Want to earn money without indulging in the processes of production or providing services? Are you better at marketing than at production or providing services?
Well, this business model is perfect for you. The aggregator business model has entered almost every field: taxi booking, food delivery, groceries, and travel. It is everywhere! The latest aggregator trends have given rise to the on-demand economy sector.
Do you ever wonder how these companies manage to accumulate different sellers and yet provide a uniform product/service? Companies like JustEat, Saucey, Drizly, Uber, FoodPanda, etc., all come under the aggregator business model. Let us have a look at “what is an aggregator business model?”
What is an Aggregator Business Model?
An aggregator company connects with different goods/service providers and sells its goods/services under its own brand. As the aggregator company builds a brand, the goods/services provided have to be in uniform quality and price. The aggregator companies do not hire the goods/service providers, the business is provided to them.
The aggregators provide marketing and customers to the goods/service providers and these providers give their goods/services to the aggregator sites. However, the aggregator sites sell these goods/services under their own brand hence maintaining the brand image. Therefore, this business model is a win-win situation for the aggregator company as well as the goods/service providers as the aggregator sites get the products and the providers get customers without having to spend money on marketing.
How Aggregator Business Model is Different from the Marketplace Business Model?
Both these business models are nuanced by their way of working. The marketplace business model works as a mediator between the customers and the goods/service providers whereas the aggregator sites acquire the ownership of the goods/services provided by the sellers on their platform. They work on a contract basis.
The aggregator business model is different from the marketplace business model as in the marketplace business model, as it just offers an online marketplace platform and earns a commission from the sellers whereas, in the aggregator business model, the company builds the brand. It is not just a mediator but a firm that is a brand providing the goods/services from smaller providers.
For example, Uber business model is an example of aggregator business model as it takes the services from the drivers and provides customers to them, whereas, Amazon business model is an example of marketplace business model as the company is just a mediator. The sellers on Amazon do not sell as Amazon sellers but by their own company name. They have their own brands and websites or brick-and-mortar stores. Amazon just helps them accelerate sales and reach a larger audience.
How does an Aggregator Business Model Work?
The aggregator firm reaches out to the goods/service providers and proposes a partnership based on several terms. These terms are usually regarding the commission charges and the service uniformity. Then the aggregator firm works upon the brand building and the marketing strategies.
The aggregator firm becomes the public front which means the customers do not have any information regarding the goods/service provider. Customers make purchases through the online aggregators and in this way, the providers get more customers without spending an arm and a leg for the marketing. With each order, the aggregator firm gets the pre-decided commission. Let us have some insight upon the revenue streams for the aggregator business model.
How do Aggregator Sites Make Money?
The revenue generation in an aggregator business model is similar to that of the marketplace business model. The partners of the company are the source of the revenue. The company generates revenue through commissions. There are two ways of generating revenue;
I.The company could fix a take-up rate, i.e. the providers fix the price and the aggregator firm quotes the final price to the customers after adding their take-up rate.
II.The company could decide the commission rate per purchase from the providers for bringing in the customers.
The commission rate revenue stream is followed by Uber. However, there is no fixed revenue stream for an aggregator business model. It could change in different scenarios as it is a flexible model.
Examples of Online Aggregators
To have a better understanding of how the aggregator business model works, let us have a look upon the online aggregators that have adopted this model.
1.Uber: Uber has been the most influential taxi booking app. Uber provides personal as well as shared taxis. The company hires drivers who bring their own taxis. Uber does not have employees, it hires these drivers as service providers and provides them a platform where they could get more customers. Uber works on a commission basis. It charges up to 20-25% of commission rate from the drivers and also earns revenue through promotional partnerships. There is also a price surge on holidays and during a certain period of the day.
The company’s successful business model has given rise to many Uber for X models; where X stands for other on demand services like food delivery, restaurant booking, grocery delivery, etc.
2.OYO: Oyo Rooms was founded as Oravel Stays in February 2012, earlier empowered by BistroStays, a vacation rental software by NCrypted. Later on, it was pivoted to OYO Rooms which works as a hotel aggregator following the aggregator business model.
OYO partners with hotels and brands them under its own name. OYO does not work on a commission basis rather it works on the take up rate. It works on a 70:30 basis. It buys off the rooms from the hotels and then resells them to the customers under its own name. The costs of the company might be greater in the beginning but eventually, the company would be in profit as this model is sustainable.
How to Start Your Own Aggregator Business?
The word “aggregate” means to collect. In that sense, the firm working on an aggregator business model works in the same fashion. It collects goods/services from different providers and sells it under its own name. The aggregator business model is easy to start with and a sustainable business model. However, it gives benefits after a long duration.
To build your own aggregator business, you must first decide upon a niche that requires an organized approach. After that, you must do enough research on the goods/service providers and how you can provide an online platform to your niche and attract customers. To know more about it, take a look at our blog “How much does it cost to build an app like Uber?”
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Did you find our blog “Fascinating Insights upon the Aggregator Business Model” thought-provoking? Do you have an idea to utilize this business model? Let us know in the comment section below.