When joining the entrepreneurship world, every proprietor requires a product or service to offer to their target customers. It is only by having a great product that you can convince customers and make your business profitable. Traditionally, this meant having a manufacturing firm or offering services to the producers to reach final consumers.
With technology, this is changing. Disruption is now the new face of the business world. Unlike before, you no longer need products or services to earn money. New business models are coming up that enable you to make money without being a creator, developer, or manufacturer. An aggregator is one of these business models.
What is the Aggregator Business Model?
The aggregator business model involves collecting information on players/competitors in a particular niche, partnering with them, and selling their products or services under your brand. Typically, it is a marketing strategy where the two parties have a win-win partnership. The aggregator’s role is to help the product owners and service providers reach more customers.
Despite the aggregator using their brand name, the owners’ ownership of their products. In other words, the owners do not become the subjects of the aggregator. They remain partners by signing a working contract on how the two parties will gain from the arrangement.
How Does Aggregator Business Model Work?
As noted, aggregators work as marketers by organizing unorganized niches. The goal is to improve customer efficiency by allowing them to find a product they need faster. The aggregators establish a powerful domain that attracts massive traffic. Under it, they list different providers and sellers with specific prices and quality.
The products are under aggregators’ names. However, it is the owners who fulfill the orders. The products or services must originate from the same industry. For instance, the proprietors can be offering hospitality and accommodation services. The aggregator promotes these services under a single brand name.
The aggregation arrangement starts with the aggregator approaching the product owners/providers for a partnership. When they agree, they sign a partnership contract. The aggregator creates a network of these partners and employs various marketing strategies to promote it under his brand.
Customers access products and services and purchase them through the platform. When the customer places an order, the partners fulfill it. They then pay the aggregator a commission for their marketing services. So, the central strategy of this model is marketing. The aggregator focus on marketing partner’s products under his brand name to earn a commission on all platform-based purchases.
Examples of Aggregator Business Model
The aggregator is one of the disruptive business models. The approach is becoming a common practice in many modern industries. You will come across an aggregator in almost every niche. However, some of the outstanding aggregators include Uber, Rotten Tomatoes, BizRate, and others.
Uber is a leading aggregator in the transport industry. The company bought a network of players in the taxi industry and offered its services under the Uber brand. Also, it sets the price a customer will pay per kilometer.
Taxi drivers and owners partner with the company to offer commuting services. When a customer pays the partner, they give the agreed commission to the aggregator (Uber).
Rotten Tomatoes is an aggregator in the film and movie industry. The platform features various reviews on different films and movies. It showcases expert reviews on films and TV shows where the third parties pay for the information.
BizRate operates in the shopping arena. This aggregator offers information on collated products and services. The information features product prices, ratings, and comparisons. It ranks as one of the reliable and valuable sources of information on product prices.
When a customer finds a suitable product within their budget, they can place an order through BizRate. The seller fulfills the order and pays BizRate a commission.
Other businesses using this model include Amazon, Yelp, Motor Trends, Scour, and Zillow.
Pros and Cons of the Aggregator Business Model
An aggregator is a powerful model that harnesses business sustainability. You can adapt it to generate revenue without requiring you to own a product or store. However, it has some benefits and challenges that you must pay attention to before choosing it. Here are some pros and cons of the aggregator business model:
Pros
It is cost-efficient to operate
Cost is the evil that every business wishes to avoid. But you cannot run a successful business without incurring some costs. However, the business model you consider can help you reduce costs and become efficient. The aggregator is one of these models.
Under it, you do not need to spend substantial operational costs such as storage, equipment, and office expenses. Aggregators usually run their business virtually. They need a website to feature their partners’ products and services. So, it is a powerful approach that can help you save on operational costs.
Multiple revenue generation opportunities
Aggregator model comes with various ways that you can use to generate revenue in your business. With an aggregation platform, you can maximize the returns from your traffic. For instance, the partners can pay for clicks, sponsored placements, and sales.
This approach guarantees consistent revenue in your venture. Also, it allows you to earn from all your efforts. Hence, it is a good idea if you are seeking ways to get diversified revenue generation.
Power to set product prices
Despite not owning the products, aggregators can have the power to define the market prices. For instance, Uber sets the price a customer needs to pay per kilometer. This aspect enables you to enhance your profit by increasing your commission. Also, it benefits both the seller and the customer. Sometimes, the prices set are suitable for all the parties involved.
Cons
Reliance on other platforms
Traffic is the main revenue element on all aggregation platforms. Your platform must get adequate and convert traffic to become beneficial. This means that you will rely on search engine rankings to remain profitable. With competition for ranking, this approach may not always work for your venture.
Conclusion
In a word, the aggregator model is a good idea for people with enhanced digital marketing skills. The idea requires the application of an effective marketing strategy that will draw traffic to your platform. So, you can take the route if you meet such qualities.
