What makes an Aggregator Business Model Successful?
Did you know 17% of small businesses fail because they lack a business model? Even if they have one, they choose the wrong business model. The selection of the right business model is essentially vital if you are starting with a new business.
Although every business model is advantageous if applied in the right industrial domain. Apart from this, the implementation also plays a vital role. If a business model worked right for an X restaurant, it does not mean that it will necessarily work equally well for Y business in the domain.
For example, Uber and OYO rooms work on an aggregator business model. These apps have worked exceptionally well in their respective industries. Here is a graph that shows the constant increase of Uber rides between the years 2016 to 2019.
This stat clearly shows that Uber is an amazing example of an aggregator business model success. But there are copies of this model that have not been able to succeed in the market. In fact, they failed drastically.
One of the popular examples of a copy of OYO rooms business that failed is ZO rooms (targeted the same market, i.e. India like OYO). Some other examples of such failures are Homejoy, Shuddle, CouchSurfing, Taxi for sure, etc.
So, wondering how to successfully implement the business model of Uber on your app? In this blog, I am focussing on everything related to the aggregator business model. So if you are thinking about this model then read the answers to the following questions in this blog.
- What is the aggregator business model?
- How does business aggregator model work?
- How is it different from the marketplace business model?
- How does uber work on the aggregator business model?
- How Uber make money?
- How to build an app with the aggregator business model successful?
At the end of this blog, you will be able to judge whether the aggregator business model is right for your next venture or not. Moreover, you will insight into how to successfully implement the aggregator business model. So, here we go!
Q1. What is the aggregator business model?
A1. Aggregator business model involves collecting data from various service providers or product sellers. They make these producers or providers partners and sell their service/product under their name.
The business following this model is known as an aggregator. It will be a brand that will provide services/ products at a uniform price irrespective of the individual seller or producer. A contract is signed between both parties.
This does not mean that they will be employed by the aggregator. They will remain an individual provider or seller of their own service or product. Aggregator just becomes a ladder to do their individual marketing.
Q2. How does business aggregator model work?
A2. Under the Aggregator business model, the aggregator comes in a partnership with the various service provider/ product producers. This partnership activates under strict terms and conditions.
The aggregator only focuses on building its brand instead of the quality of its services. To understand the working of the aggregator business model in detail, let’s explore its various elements:
Customers: There are two categories of customers in the aggregator business model. The service takes and providers, both act like customers to aggregators.
Industry: The industry is chosen by the aggregator and service provider functioning in that particular industry are organized under a single brand name.
Partnership models: Aggregator comes into a partnership with the accumulated service providers/ good producers. They do not act as customers or employees of the company.
Brand: The major spending in aggregator business models is on building a brand. Service providers will be recognized with a single brand name that will represent them.
Quality: The aggregators try to provide a standardized quality of services. It is majorly dependent on the service providers but aggregators do have teams to maintain the quality.
Contract: A partnership contract is signed between the brand and individual service provider/ good producer. The terms and conditions of this contract are clearly declared.
Thinking about how to start an Aggregator Model Business like Uber & what are the costs involved in getting an app developed?
Q3. How is it different from the marketplace business model?
A3. In both these business models, the business works under a contract. Hence the basic nature is the same in both cases. The major difference lies in the kind of partnership they create with sellers/ producers.
In the marketplace business model, the business works as a mediator between the end-user and seller. They provide them with a platform to sell their services or products. It is quite famous and successful among e-commerce companies like Amazon.
In the aggregator business model, no such platform is provided. The service providers are backed with a strong brand created by the aggregator. Like Uber which takes services from drivers and provides them to the customers.
Q4. How does uber work on the aggregator business model?
A4. Uber has a strong and commendable business model that has worked very well for its growth. Uber as an aggregator brings drivers who are distributed in an effective transportation network.
It helps customers to get private cars at cheaper rates. Moreover, it makes carpooling easy and safe. It has been a successful taxi substitute since 2009. Uber is working on a partnership with drivers rather than employing them.
The drivers are given all the rights to reject or accept the terms and conditions of Uber’s contract. In a nutshell, Uber accumulates the various sources from where cab service can be given to users.
Whoever accumulates is known as “aggregator” which is why Uber is known as Aggregator. As a brand, it uses its name to represent these accumulated service providers. It works on the slogan “No office, No boss”.
This is written on their website which works as a catch! Moreover, Drivers are earning well under Uber’s brand name. Give this Peter Ashlock’s answer a read. He has given insights into how much an Uber driver earns.
Uber’s aggregator business model is revenue-generating on various other levels. It has provided everything related to transportation needs in a single mobile application. Smartphone users can find rides at cheaper rates in comparison to alternatives.
The drivers and customers are equally benefited through this model. This leads to a strong distribution network, more number of customers as well as cars. Uber has successfully generated the supply as well as demand for its services.
Hire a Mobile App Developer & Start Your Aggregator Business With A Bang!
Q5. How Uber make money?
A5. Uber’s collaboration with drivers opens multiple gateways to earn profits. Here are the top channels which bring money to Uber:
Commission on each ride: Uber provides a single app through which customers book rides from them. Each time, Uber charges 20-25% of the total amount from the money charged from the customers as commission.
Price per km: Uber charges a fixed price per kilometer. The overall price of a ride is calculated based on the km traveled and the total time spent.
Price rise: Uber works on dynamic price policy. In case of heavy demand like festive seasons or peak hours, it raises the price per km. This gives an opportunity to earn more.
Promotions: Uber enters into a promotional partnership with companies that generates revenue for this taxi service brand. Some of these brands are Hilton, Pepsi, BMW, Spotify, etc.
Q6. How to build an app with the aggregator business model successful?
A6. Building an app for the business based on the aggregator business model is not a strenuous task. But making it successful is something that requires a supreme level of effort. I hope that after reading about Uber, you have made some things clear in your mind.
Let’s just segregate them according to the service providers you will have to hire for specific features:
Mobile app developers: Uber provides service providers as well as service takers with an app that helps them to stay connected all the time. Proficient app development services can make sure your app is scalable, robust and provides an amazing user interface.
Machine learning service providers: Have you read about the price per km policy of Uber above? How do you think it will be calculated automatically. If you will hire python developers, they will incorporate machine learning algorithms to enable these functions.
Starting a business on an aggregator business model is a good idea but it requires a proper implementation to make it a success. The app of an aggregator like Uber can be copied but the market cannot be captured.
It requires the focussed efforts of the brand, service providers and most importantly of the custom software development company. As an entrepreneur, you need to plan and implement strategies along with your partners.
PixelCrayons can be an optimum partner if you want to build an app like Uber. We have a renowned name in the mobile app development industry. We have developed apps for clients who were based on the business aggregator model.
Our mobile app developers are extensively experienced in constructing such apps with all the necessary functionalities. If you want to talk to them then click here and avail their free consultation services.