Complexity is the name of the game when it comes to web-based business space. It throws multiple opportunities to entrepreneurs and sets new limits too. There are hundreds of companies struggling to stand out in each industry. For customers, choosing between hundreds of options becomes quite a challenge.
As a result, new business models come to help organizations integrate into a digital environment and thrive in it. An aggregator is one such model. It rushed in to disrupt nearly every industry, tame the chaos and complexity of diversified markets, and help providers deliver their value propositions to customers.
In this article, we’ll outline the key features of aggregator business models and how they help win both businesses and customers.
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The winning approach of an aggregator business model
Aggregator business models involve bringing together multiple suppliers and consumers through a digital platform or marketplace. In this scheme, an aggregator acts as a mediator. A company earns revenue by taking a commission or fee for providing a place for sellers and customers to connect and facilitating transactions between them. An aggregator wins by:
- Establishing a nearly unlimited user pool;
- Establishing consistent and diversified revenue streams;
- Avoiding the need to produce anything or maintain a warehouse for storing stock;
- Skipping overhead costs that are handled by the provider.
On the other hand, each provider hits its target audience by default. A provider wins by:
- Getting direct access to the end users of its product or service;
- Building a functional customer base without investing too much;
- Cutting down marketing expenses thanks to marketing effort support provided by an aggregator company;
- Promoting its product or service via a special platform;
- Retaining independence since the aggregator does not employ the provider.
Finally, an aggregator model enhances the value proposition to the customer. A consumer wins by:
- Receiving easy access to products or services they need;
- Saving time on surfing the web and sifting through multiple options;
- Getting an opportunity to pinpoint the best price and minimize costs.
Aggregators own centralized control
Aggregator companies typically have centralized control over their platforms, as they are designed to collect and organize data from multiple sources in one place. Centralization enables an aggregator to create a seamless user experience and allows consumers to save time and money. Other benefits include increased efficiency, convenience, and consistency.
Aggregators create partnerships with providers and don’t own their businesses, giving them the freedom to make their own decisions on their businesses. At the same time, they establish certain rules for using their platforms. Centralized control also gives aggregators significant power and influence over data sources. In fact, they sell access to customers.
They develop a single brand to provide goods or services
Initially, this business model is meant to gather multiple providers and offerings in a single place and bridge them to customers. At the same time, those providers normally offer similar products or services and belong to the same sector or niche.
Thus, aggregators collect data from providers operating in a single industry, such as hotels, taxis, transportation services, food delivery, or beauty products, and consolidate them under one brand.
An exclusive branding strategy works to do the following:
- Earn and solidify market reputation;
- Make an aggregator platform recognizable and competitive in the market;
- Enhance the platform’s popularity;
- Establish an aggregator as a trusted authority;
- Gain customer credibility.
With this branding strategy, providers get an opportunity to save on marketing efforts. And aggregators build a unique brand that sells them to both customers and providers.
On the other hand, a single brand allows for stipulating unified rules such as one price band and quality standards.
Aggregators create economies of scale
In general, an economy of scale emerges when a company can scale up its business (grow production or increase the scope of service) with fewer input costs. In a word, it’s additional cost advantages an organization enjoys along with its development.
When it comes to aggregators, they are highly scalable since their digital platforms can easily reach a large number of users across multiple geographies. This can lead to rapid growth and the ability to capture a significant share of the market. In the meantime, they don’t have to invest too much in that growth.
They imply a sense of competition
Supported by digital experience and knowledge of local markets, aggregators ensure the distribution of products or services to a wider audience. Established around a two-sided communication format, such companies entail a sense of competition to match both provider and customer needs.
A model relies on the creation of a single brand that will be equally attractive to providers and customers. It aims to create a network effect that will remain efficient in the long term and works great for all parties involved. That’s why aggregators focus much on quality and even engage professional teams to ensure they meet the highest standards.
While making the fragmented market more accessible and easier to navigate for customers, aggregators make it more accessible for smaller providers as well, allowing them to reach audiences and consumers they wouldn’t hit otherwise.
To Sum Up
An aggregator business model is a prompt and efficient response to the challenges of a digital business environment. It has proved to be viable and already helped many startups (Uber, Zelato, Lyft, Ola, Booking.com, Tripadvisor, etc.) earn billions of dollars. And it still has a lot to offer to new projects. A low-cost aggregator strategy makes this model competitive, while its networking potential promises quick growth.