Be it taxis, hotels, groceries, food, or travel, the aggregator business model has entered into and has disrupted every industry.
This model (also called On-Demand Delivery model or Uber for X model) involves organising an unorganised and populated sector like hotels and taxis and providing the service under one brand.
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Aggregator Business Model
Aggregator Business Model is a network model where the aggregator firm collects the information about a particular offering providers, sign contracts with such providers, and sell their services under its own brand.
Since the aggregator is a brand, it provides the offering which has uniform quality and price, even though it is offered by different partner providers.
The offering providers never become aggregator’s employees and continue to be the owners of the product or service provided. Aggregator just helps them in marketing in a unique win-win manner.
Characteristics of Aggregators
Partnership Model
The offering providers are not the employees of the aggregator. They act as partners to the business. Partners always have the freedom to accept or to reject the offer provided by the aggregator (these terms are clarified in the contract).
Customers
The aggregator business model runs on a two-fold customer strategy where the business has to cater to not only its offering’s consumers but also has to treat its partners as another set of customers. This is because partners also have a choice to choose the competitors over the company.
Hence, the brand is built in such a way so as to attract both of the parties to use this platform.
Industry
All the offering providers belong to the same industry.
The Aggregator collects the offering providers of a single industry and organises them under its own brand. Like Airbnb for Hotels, Uber for taxis, Oyo for hotel rooms, etc
Brand
Aggregators spend most of their revenue in building up a brand. This brand has certain notable features like – quality, price band, on-demand delivery, etc. All the goods/services are provided under a single brand but by different providers.
Branding is done at every customer touchpoint to have a recall value.
Quality
The aggregator strives to provide a standardised quality to every user. It usually has quality assurance teams that make sure quality is maintained.
Contract
A contract is signed between the aggregator and the goods/service provider with all the partnership and commission terms. The terms provide a win-win situation for both the parties where the partners focus on providing quality product/service to the customers and the aggregator focus on marketing and creating more leads for the partners.
Terms usually include
- Branding terms,
- The standardised quality required by the aggregator,
- Commission terms (Uber Business model) or take-up rate terms (Oyo Business model)
- Other terms depending on the industry and the aggregator involved
Aggregator Revenue Model
The offerings providers play a vital role in the aggregators’ revenue model –
- Aggregators provide them with the customers and in return charge some commission. (Uber Business Model), or
- The partners quote the minimum price at which they’ll operate and the aggregators, after adding up the take-up rate, quote the final price to the consumer. (Oyo Business Model)
This method isn’t always in operation. The revenue generation is different for different business stage, cycle, and season. There is a big role of discounts and dynamic pricing in determining the total revenue generation by aggregators.
Pricing
Aggregators are different from a marketplace (like Amazon, Alibaba, Flipkart, etc.). They have the liberty to provide offerings for standardised prices or price bands, and some can even set their own price. For example, Uber has a definite price per kilometre and Oyo sets its own price using the take-up rate pricing strategy.
Competition
Competition in the aggregator business model is tough to handle as the same partners might work for competitors as well.
How Does Aggregator Business Model Work?
Theoretical explanation of this model is simple:
- Aggregator visits the offering providers.
- Aggregator promises them more customers and proposes a partnership plan.
- Service providers are now the partners.
- Aggregator builds up his own brand and tries to attract customers through many marketing strategies.
- Customers make purchases through the aggregator.
- Partners get the customers as promised.
- Aggregator gets the commission.
Go On, Tell Us What You Think!
Did we miss something? Come on! Tell us what you think of this article on Aggregator model in the comments section.
A startup consultant, dreamer, traveller, and philomath. Aashish has worked with over a 50 startups and successfully helped them ideate, raise money, and succeed. When not working, he can be found hiking, camping, and stargazing.
it’s a great article. But can you share a basic excel sheet for the aggregator revenue model, that will be really more helpful
I find your posts very useful to youngsters who want to start their own startups. Excellent, in fact. A very good service. All the best.
The aggregator business model simplified! Thanks for sharing this great piece.
I mean this earnestly, i.e., I am not trolling you. This was an excellent article in that it delivered on its promise. I learn something new. Thank you. Do not take this the wrong way, please. You need an editor to improve your copy. I am an editor an would be willing to help/work with you in that capacity if you are amenable to the idea.
Could you tell me if the service provider doesn’t have a standard price, what could be revenue model apart from third part ads?
Is it neccessary for a team member of an aggregator to invest in some way?
good write-up …..
I really like the business model you´have explained above. I´d suggest to enforce the brand creating a RFID tag for each product containing information about the partner, aggregator and for future queries from consumers. For services, create a QRcode in the webpage.
A nice work on aggregator model… you just solved a problem
present im working on a starter corporation and change this kind of model, but surely in technical, it its not easy as you think. lot of problem are made.
but, when you finish dealing with your problem, we are growing 100%
rizal,
present im working on a starter corporation and change this kind of model, but surely in technical, it its not easy as you think. lot of problem are made.
but, when you finish dealing with your problem, we are growing 100%
rizal, [email protected]
Your writings are very good and informative.
Can you describe the business model of Careongo? Indian pharmacy aggregator?
Need to CHK if an aggregator in food biz needs any licence from FSSAI?
No the aggregator need not have a FSSAI permit however the partnering restaurants/hotels/eateries must have all the valid license n permits.
is it possible to start an aggregator business, without actually utilizing an Ecommerce function ? if yes what would the revenue stream options be other then ads?
How does a financial service aggregator like Square Point-of-Sale deal with the card schemes such as Visa and MasterCard as opposed to acquirers that are officially registered with them and are charged with interchange fees?
I am working on a startup concept using this model. Researching on the most efficient bank/financial-entity method to support transient transaction.
Do you have a suggestion?
Hi Truc
We provide startup consultancy as well. Email us at [email protected] for more details.
I am Studying OYO model in detail , can you tell me about their percentage commission and other terms and conditions?
Hi,
You can learn more about Oyo rooms business model here.
http://www.feedough.com/business-model-oyo-rooms/
How does aggregator create their own brand?
Branding is a tough thing thing to do!
Pioneers find it a bit easy to build up their brand as compared to followers. Publicity does the job for them. Startups like Oyo which get big funding, spend a greater proportion on advertisements and public relations too. All this help them build up a brand equity.