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The successful brick-and-click business model
Ctrip.com International Ltd.

Ctrip.com International Ltd. (Abbr. Ctrip) is an international travel service company with headquarter in Shanghai. The business model of Ctrip is the successful combination of IT website service and the traditional travel products (so called brick-and-click business model). Ctrip is famous for its competitive prices and considerate service for business hotel reservation, airline tickets reservation and one-door-service travel packages. The company was established in 1999 with the first round of foreign investment from IDG. In 2002, Ctrip acquired one of the largest ticket reservation companies in China, and broke through the trading volume of RMB 100,000,000 in October of that year.

In December 2003, Ctrip issued ADR (American Depository Receipt) on Nasdaq and became the first Chinese enterprise in travel industry to get IPO in America. On November 26, 2004, the price climbed to $49.61, compared with the opening price one year ago as of $ 24.

There are several reasons why Ctrip achieved huge success both in China and America.

First of all, Ctrip chooses a profitable business model. The combination of traditional travel industry and advanced IT website turns out to be a fabulous selling point. The company takes full advantage of internet website platform, which enables it to provide comprehensive travel service and information in a quick and easy way. According to the statistic from China National Travel Bureau, the total expense on travel in China was around $ 47 billion. And because of this huge market and its potential to grow through website, Ctrip moves forward towards Nasdaq on a faster and more stable pace.

Secondly, the timing of getting IPO is right for Ctrip. In June 2003, China government successfully controlled SARS and the travel industry began to bounce back. The profits of Ctrip began to increase rapidly later. The market of Nasdaq also showed strong signal of upbeat. Meanwhile, the network users in China reached 68 million, among which the number of people who wanted to book hotels and airline tickets was increasing accordingly. The good and stable client basis helps Ctrip to accumulate high reputation and famous brand name among those website companies. For example, in 2004, the current registered members reach around 10 million, among which the percentage of people who purchased the products from Ctrip more than twice had exceeded 75%.

Thirdly, in contrary to the bubble in network history, Ctrip’s success relies largely on its stable profits in the past years. Ctrip announced making profits in 2001. According to its third quarter financial report in 2004, the gross profit increased 13% in the third quarter of 2004 compared with last year while the net profit increased 87% compared with the third quarter of last year.

The development and accomplishment of Ctrip have proved that the brick-and-click business model still has lots of room to go. Based on the high-tech platform, advanced management ideas and comprehensive service and products, Ctrip has already developed a brand new road for all Chinese enterprises with the similar business model.

(Author: Jenny X. Zhu is currently the board member of ACPA, and is working in a financial service company as financial advisor. She once worked as the commercial assistant to the Chief Operating Officer (originally Executive Vice President) in Shanghai)