Aggregator Business Model | What Is It And How Does It Operate?

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.

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

Customers

The aggregator business model runs on a two-fold customers strategy where the service consumers as well as the offering providers act as the customers of the company. 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 good/service providers of a single industry and organises them under its own brand. Like Airbnb for Hotels, Uber for taxis, Oyo for hotel rooms, etc

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Partnership Model

The good/service 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).

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)
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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:

  1. Aggregator visits the offering providers.
  2. Aggregator promises them more customers and proposes a partnership plan.
  3. Service providers are now the partners.
  4. Aggregator builds up his own brand and tries to attract customers through many marketing strategies.
  5. Customers make purchases through the aggregator.
  6. Partners get the customers as promised.
  7. Aggregator gets the commission.
aggregator business model

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22 Comments

  1. it’s a great article. But can you share a basic excel sheet for the aggregator revenue model, that will be really more helpful

    Reply
  2. 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.

    Reply
  3. 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.

    Reply
  4. Could you tell me if the service provider doesn’t have a standard price, what could be revenue model apart from third part ads?

    Reply
  5. 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.

    Reply
  6. 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,

    Reply
  7. 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]

    Reply
  8. Your writings are very good and informative.

    Can you describe the business model of Careongo? Indian pharmacy aggregator?

    Reply
    • No the aggregator need not have a FSSAI permit however the partnering restaurants/hotels/eateries must have all the valid license n permits.

      Reply
  9. 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?

    Reply
  10. 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?

    Reply
  11. 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?

    Reply
    • 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.

      Reply
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