This case illustrates the fortunes

This case illustrates the fortunes of lastminute.com, a startup which used the Internet to introduce an innovative service. The case describes the service and its growth. Success factors in achieving growth and threats to growth are described.
Lastminute.com was a European innovation, since at launch, no equivalent site existed in the US. Its business model is based on commission from selling ‘distressed inventories’ which will have no value if they are not sold immediately. This includes hotel rooms, airline and theatre tickets. It has 1000 suppliers including British Airways, Bass Hotels and Virgin. In February 2000 it claimed over 800,000 registered users, growing at about 30 per cent per month and about 5 million page impressions each month. By 30th September 2001, there were over 4 million registered subscribers, with a total transaction value on the site of £124 million. Of these subscribers, there have only been 536,000 customers since inception. However, Lastminute.com is working hard at increasing the conversion rate of new subscribers to customers. This increased from 5.5% to 13.9% between 2000 and 2001. The preferences of users for the type of service required are held on database and then matched against the offers of suppliers to the site. The choice of suppliers is one of the key differences between an intermediary site such as this and one hosted by a single supplier or travel agency. Enhancements in 2001, to help increase conversion included:
• 9 times faster image download time
• Completely redesigned home page and navigation
• Smarter search capability including a mapping search tool to find restaurants, hotels and entertainment options in your local area
• 200% product supply increase with over 100,000 offers available at any given time
• New “My Space” category with personalized offers and email alerts
• New “Staying In” category with food and in-home entertainment delivery options

The company was founded by Brent Hoberman, 31, and Martha Lane-Fox, 27, both Oxford graduates. Hoberman suggested the idea in 1996 while working at Spectrum, a company specializing in new media strategies. At the time, Lane-Fox said that the idea was too complex and would need thousands of suppliers to be effective. Hoberman and Lane-Fox raised £600,000 to get the company going and achieved many high profile backers such as France Telecom, Deutsche Telecom, Sony Music Entertainment, the British Airports Authority and Intel and venture capital company Arts Alliance Advisers. One problem was the domain name which had been registered by a Sardinian businessman. Both founders were adamant that their site had to be called this and the Sardinian was happy to sell it for several hundred thousand pounds. This can be compared to the owner of Jungle.com, a Californian who sold it for £235,000 to the site’s founder.
The company hoped to use the money from flotation to increase access to the service by offering access to its service by WAP mobile and has signed deals with BT Cellnet and Orange to help achieve this. Other site improvements will also be made – Lane-Fox has been quoted as saying ‘We’ve spent a lot of money improving the back-end, but we want to do more with the front-end’. The improvements to the ‘back-end’ have been necessary to avoid problems with customer service. Writing in Computer Weekly, 2 March 2000, Anne Hyland reported that several customers had money deducted from their account without purchasing any products from the site. For example, Charlotte Brett, a London customer has had £50 deducted from her account on three occasions in January and February 2000. The money was recredited to her account, but Ms Brett was quoted as saying ‘I am a very angry customer; in my experience they have failed on the three key areas of technology, customer service and Internet capability’. Brent Hoberman said the problems were caused by its third-party credit-authority firm.
What of the future threats and opportunities for the company? In a Guardian interview with Jamie Doward on 27 February 2000 Lane-Fox was asked about the threat of a major ticket site setting up its own site. Lane Fox dismissed this possibility: ‘Companies can’t do it on their own web site because they fear cannibalization’, and she says of first-mover advantage: ‘you still have to set the company up and we’re starting to get critical mass in Europe’. Lastminute.com have opened offices in London, Paris, Munich and Stockholm to help achieve this. Towards the end of 2001, nine European airlines including Air France, BA, KLM and Lufthansa.responded to Lastminute.com with the launch of Opodo (which stands for OPportunities tO DO, (www.opodo.com). By April 2002, Opodo had become the third most important travel site in the UK, but it appears that the Lastminute.com brand is now well established and it is unlikely to be displaced.