The rise of digital technologies has opened up new business opportunities, with many companies seeking to leverage the power of the internet to connect buyers and sellers. Two of the most common business models that have emerged in this space are the Aggregator and Marketplace models. While both models connect buyers and sellers, they operate in different ways.
In this article, we will explore the key differences between Aggregator and Marketplace business models and how they work in practice. We will also explore some examples of companies that have successfully implemented each approach.
Aggregator Business Model:
The word aggregate means to ‘bring together’.
An aggregator brings together different businesses offering a similar service under a common branding.
In an Aggregator business model, the services offered by different service providers are sold under an umbrella branding. The aggregator enters into a contract with different service providers to ensure that a minimum acceptable standard of service is provided by each service provider.
The Aggregator determines both the ‘price’ as well as the ‘terms and conditions’ under which the services are ‘sold’ by the service providers.
The Aggregator makes money by charging a commission from the service providers.
Urban Company is an excellent example of the Aggregator business model. Urban Company is an online platform which connects home service professionals with customers. For example, if you visit the Urban Company website to book a home cleaning service, you would notice that the price and service terms and conditions are determined by Urban Company. Once you have made the booking, Urban Company will assign one of the many cleaning service providers registered with their platform for your servicing needs. Here the services are being sold under the Urban Company branding.
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Marketplace Business Model:
A marketplace is an e-commerce platform that connects buyers and sellers thereby facilitating direct transactions between buyers and sellers.
In a Marketplace business model, the focus is on creating a user-friendly interface where sellers can list their products or services, and buyers can browse, compare, and purchase them directly through the platform. The platform operator typically charges a commission or transaction fee for each sale made through the platform.
In the marketplace business model, the pricing for the goods or services as well as the terms and conditions under which they are sold are determined by the seller and not by the portal. For example, in the marketplace, it is the seller who determines whether the product being sold is eligible for return or not. The shipping of goods is also the responsibility of the seller; though sometimes the portal may offer logistics as a value added service to the sellers.
Amazon is the best example of the marketplace business model; connecting millions of independent sellers with buyers and facilitating billions of dollars of sales worldwide.
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In conclusion, while both the aggregator and marketplace business models connect buyers and sellers, they operate differently. By understanding the differences between these models, companies can choose the one that best fits their needs and helps them succeed in this digital age.