Aggregator Business Model | What Is It And How Does It Operate?
Be it taxis (Uber, Ola, etc.), hotels (Oyo), groceries (Grofers), food (Munchery, Food Panda, Swiggy, etc.), or travel (Make My Trip), aggregator business model has entered into and has disrupted every industry.
This model (or On-Demand Delivery model or Uber for X model) usually involve organizing an unorganized and populated sector like hotels, taxis, etc. and provide the service under one brand.
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Aggregator Business Model
Aggregator Business Model is a network model where the firm collects the information about a particular good/service providers, make the providers their partners, and sell their services under its own brand. Since the aggregator is a brand, it has to provide services which have uniform quality and price. This is done by signing up a contract with the partners.
The good/service providers never become aggregator’s employees and continue to be the owners of the good/service provided. Aggregator just helps them in marketing in a unique win-win way.
Characteristics of Aggregators
The aggregator business model runs on a two-fold customers strategy where the service consumers as well as the goods/service 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 rather than the competitors.
All the service providers are from the same industry. Aggregators collect the good/service providers of a single industry and organize them under his own brand. Like Airbnb for Hotels, Uber for taxis, Oyo for hotel rooms, etc
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).
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.
The aggregator strives to provide a standardized quality to every user. They make sure that the partners provide you with the standardized quality product/service. These aggregators have teams that make sure quality is maintained.
A contract is signed between the aggregator and the goods/service provider where all the terms are cleared. 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 standardized quality required by the aggregator.
- The Commission (Uber Business model), or
- Take-Up rate (Oyo Business model).
- Other terms depending on the industry and the aggregator involved.
Aggregator Revenue Model
As already stated above, the goods/service 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.
Aggregators are different from a marketplace (like Amazon, Alibaba, Flipkart, etc.). They provide different services for different but standardised prices (or price bands).
For E.g. UberX has a definite price per kilometre.
Competition in the aggregator business model is tough to handle as the same partners might work for competitors too.
How Does Aggregator Business Model Work?
Theoretical explanation of this model is simple:
- Aggregator visits the Good/service 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.
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