Is the  “Cheapest deal” always the “Best deal”?

The reason I ask that question is because as a supplier of anything, whether its holidays, biscuits or refridgerators, you will always be undercut by someone. 

We sometimes arrange other travel arrangements for past Nile Cruise clients and when we do so we always try and recommend reputable, financially sound and professional suppliers.

However no matter what your price you will always have a competitor somewhere prepared to sell whatever you sell for a cheaper price.  Often because that competitor is desperate to get business “at any cost”.  Usually because they cant’ attract business for their service, reputation or their knowledge.  So the only way they can obtain business is by taking business from others by offering to sell similar products at the cheapest price possible.

Now initailly this might sound great for the consumer.  Every consumer wants to pay the best price possible for whatever they are buying.  But is the “cheapest price” always the best deal?  I would argue that often it isnt.

Take the case of Goldtrail Holidays who went bust last Friday.  I would suggest that they were an example of the type of seller who cant’ compete on service or quality so competes purely on price.  Last week Goldtrail were offering last-minute 1 week holidays to Turkey for prices around £120-140 per person self catering and not much more for bed & breakfast.  They were also offering “All Inclusive” holidays around the mid £300 mark.

(By the way people were still asking: “Is that the best price you can offer?”.  Staggering!!).

Now think about that price of £140.  That price would have included a flight, transfers and accommodation.  All for £140.  Let me tell you what today’s (20th July) prices for each component is:

Flight London Gatwick to Dalaman on 23rd July: £281  -  (straight away we are WAY over Goldtrail’s total price)

Transfer Bodrum Airport to Marmaris with Holiday Taxis – £19 each return

7 nights Self Catering at the Banana Aparts, Marmaris (Bedbank.com) – £60 per person

Total price £360 per person and last week Goldtrail were selling the same type of thing for between £120 and £140 so it doesnt’ take a rocket scientist to see that something wasnt’ exactly right.  How can you sell holidays for £120-140 that seemingly are costing you way more than that to buy in?

However, that’s not my point.  My point is that you will always get customers who will buy that sort of deal because it’s cheap.  But is it cheap?  Or “unrealistic”.  There is a famous saying that “if it looks too good to be true then it probably is”.

Those people who bought holidays at those crazy prices last week are now without their holidays.

(I might add that Goldtrail were accepting bookings up to late afternoon Friday as they were going bust.  Taking money right to the very last minute from people who thought that they would be flying out on Monday.  An hour or so later Goldtrail declared that they were ceasing trading).

I feel really sorry for those people who have lost their holidays but I also feel sorry for the hoteliers in Turkey and Greece who will probably never get paid for the accommodation, food and drink that they will have already provided to past customers.  All we hear about them is when it’s reported on TV or in the press that they are pressurising clients to pay for their accommodation or be thrown out after the failure of the tour company.

In yesterday’s Guardian I read this in a report about the Goldtrail failure:

“Samantha XXX, who was in Marmaris to celebrate her daughter’s first birthday, said their hotel, the Secret Garden, demanded she and her partner pay an extra £110.  She said: “It’s ruined everything.  We had to struggle to find some spending money but we were so looking forward to celebrating our daughter’s first birthday in the sun.  We’ve had to cancel her birthday and we darent’ leave our hotel in case they change the locks”.

Staff at the Secret Garden said they were not prepared to accept any promises from ABTA or the CAA.  The receptionist said: “we’re a small family-run business and if we dont’ get paid we’ll go under too.  I’m sorry for the stress its’ causing the British customers but for them it’s a simple insurance claim when they get home”.

I feel really sorry for both parties.  Obviously for the client who feels very aggrieved having already paid Goldtrail but I also feel sympathy for the hotelier who probably has absolutely no chance of getting back anything like the amount of money that Goldtrail owes them.

So who’s to blame?  The client for booking with a company who’s prices always looked much, much cheaper than their rivals?  The trade associations ABTA and the CAA who must have been aware of the prices that Goldtrail were charging against those of other companies?  The hoteliers in Turkey and Greece who dealt with Goldtrail and obviously had to sign contracts that must have really squeezed their profit margins?

Who’s to say?

I think my only point here is to say that if you search around enough you will always find a supplier or retailer prepared to trade solely on cost.  Of course everyone wants a good deal.  But I think that we all need to really look carefully at these suppliers and retailers and ask why are they the cheapest?  

Are they financially sound?  What is their sales service like?  Are they knowledgable? Do they know what they are talking about?  What is their after-sales service like?  Do they have an after-sales service? Do they care about their product or are they just out for a quick buck?  If you buy from them will they still be in business next week, next month or next year?  If they solely compete on price…probably not.

One thing we can take from the Goldtrail failure is definitely: “If it looks too good to be true then it probably is”.