The business world is thriving, and every adept entrepreneur would agree that innovation and disruption are the new flyovers to surpass the proliferated business competition. The answer is simple – ‘Either you lead the disruption, be a part of it, or dare to face it, you cannot just ignore it.’ With that said, the Aggregate Business Model is yet another colossus of disruption.
Be it the hotel industry, taxi industry, groceries, home-care, home delivery, or other on-demand services, the aggregator model has disrupted each sector for better (most of you would agree!). The model flourishes around the concept of organizing an unorganized business sector and label it under its own brand.
So, what is the Aggregator Business Model?
Aggregator Business Model is a successful subset of the Ecosystem Business Model. It works by establishing a network of buyers and sellers. An aggregator operator analyses a particular unorganised business sector, gathers vendors for the relevant business offering, and sign contracts with these vendors to sell their offering under its own brand.
The aggregator’s role here is to build a brand and organize a particular business sector, to help the vendors or service providers find better exposure and sell their products/services in an organised manner. The aggregator makes sure it provides a uniform quality, and a standard price for the offerings listed on its platform, though they are listed and offered by different partner providers.
The vendors listed on an aggregator platform are independent providers. They work as business partners of the aggregator operator. The aggregator is liable to market and sell their products/services better under its own brand, but doesn’t look after the production.
Uber, Ola, Airbnb, are popular aggregators that are shaping the strategy for new aggregator platforms.
Aggregator Revenue Model
So by now, you would be having a clear idea of the aggregator model, but do you know how this model generates revenue? So, the aggregator revenue model depends primarily on the type or business offerings it offers. There are generally two types of revenue generation model for aggregators.
Fixed Commission Model: Akin to the Uber revenue model, the aggregator operator charges a fixed commission for facilitating every transaction the partner provider generates through its platform. This commission can be defined as the fee an aggregator charges for every customer a partner provider makes via the aggregator platform.
Added Take-up Rate Model: Akin to the Airbnb revenue model, the partner providers (here) quote the minimum price for their offerings. And then the aggregators, after adding the take-up rate, display the final price to the buyers. This model has dynamic pricing that varies according to the season, business stage, demand, etc. And discounts also play an important role in reckoning the overall revenue generated by the aggregator.
How Does The Pricing Works?
Unlike the Marketplace Business Model (Amazon, Etsy), an aggregator is liable to provide a standard and uniform price/price-band (just as an individual brand). The aggregator and the partner provider mutually decide the standardized price or price-band (including aggregator’s commission) for the offerings. However, in the take-up rate model (Airbnb, Oyo), the aggregator has the liberty to set its own pricing depending on the take-up rate.
How is the Aggregator Business Model Different from a Marketplace App?
Both marketplace and aggregator models are subsets of the Ecosystem Business Model and operate by building a network of buyers and sellers. In both models, the aggregator or the marketplace operator doesn’t manage the production part of the business offerings but need to take care of the sales, marketing and customer experience. Moreover, an aggregator is expected to deliver uniform quality services across its platform, irrespective of the seller/provider.
An aggregator helps small businesses or individual service providers, who do not wish to invest in brand-building, list their products and services on its platform and sell it under the platform’s brand name. A successful example of the Aggregator model is Uber, Ola, etc.
On the other end, where marketplaces allow brands and businesses to list their product or service offerings under their brand name, an aggregator sells services or products under its standard brand name. And therefore, it manages the price/price-band of the services/products to offer uniformity and good value.
Other Key Attributes of Aggregator Business Model
Below are some characteristics that will help you understand the aggregator model better:
- Niche Industry: An aggregator works under a single industry where it builds a network of service providers from the same niche and connects them with the buyers. Example: Uber and Airbnb.
- Standardised Brand: Unlike marketplaces, where different brands list and sell over a single marketplace platform, the aggregator gathers vendors to sell under its own brand name. Therefore, an aggregator works comparatively harder over brand-building, which is the main parameter that decides its value.
- Partnership Model: The vendors listed on an aggregator platform are not referred to as the aggregator’s employees but as its business partners.
- Contract: A detailed and transparent contract is signed between the providers and the aggregator that lists the partnership and commission terms. The provider is liable for the production, and the aggregator focuses on drawing buyers to its platform, thus generating sales for the partner providers.
- Quality: Aggregator is liable to deliver a uniform quality of products/services to the buyers, invariable of the service provider. The aggregator must establish quality standards and share eligibility with its partner providers. The goal is to provide a uniform, stellar quality services akin to an individual brand.
How Aggregators Attract Buyers?
Generally, an aggregator business is established to target and resolve a common problem and attract buyers. For instance, taxi booking was far more confrontational and haggle-loaded before the rise of Uber. Uber solved this common problem by developing an aggregator platform and listing individual service providers under its own brand name. Along with creating an on-demand service platform, Uber meticulously organized this unorganized and populated business sector, thereby creating a successful flourishing business model. It attracted a large number of consumers to the Uber platform.
Catalysts to Attract Buyers on your Aggregator Platform
- Offer monetary incentives to initial consumers on your platform, which consequently will attract more providers to the platform.
- Offer first-time user discounts on your app to build an initial buyer base.
- Start-off as a service provider/seller yourself for attracting customers and building an initial buyer base.
How Aggregators Attract Sellers/ Service Providers?
An aggregator business starts with organizing an unorganized business sector that has a huge potential. An aggregator attracts providers by offering them a good customer base, better business reach and better business opportunities. For Instance: Airbnb was able to attract copious sellers by helping newcomers create their vacant living spaces into rental rooms for travellers. Airbnb listed them under its own brand and helped them establish a new source of income.
Catalysts to Attract Sellers on your Aggregator Platform
- Create a simplified and comprehensive seller program that could help new providers easily enrol on your aggregator platform.
- Keep a low initial commission in the initial phase to attract the sellers by offering higher profits.
- Attract newcomers and help them establish their business as a provider on your aggregator platform.
- Display the capabilities of your aggregator platform by showing success reports for your existing sellers.
- Use digital marketing and offline marketing channels to attract more providers.
Advantages of the Aggregator Business Model
Huge Growth Potential
An aggregator business is generally strategized keeping in mind a large customer base, and therefore it has enormous growth potential. If the model solves an urgent and crucial problem for a large consumer base, the platform is likely to proliferate quickly. For instance, the widely popular ‘Uber model’ was accepted readily by a majority of consumers. It solved their common issue of booking a taxi on-demand. Moreover, it brought the convenience of taxi booking right at their fingertips and made the process transparent and less confrontational. With a vast customer base and regular profit commissions, your aggregator business can offer you great fortunes.
It might be a challenge for aggregators to establish an initial buyer-seller network on their platform. But once they surpass a threshold regular traffic, the platform is likely to grow with its own network. Once your aggregator application generates consistent consumer footfalls, it would be easy for you to enrol new providers and grow in terms of brand value. With each new consumer and seller signing up on your platform, a new value unit adds to your aggregator business.
Lower Competition Once Established
Since the aggregator model is a subset of the Ecosystem Business Model, it leads by creating a network of sellers and buyers. And an aggregator has to invest a significant amount of efforts in brand building. The model does not promise overnight success and requires time. Once you have established a buyer-seller base and a handsome brand presence, it would not be easy for a startup to dethrone you.
Since you lead by building an extensive network of consumers, your platform generates a copious amount of data. You can earn by selling this high-quality data, use it for strategizing your digital marketing campaigns, and employ this data to use in collaboration with AI bots to redefine the user experience for your consumers. Most aggregators use this data to plan their branding strategy.
Challenges with Growing and Managing an Aggregator Application
Delivering Uniform Quality with Different Vendors
An aggregator app or business, akin to an individual brand, is expected to deliver a uniform quality of services to its buyers. It is irrespective of the seller or the provider. And it can be a tiresome journey uphill for an aggregator. He has to develop the right quality standards for his platform and train the partner providers to meet these standards. An aggregator must pay extra focus towards brand building and delivering a stellar user-experience to each of its customers.
Establishing Standardized Pricing
Unlike the marketplace model, an aggregator business sells products and services under its brand, and therefore an aggregator needs to establish a standardized price or price band for its offerings. But it is quite challenging for the aggregator to bring all the providers on the same page and conclude the pricing standard that appeals to all the partner providers.
Retaining Vendors on Your Platform
The providers that you enrol on your aggregator application work as your business partners and they have the freedom to list themselves on multiple aggregator platforms. It entails a sense of competition for the aggregator, and he has to find ways to retain the providers on your platform. You might also need to reduce your commission percentage or offer better value through your platform to retain your partner providers and boost their loyalty.
Aggregator Business Model is one of the most promising business strategies in the present times and will lead as a premier disruptive strategy soon. The model offers an extensive list of advantages, but it is only if you smartly circumnavigate the initial challenges that come your way.
An aggregator must direct most of his efforts towards brand building, value creation, and providing stellar user-experience. A major part of your user-experience depends upon the functionality and features of your aggregator application. Your application should not just offer delightful user-experience to the buyers, but also enable the providers to enrol their services seamlessly on the platform. And therefore, you require a well-experienced technology partner who could make your business development journey smooth.
As aforementioned, a reliable technology partner is a crucial member of your business establishment journey, and we as a technology partner would be happy to support you. Whether you wish to build an aggregator application or discuss on the features of your custom aggregator app, we would love to connect. You can also opt for our free consultation.