Agency Cost
I am not sure whether if there is any studies about the proportion of agency cost which goes into the prices of final products in any economies. I imagine it should be in the single digit range of percentage point in most industries. Airlines have for almost a decade reduced the standard commission for travel agents down from 10% to now a range of 7%, 5% or even 0%, depending on the geographical markets.
It appears, therefore, on the surface of margins that it is increasingly difficult for agents to make money. It is also readily assumed that the role of Internet in facilitating direct selling has much to do with reducing the survival space for agents. I am not so sure about that. In fact, I can hardly imagine any industry without the wheeling and dealing of middlemen. But what squeezes their margins is simply competition itself, rather than a conscious effort on either the seller or buyer part to cut out the middleman.
For as long as an agent operates to add value to a transaction, in most cases, by way of facilitating the transaction itself with some appreciated kinds of service, there is plenty of business to be had. The great majority of international airlines tickets are still issued by travel agents, despite the growth of Internet bookings for over a decade.
But the agency-value added has to be one of integrity, i.e., what the customer truly appreciates, instead of any fictitiously inflated amount. Gone were the days, at least in the travel industry, when agents could expect their earnings to be protected by the principals at the expense of customers. So nowadays, perhaps except for the high-value merchandise like properties, agency earnings are increasingly geared towards the form of management or service fees instead of any fixed percentage of the transaction value. And, like respect, they have to be earned rather than taken for granted.
It appears, therefore, on the surface of margins that it is increasingly difficult for agents to make money. It is also readily assumed that the role of Internet in facilitating direct selling has much to do with reducing the survival space for agents. I am not so sure about that. In fact, I can hardly imagine any industry without the wheeling and dealing of middlemen. But what squeezes their margins is simply competition itself, rather than a conscious effort on either the seller or buyer part to cut out the middleman.
For as long as an agent operates to add value to a transaction, in most cases, by way of facilitating the transaction itself with some appreciated kinds of service, there is plenty of business to be had. The great majority of international airlines tickets are still issued by travel agents, despite the growth of Internet bookings for over a decade.
But the agency-value added has to be one of integrity, i.e., what the customer truly appreciates, instead of any fictitiously inflated amount. Gone were the days, at least in the travel industry, when agents could expect their earnings to be protected by the principals at the expense of customers. So nowadays, perhaps except for the high-value merchandise like properties, agency earnings are increasingly geared towards the form of management or service fees instead of any fixed percentage of the transaction value. And, like respect, they have to be earned rather than taken for granted.
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