Strategic Finance and the Outsourcing Decision
For a long period of time, the term outsourcing has been associated with cost reductions. Outsourcing is generally considered to be an operational tool or at best a tactical tool. However, this has changed in the past few years. There are many companies across the world which have outsourced or offshored some of their functions […]
Interest Rates and Their Effect on Small Businesses
Predicting future interest rate movements is not only important for traders who invest in financial markets. Instead, it is also important for regular business people. It is important for small businesses because the increase and decrease in demand is related to interest rates which the central bank sets. The problem is that most central banks […]
Costs Associated With Bankruptcy
In the previous article, we have studied about how some companies have started using bankruptcy strategically. This means that they use bankruptcy to discharge some of their debts if they are unable to meet their financial obligations. However, it needs to be understood that this discharge of debt does not happen without a cost. There […]
What is Litigation Funding?, Its Advantages and Disadvantages
Legal costs have long been a deterrent for people wanting to file lawsuits. In a country like America, the legal fees can be significant. A lot of good lawyers charge hourly fees. Many plaintiffs believe that in an hourly fee system, the lawyer is incentivized to drag the case for as long as possible. This […]
Building a Startup Team
When people think about how startup founders invest their time, most of them think about dealing with investors or managing the operations of the firm. Almost, no one imagines that the founder of a startup company spends a considerable amount of their time in building a team. This is because hiring is not considered to […]
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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