The inception of the Internet has completely changed the rules of engagement for businesses in virtually every sector. Many companies are conducting business online, rather than through traditional distribution channels. Certainly, a growing number of entrepreneurs are attracted to the ecommerce industry, as the sector has nearly doubled in the past five years.
That said, most ecommerce entrepreneurs struggle to compete because they don’t understand the rules of engagement. For instance, they try to compete with large brands such as Amazon on their own terms. But that doesn’t mean that standing out isn’t possible. Savvy entrepreneurs, such as Joao Ricardo, the founder of travel-deals site Hotel Urbano, have thrived by differentiating themselves.
Ricardo’s journey into ecommerce
Fourteen years ago, Ricardo -- who I recently had the chance to interview -- was a law school student from Brazil who spent six months living abroad in London as part of a student exchange program. As part of his experience there, he learned a lot about technology, which forced him to reconsider his career track.
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Ultimately, Ricardo dropped out of college to pursue a career in ecommerce with his brother. The two started in their garage without any upfront investments, but within a couple of years, they were generating between $20 million and $25 million in revenue. Their success was so astonishing that a number of venture capital firms began contacting them.
Sounds like a great rags-to-riches story, right? Unfortunately, things weren’t so great at this point. Their ecommerce company was operating on thin profit margins. The Ricardo brothers were having a very difficult time competing, as they needed to offer low prices to contend with brands such as eBay that were operating on much larger economies of scale.
The brothers could have abandoned their dreams of becoming successful with ecommerce, but they decided to try a different approach -- creating Hotel Urbano, which focused exclusively on the Brazilian market.
Differentiating Hotel Urbano from Expedia
Carving out a niche for themselves by specializing in the Brazilian market gave the two a strong edge over other online travel companies such as Expedia. To explain their success, Joao Ricardo borrowed a quote from Chinese business magnate Jack Ma when he compared Hotel Urbano to Expedia:
They may be a shark in the ocean, [but Hotel Urbano is] a crocodile in the Amazon River.
So how did Ricardo and his brother distinguish Hotel Urbano from Expedia and other online travel companies?
1. They recognized an underserved market.
The Brazilian hotel market has very little demand compared to hotels in other countries. In 2013, one out of every three hotel rooms was unoccupied at any given time. But instead of seeing low engagement, the Ricardo brothers saw opportunity. The underutilization of the country’s hotels demonstrated that the industry had plenty of room for growth, making it a great opportunity for Hotel Urbano.
2. They used data in their marketing strategy.
Ricardo attributes the company’s success to his solid ecommerce marketing strategy. Hotel Urbano leveraged data acquired from Facebook and other sources to get personal details about clients. The company then used this data to help match users with the right offers.
“I think a huge trend is not just the way people book hotels, which is very similar to any other online travel agency,” he stated in an interview. “Ever since we started Hotel Urbano four years ago, we have been able to monitor and track the behavior of every single potential traveler. So at Hotel Urbano we have quite a different approach than the traditional OTAs. If you already know you want to go to New York you can go on Booking.com and book a hotel. The same with Expedia and Hotels.com. At Hotel Urbano, 35 percent of our business comes from these kind of clients who already knows the place they want to go.”
3. They are willing to change the industry.
Ricardo believes he can modernize the Brazilian travel industry -- and he’s confident that by providing a more convenient platform for travelers seeking hotels, Hotel Urbano will encourage more foreigners to visit Brazil. Essentially, he’s propelling demand for the travel industry (which his company, conveniently, is there to serve).
Data shows that his stance isn’t self-aggrandizing, however, as his brand is clearly boosting business at many hotels. Industry data shows that Hotel Urbano is often responsible for up to 65 percent of the occupants staying at the country’s hotels.
4. They built a strong social-media presence.
A strong social-media presence is beneficial for brands in many sectors, but in the travel industry, it’s an absolute necessity. For this reason, it’s hardly an understatement to say that a big part of Hotel Urbano’s has occurred because it’s become the travel brand with the second most followers on Facebook, following Disney.
If you want to learn more about Ricardo’s success, check out our full conversation here: