With the likes of Amazon and Uber dominating their targeted niches, everyone has been wondering how these giants have been able to profit from their business models. These companies are known to be pioneers in their respective categories.
Everyone wants to know the secret behind their massive success. Their massive success lies in the business model they follow. Amazon uses the Marketplace business model, while Uber uses the Aggregator business model.
In this article, we are going to look at the advantages and disadvantages of using either of the two business models mentioned in the previous paragraph.
What are business models?
A business model consists of a plan that tells how a company creates and delivers value to its customers. Moreover, a business model includes details on how the organization generates revenue and assesses the customer base it targets.
A successful business model makes sure that the means of revenue generation is organic and the product does not target a specific niche only.
It is important to assess the prospective customers before starting a business because it is the customers who help to generate revenue. Revenue generation is key for a business to stay afloat.
What are Marketplace Business Models?
Marketplace business models employ the concept of a market and develop it virtually. A virtual marketplace functions similar to a marketplace in a real world scenario. This business model uses an e-commerce website to provide a platform for seller to sell their goods. The e-commerce platform does not own the products that are up for sale on the platform. They merely act as mediators.
The prices of the goods are set by the sellers. The buyers use the platform to buy goods. The e-commerce charges commissions and fees on the sale of products. The commission and charges are levied on the sellers. Like mentioned above Amazon is a prime example (pun intended) of the marketplace business model. Alibaba is another successful example of this business model.
What are Aggregator Business Models?
This business model may sound to be similar to marketplace business models. However, there are some differences. Aggregator business models organize services such as car hailing, taxi, hotels etc. under their banner so that they can sell them using their name.
The partners of the business work in co-relation with the business model to provide their services. Unlike the marketplace business models, the cost of the service is set by the business instead of the seller. The reason being that sellers do not use their own names while providing their specific service.
Uber uses the aggregator business model. Let’s take Uber as an example to explain this business model better. All the drivers associated with Uber are their partners. They sell their service under the banner of Uber but charge the customers according to the plan provided by Uber.
More examples who use this business model are Lyft, Airbnb, Careem etc.
Business Models and Brand Image
The two business models have a lot of similarities but they have their differences too. One of the differences is how the brand image is portrayed by the parent companies.
Marketplace business models have their own brand image and the sellers on the e-commerce platform have their own brand image as well. This is because in a marketplace business model, the partners represent their own brand through the platform provided to them.
How does the brand image work?
Most e-commerce platforms have a certain criteria that a seller must fulfill to get a place on their website. This is done by e-commerce platform to keep their brand image intact. For example, Amazon does not allow fraudulent sellers to operate from their website.
Moreover, it depends on the seller to take care of their own brand image when they sell through a company that uses the marketplace business model. This is because buyers are aware of the sellers and their selling history. These details are included on the website for a seamless user experience. The customer can then choose to buy from brands that are reputable and trusted.
Brand image of aggregator business models
The brand image of companies that operate on an aggregator business model act as an umbrella for all the partners that work with the partner company. For example, all the drivers working with Uber need to maintain a specific status quo and follow the rules set by the parent company to operate under their umbrella.
Any wrongdoing by a partner will result in defamation and tarnishing of the brand image of the parent company. There was a huge outcry on the social media where various customers complained about sexual assaults from Uber drivers. Uber’s brand image was affected because of the act of its partners.
Quality of services and products
The quality of services and products can differ in a marketplace business model. Two sellers can be selling the same products but of different quality. A marketplace business model does not ensure standardized quality of products and services.
Aggregator business models offer standardized quality in services as all the partners operate under one single banner.
Pricing of services
Aggregator business models have similar price offered by their services. This price is set by the company beforehand and this price is used all around the base.
In a marketplace business model, two or more sellers can be selling the same product under different price tags. This is fairly common in this business model. Sellers use different prices to get an edge from its competitors.
In the beginning, aggregator business models and marketplace business models may seem similar to you. However, they have stark differences that sets them apart. Core business ideas such as brand image, quality and price of goods help to separate the two business models.
Marketplace business models have different brands and their respective brand images. Aggregator business models have only one brand image. Marketplace business models have differing quality and price in their products. Aggregator business models have standardized quality and price.