Convertible Notes and Startup Funding
February 12, 2025
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Financial planning is often confused with investment planning. Although investment planning is a major part of financial planning, it does not encompass the entire concept. There are several more components to financial planning as well. In this article, we will have a closer look at the various components of a financial plan. Budgeting: A lot […]
In the previous article, we had a closer look at the concept of covenants as well as indentures. However, we only covered the basics. Indentures and covenants are extremely important to the investors who deploy their money in fixed-income securities. It is for this reason that investors need to have a better understanding of the […]
Companies want to go public because it helps them raise cash, which can be used for further expansion. However, the promoters of these companies often do not want to go public since this would mean that their stakes would be diluted and that they would lose control over the company. A low promoter’s stake in […]
The theory of behavioral finance has become exceedingly popular in the past few years. This is largely because of the fact that it mixes the dry, numerical subject of finance with the interesting world of psychology. Most people who read about biases described in behavioral finance books often have a “me too” moment. The biases […]
In the previous articles, we have already studied the aggregator as well as the marketplace business models. These two types of business models have taken the start-up community by storm in recent years. Many start-ups which have become successful and have gone on to become unicorns are using some variants of this model in different industries.
From a student’s point of view, it is very important to understand the difference between these two models as well. They may appear to be quite similar to the average person. However, there are some subtle differences that make these models markedly distinct from each other. These important distinctions have been explained in the article below:
An online marketplace can be considered to be a representation of a real-life marketplace. Hence, just like a real-life marketplace, there are lots of brands that sell their products on the website. Even if the marketplace is a vertical marketplace i.e. it deals with only one category of goods, the marketplace will generally provide multiple brand options to the customer. It has been observed that aggregator websites generally specialize in a single industry whereas on the other hand marketplaces sell goods and services which cut across several industries.
By definition, the marketplace provides different types of sellers to sell products on the site. Hence, the quality levels maintained by each of these sellers can be quite different. Customers are aware of the fact that the product quality can vary drastically if they choose to buy different products from the same website.
For instance, if a customer books a cab from Uber, they expect the terms and conditions to be seen regardless of which individual cab driver provides the service to them.
On the other hand, if the customer deals with a marketplace, they know that different types of sellers are selling products on the marketplace. Hence, the terms and conditions can be very different.
For example, the terms and conditions for sale may be different when the customer purchases a laptop from Amazon than when the same customer purchases a book from Amazon. In some cases, the terms can conditions can vary even if the customer chooses different brands.
The aggregator is the one that sets the price in an aggregator model. The prices set are binding upon the service providers in case they want to provide the service.
On the other hand, marketplaces allow the service providers to select their prices within a certain price range. For instance, if a person wants to buy a laptop from Amazon, they could get multiple price quotes from different sellers for the same product. They can then choose a service provider depending upon other factors.
However, in the case of an online marketplace, the marketplace may charge a listing fee to the seller. Once the seller posts the product on the website, the marketplace may charge a commission. This commission is generally a fixed percentage of the selling price. The service provider has complete freedom to choose their selling price. However, they have to pay a commission based on that selling price.
The bottom line is that even though both online marketplaces and aggregators appear to be quite similar, the business models are very different. The key factors which make an online aggregator successful are very different from the ones which make an online marketplace more successful.
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