations imposed on the airline industry are beyond the control of Lucky Air so the company just has to work within its boundaries. Lucky Air has to improve its online presence and shift its ticket buyers to their online selling platform. Lucky Air can do this by having promotions or discounts on their tickets, this will save Lucky Air commission fees and it will also increase customer engagement. Consumers are really attracted by cheaper flights; however, the quality of the experience also matters (McMahan, 2019). The online platform should have a blog or comment section that allows customers to share the flight experiences. This builds a sense of community amongst customers, promotes customer engagement, and this will, in turn, increase customer retention. Promoting an e-commerce strategy is a lot tougher than most think and it comprises of several things. It needs a shift in business model which is never easy to attain. Shifting business online isn’t as easy as asking customers to visit your website, the IT infrastructure has to be able to sustain traffic, the payment gateways have to functional all the time, and the marketing departing has to work hard to let customers know about the online platform, it isn’t something that can be done overnight.

Differentiation Tactic

The differentiation tactic that Lucky Air should offer is convenience. Convenience is an embodiment of several things, which is what makes it vital. As Lucky Air promotes its online platform, it needs to add more value to its offering. Lucky Air need to have an ‘e-concierge’ service that can book accommodation for customers and even go as far making restaurant reservations for customers. The restaurant reservation feature will make a lot of people happy because less people are accepting in flight food and short flights usually don’t have such a service. Low air pressure in airplanes affects the way we taste food and airlines often have poor food storage methods which has led to people turning away food on flights. All this supports the cost centered strategy and also increases engagement and convenience for customers. Convenience is essential to customers and it enhances the entire customer experience and it can be a deciding factor whether a customer is loyal to a brand or not.

Conclusion

This strategy will help reduce the cost for Lucky Air as they lower commission fees and as the airline achieves economies of scale as the gain more customers from the differentiation tactic. It is simple to promise customers something different and launch it; however, consistency matters as well, it isn’t good enough to just offer new experiences, companies need to stay consistent and offer high quality service all the time.