How Airlines Can Coax More Small International Traders into Their Customer Base
With increase in global connectivity and the importance of international trade, a new kind of trade pattern is emerging. Small traders, towing no more than a couple of suitcases each, cross international borders in search of merchandise they can potentially sell back home. They purchase the merchandise in (rather small) bulk in foreign markets, throw them into their suitcases. Once back at home, they throw open their suitcases and sell the contents at a margin. The profits on the foreign merchandise finance their next trips, which hopefully would involve more scale and more valuable products over time.
The emergence of these small international traders, not depending on the usual merchandise trade based on container ships and massive packaging, has in particular impacted regions of the world that lie outside traditional focuses for international trading firms. The contents of these traders' suitcases often end up in remote villages disconnected from anything beyond the most primitive of infrastructure. Without small traders with their suitcases, villagers may have to travel hours more to the markets, seeking out pricier alternatives that have much less consistent supplies.
It is no doubt that these small traders with suitcases have emerged against heavy odds that increase their costs of operation. Visa fees for international travel is not only expensive but difficult to get for some of the most underdeveloped countries in the world. Once at the destination, they may be constantly harassed by local authorities for their (more often than not) "working" on a tourist visa. Their already slim margins are further shaven off by a slew of bribes, customs taxes, and unscrupulous suppliers who charge high prices for suboptimal products.
But if there is one obstacle that is more pivotal than any other, it would have to be the sheer expenses international small traders have to incur on transport. Small markets with little competition among different airlines means that routes between their home countries and sourcing destinations are served by few pricy flights. And for small traders pulling several suitcases stuffed with merchandise, there may be extra fees they may incur for overweight luggage. Given the low value of products in the suitcases themselves, sometimes the cost calculations of paying those luggage fees do not even make sense.
The enormous expenses of international flights act as a dampener for emergence of more international traders. Only those with sufficient incomes to buy plane tickets (itself not common in places like rural Africa), willing to endure multiple long journeys across the world every year, and can stomach the massive risk of sourced products not selling in their home countries, can afford to enter and stay in the business of small-time international trading. The high costs of transport ensure that the group of traders remain small, and prices of their sourced goods remain expensive for the intended customers.
Yet, given the continued geographical restrictions of large-scale international trade, there is plenty more room for the number of international traders to grow. Unprofitable ventures in small villages for large trading firms due to lack of scale would be make possible by more small traders importing products in suitcases and profitably selling them on the streets. If airlines are able to lower the costs of international travel for sourcing products at small scale, they should be able to see a corresponding increase in demand as more small traders take advantage to enter the market.
Of course, lower prices on the routes frequented by small-time traders would not be easy for the airlines. After all, in absolute terms, theses routes are not high-capacity ones, much less used and lucrative than transcontinental North America - Europe - Asia flights. Suddenly increasing capacity without sure signs of increased demand represents large risks that airlines do not want to take. The solution to the dilemma may be to create a new class of intercontinental budget flights with minimal services but large capacity for transporting extra luggage.
In essence, these flights will resemble more of a freight plane with few passenger seats. Customers will be charged mainly for the amount of luggage they bring into the flight, while the seating would make up a minority of the total price. In exchange for the relatively cheaper seating (and indeed, the smaller space for passengers), in-flight services will be reduced to minimal (same as low-cost carriers) to as to reduce operating costs. The reduction of in-flight services is unlikely to matter too much for small traders who are used to the most basic of living conditions.
The emergence of these small international traders, not depending on the usual merchandise trade based on container ships and massive packaging, has in particular impacted regions of the world that lie outside traditional focuses for international trading firms. The contents of these traders' suitcases often end up in remote villages disconnected from anything beyond the most primitive of infrastructure. Without small traders with their suitcases, villagers may have to travel hours more to the markets, seeking out pricier alternatives that have much less consistent supplies.
It is no doubt that these small traders with suitcases have emerged against heavy odds that increase their costs of operation. Visa fees for international travel is not only expensive but difficult to get for some of the most underdeveloped countries in the world. Once at the destination, they may be constantly harassed by local authorities for their (more often than not) "working" on a tourist visa. Their already slim margins are further shaven off by a slew of bribes, customs taxes, and unscrupulous suppliers who charge high prices for suboptimal products.
But if there is one obstacle that is more pivotal than any other, it would have to be the sheer expenses international small traders have to incur on transport. Small markets with little competition among different airlines means that routes between their home countries and sourcing destinations are served by few pricy flights. And for small traders pulling several suitcases stuffed with merchandise, there may be extra fees they may incur for overweight luggage. Given the low value of products in the suitcases themselves, sometimes the cost calculations of paying those luggage fees do not even make sense.
The enormous expenses of international flights act as a dampener for emergence of more international traders. Only those with sufficient incomes to buy plane tickets (itself not common in places like rural Africa), willing to endure multiple long journeys across the world every year, and can stomach the massive risk of sourced products not selling in their home countries, can afford to enter and stay in the business of small-time international trading. The high costs of transport ensure that the group of traders remain small, and prices of their sourced goods remain expensive for the intended customers.
Yet, given the continued geographical restrictions of large-scale international trade, there is plenty more room for the number of international traders to grow. Unprofitable ventures in small villages for large trading firms due to lack of scale would be make possible by more small traders importing products in suitcases and profitably selling them on the streets. If airlines are able to lower the costs of international travel for sourcing products at small scale, they should be able to see a corresponding increase in demand as more small traders take advantage to enter the market.
Of course, lower prices on the routes frequented by small-time traders would not be easy for the airlines. After all, in absolute terms, theses routes are not high-capacity ones, much less used and lucrative than transcontinental North America - Europe - Asia flights. Suddenly increasing capacity without sure signs of increased demand represents large risks that airlines do not want to take. The solution to the dilemma may be to create a new class of intercontinental budget flights with minimal services but large capacity for transporting extra luggage.
In essence, these flights will resemble more of a freight plane with few passenger seats. Customers will be charged mainly for the amount of luggage they bring into the flight, while the seating would make up a minority of the total price. In exchange for the relatively cheaper seating (and indeed, the smaller space for passengers), in-flight services will be reduced to minimal (same as low-cost carriers) to as to reduce operating costs. The reduction of in-flight services is unlikely to matter too much for small traders who are used to the most basic of living conditions.
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