Marketplace businesses can boom!
In recent years, making a purchase online has become the new normal, and there has been a proliferation of online marketplaces and aggregators.
Online marketplaces and aggregators have disrupted the industry and, at the same time, created many new opportunities.
While there are similarities between marketplace and aggregator business models, each one is unique in its own way.
In this article, we will compare online marketplaces and aggregators in terms of their function, benefits, and potential drawbacks.
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An Aggregator What? What Is the World is an Aggregator?
An aggregator business model is where a company creates an online platform to bring together third-party vendors.
In this platform, unorganized third-party vendors (in the same industry) offer their products or services under one company's brand/service.
The aggregator model has seen success in industries like groceries, nutrition, transportation, food delivery, hospitality, and travel.
In an aggregator business model, the suppliers or service providers act as partners of the main brand.
As such, these providers sign an agreement stating they will abide by the brand's rules, quality standards, and uniform pricing.
In an eCommerce setting, aggregators collect results of different shopping websites into one platform and give their users price and product comparisons.
Examples of such online commerce aggregators include Bizrate, Thrasio, and Perch.
Types Of Aggregators - They Are All Over the Place!
Below are some of the most common types of aggregators we see online today.
News Aggregators collate news, insights, or relevant web content from different sources online and post them at a single location.
Examples of these are News 360 and Feedly.
Social Network Aggregators are platforms that compile content from social media websites like Facebook, Twitter, Instagram, and LinkedIn.
Examples of this might be Hootsuite, Curator, and Spotlyte.
Review Aggregators are websites like Rotten Tomatoes and Yelp.
These gather reviews of films and television shows, video games, books, and restaurants and make them accessible in one domain.
Poll Aggregators gather opinion survey results from various organizations to estimate public opinion on important matters.
Shopping Aggregators collate results from a number of eCommerce websites and showcase price, product, and rating comparisons.
Shopping aggregators provide high value for users, with 59% of consumers choosing to visit these first before merchant websites.
BizRate is a good example of this.
Real Estate Aggregators collate relevant information from real estate and MLS listings from online sources.
These websites allow buyers to compare home prices, property details, and real estate deals.
Zillow and Trulia are good examples of real estate aggregators.
Job Aggregators are platforms that gather information from job posts from job websites.
LinkedIn is one of the more prominent job aggregators, amongst others.
The Main Advantages Of An Aggregator Marketplace
Why start an aggregator?
Here are a few of the advantages.
It reduces barriers to entry for startups.
Since aggregator marketplaces don't need to source or create products or services themselves, they can shift their focus to building a platform that brings together various vendors within the same industry.
Aggregators enter into a partnership with service providers and not employees, allowing for flexibility.
In an aggregator business model, individual service providers and suppliers sign a contract with the aggregator company.
These service providers are not considered employees.
They, therefore, make independent decisions on how to accept the terms of the agreement.
Aggregator marketplaces can focus on the brand and its marketing.
Aggregator marketplaces provide value to their service providers through marketing.
Because of this, providers can focus on bringing the best products and services to the partnership.
Service providers, in turn, take advantage of aggregators' brand recognition to bring more customers to their business.
An example of this can be seen with Doordash's partner restaurants.
On their own, individual restaurants may not get access to the same volume of orders.
However, partnering with the company allows them to offer their menu and get exposure to a greater base of customers.
Under Doordash's brand identity, individual restaurants have a more extensive reach and loyal customer base.
In turn, Doordash focuses on bringing the best food products to market.
An aggregator marketplace can provide a one-stop-shop experience for customers.
They can compare and contrast different products and services before making a decision.
This can lead to higher customer satisfaction rates.
For example, when prospective guests visit Airbnb, they are given a number of options to stay in a certain place with different price points, features, and experiences.
They have the ability to create uniform pricing and quality in their platform.
Stability around pricing and quality benefits customers.
Vendors can't just raise their prices willy-nilly and instead have to follow the aggregator's rules.
An example of this would be Uber.
Customers of the platform know that when they book a ride on Uber, the drivers charge them the amount set by the company regardless of which driver is providing them the service.
Perfect - no more guessing!
Some of the Challenges with Launching An Aggregator Marketplace
There are challenges too!
Aggregators choices are limited when they go industry specific.
Aggregators tend to focus on products and services in the same industry (a vertical).
This can prove to be limiting when it comes to eCommerce.
For example, Perch, the eCommerce aggregator marketplace offering items for home and kitchen, apparel, beauty, and toys, can be ideal for a consumer looking to purchase within the home vertical.
If a buyer is looking to buy items from other categories, they would likely go to an online marketplace like Amazon with a more extensive range of products.
Competition can be tight.
With service providers in aggregators belonging to the same industry, competition is often tight.
It's not unheard of for a service provider of one aggregator platform to also work with a competitor.
In the case of Uber, a driver working for the company may also be a provider for its competitor, Lyft.
Comparison Of Online Marketplaces And Aggregators
Online marketplaces and aggregators often appear very similar, but there are differences between these two business models.
Both of them act as middlemen, using one platform to connect service providers and suppliers to their respective buyers.
Both business models also earn a commission by providing their service and do not have their own inventory.
Both rely on their service providers and sellers to have their products offered on the platforms.
When it comes to the control of goods and services though, aggregators typically have more control than online marketplaces.
Service providers enter into an agreement with the aggregator with the understanding that the company will an element of uniform pricing.
The aggregator agreement also defines the quality required of service providers.
With this, the aggregator ensures that the products and services offered in its platform are of very similar quality.
A notable difference between online marketplaces and aggregators is branding.
In an online marketplace, there is an element of each brand working on its own.
In an aggregator marketplace, different service providers operate under one brand.
For example, Lyft drivers provide rideshare services all over the country under one brand.
There are no "separate driver brands."
Lastly, aggregators usually verticalize and focus on one industry, as seen in platforms like TripAdvisor (travel) and Ola (taxi).
Table 1: Comparison of Online Marketplaces' and Aggregators' Features
FEATURES | ONLINE MARKETPLACES | AGGREGATORS |
Connects both vendors and buyers into one platform | ✔️ | ✔️ |
Reduces barriers to entry by leveraging others' products and services | ✔️ | ✔️ |
Controls prices of goods and services | ❌ | ✔️ |
Doesn't own any inventory | ✔️ | ✔️ |
Earns a commission | ✔️ | ✔️ |
Maintains a similar level of quality for goods and services | ❌ | ✔️ |
Products and services are within the same industry | ❌ | ✔️ |
Goods and services are offered under one name/brand (providers hidden) | ❌ | ✔️ |
Conclusion
Online marketplaces and aggregators have become part of how consumers conduct business online.
While there are many similarities between these two, they have differences in the way they operate.
Interesting in creating an online marketplace or an aggregator?
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