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The Bank of Japan has recently decided that it will cut its rate below the zero percent mark. Bank of Canada has also hinted that it may also join the Bank of Japan in this extreme step and drop its interest rates below zero as well. However, most average people in the world are dumbfounded […]
Advantages of Using Cryptocurrency
The popularity of cryptocurrency has exploded over the past few years. Statistics clearly suggest that cryptocurrencies are one of the most widely traded financial assets today. This is obviously because of the fact that there are some advantages to using cryptocurrency. In this article, we will have a closer look at those advantages and try […]
Intrinsic Value and Mispricing
The whole objective of equity valuation is to find mispriced securities. Investors can make abnormal profits when they find securities which are lower than their intrinsic worth trading in the market. However, the concept of mispricing and intrinsic value is misunderstood to say the least. What the average person considers as mispricing is at best […]
5 Step Retirement Planning
Retirement planning is one of the most neglected fields in financial planning. This is the reason why a lot of people have either completely failed to plan for their retirement or have lost a lot of their retirement funds due to poor planning. The end result is that a lot of these people in their […]
Redlining: Americas Racist Financial Policies
America is a developed country and an inclusive society. It should ideally no longer face the problems of racism and social inequality and yet it does. It is no accident that a large number of poor and destitute consist of people from African American and Latin American communities. In fact, it is a result of […]
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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