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Derivative Solutions
Kirby's Korner · July 14, 2000

Life is filled with examples of things that are done because they're possible, not because they're a good idea.

Things like shag carpets, white sofas, William Shatner singing.

I've come across the latest possible-but-questionable online travel venture, IDerive.

Don't bother clicking to the Web site yet. As this column is being posted, nothing but background information on the venture is available. During the summer, IDerive promises to start offering hotel reservations and automobile sales; during the fall, it will sell airline tickets and consumer electronics.

The name of the New York-based company appears to come from the financial term "derivative," which is French for "don't invest in these things unless you know precisely what you're doing." Buyers who use the site should take heed.

The site will work like this: a seller will post an item, specifying a sales price, which IDerive promises will be exceptionally low. However, if the seller is able to sell the item elsewhere at a better price, it retains the right to withdraw the item from sale up to a date it specifies, even if it has a firm commitment from a buyer.

A buyer, meanwhile, can agree to purchase the item and fork over a credit card number. In return for the chance that the seller may withdraw the item, the buyer will receive a check for a specified amount. (Examples on the Web site put the payment at around 10 percent of the sales price.) If the seller hasn't withdrawn the item by the specified date, the buyer gets it; if the seller has withdrawn the item, the buyer gets a refund. In either case, the buyer retains the promised check.

(I'm not sure who keeps the "float" on the amount involved in the check rebate, essentially the money available for use between when the credit card is charged and when the check is cashed. Maybe this is how IDerive makes its money.)

This scheme might work for expensive items that are, to use a legal concept, fungible -- that is, essentially interchangeable. I could see myself using it to buy an expensive stereo system, for example, if I got a good deal from the site in the first place and a nice rebate. I could always pick up a replacement at my local Best Buy if the deal fell through.

But for time-sensitive items like hotel rooms? Airline tickets? Please. Keep in mind these aren't last-minute deals, encouraging travel when you might not otherwise go. These are one-sided commitments for travel that is days or weeks down the road, practically guaranteeing you'll make other plans based on your expected hotel room or airplane ticket. What do you do when the room or ticket doesn't materialize?

Say what you will about Priceline.com or other new sales avenues on the Internet. When they work as they should, the buyer at least has a firm commitment within a matter of minutes or hours. The purpose of IDerive is to eliminate that commitment.

(And let's ignore, for the moment, how IDerive is going to explain its sales model in simple terms in a medium that invites skimming. I'm a lawyer and a professional writer. I still picture hordes of disgruntled "buyers.")

I could see the IDerive model working for packaged vacations. Consumers might be willing to make a choice such as this: "If I can get a week in Sierra Nevada for $500, including air, I'll take it; otherwise, I'll use the $50 rebate to cool my apartment that week."

But when travelers are planning individual parts of their journey, a derivative of uncertainty is not what they're looking for.

David Kirby is the editor of Interactive Travel Report. His column appears on Friday. You can reach him at david@ticked.com.