For over two decades, the marketplace business model – popularized by companies like Amazon, eBay, and Walmart – has ruled the world of eCommerce. Many small and medium retailers take advantage of this model to simplify their selling process and leverage the trust these marketplaces enjoy.
Nonetheless, the model also has several drawbacks. In particular, customers complain that the quality and prices of goods in these marketplaces vary, which affects their experiences. It consequently impacts many vendors’ sales and profits.
To address these challenges, another innovative business model has evolved in eCommerce – the brand aggregator business model. This model has a huge latent potential and can empower brands to boost their growth and financial capacity. Here’s how.
How the Aggregator Business Model Works
By now, anyone who has shopped on Amazon knows how the marketplace model works. Simply put, a website or app lists the products from various third-party vendors, which enables these vendors to sell their offerings and promote their business through one wide-reaching platform. In this online marketplace, different sellers sell their products to customers under their own brand name.
In contrast, under the aggregator model, an aggregator company buys brands outright. Aggregators invest plenty of dollars into nurturing, marketing, and promoting their brands. They also make an effort to attract more customers by boosting the quality of every product offered under their brand name. Through such efforts, brand aggregators enable smaller brands to grow at a much faster rate than they would be able to do on their own.
Consolidation to Centralize Operations and Cut Costs
Brand aggregators bring multiple brands under one umbrella to create opportunities for consolidation and centralized operations. Such consolidation enables them to cut costs, and utilize available funds more effectively – whether it’s for marketing, promotions, customer acquisition, customer retention, or some other business function. Aggregators also bring in a high level of expertise in running an e-commerce business, which they leverage to create greater efficiencies, and improve outcomes (e.g., higher sales) for all their brands.
Further, many aggregators are vertically integrated, that is, they own multiple stages of production in a product’s supply chain. For instance, one aggregator may both manufacture and distribute its products, so they don’t have to rely on an outside distributor. And another may own a raw material supplier so they can get the material they need to manufacture their products cheaply and at scale. Such vertical integration also helps brands lower their costs.
Earn a Reputation for High Quality
Typically, an online marketplace like Amazon offers an enormous number of similar items from multiple vendors. However, these goods often vary in quality. Some customers are more interested in quality over quantity. But by selling on online marketplaces, the high-quality goods and vendors compete on the same scale as the lower-quality goods and vendors, which obviously creates an unfair disadvantage for the former.
Brand aggregators can eliminate this disadvantage because they take responsibility for the quality of each brand and product they support. Since their own brand name is involved in every transaction, they consistently focus on both the quality of goods on offer, as well as the quality of customer experiences. Consequently, every product presented on an aggregator will be of consistent quality – not to mention consistent price – that most customers appreciate. This can have a huge impact on the brand’s reputation, market standing, and ultimately on its sales and profits.
Business-critical Sales and Marketing Support
In a crowded, noisy market that’s overpopulated with me-too brands, marketing and promotions play a vital role in helping brands reach their target audience. Personalized and targeted marketing can help brands engage with customers, meet their needs, and garner their long-term loyalty and brand support. If done well, marketing can yield a very high return on investment (ROI).
But smaller brands rarely have the budget to spend on marketing teams or promotional activities, which deprives them of many of the benefits mentioned above. Here’s where aggregators can step in to fill these gaps.
A brand aggregator often completely manages the branding, marketing, and lead generation activities for its brands, while brands focus on their core business activities. With capabilities around omnichannel marketing, geofencing, voice search, and the likes, aggregators help create a win-win situation, in which brands can leverage the aggregator’s strengths to grow more and succeed even in a crowded market.
Improved Customer Engagement and Relationships
The best brand aggregators use world-class tools enabled by Artificial Intelligence, Machine Learning, and other technologies to improve processes, streamline operations, and even make sales forecasts. They also use tools to help brands research and understand customers, engage with them, and build relationships with them.
Brands can utilize the aggregator’s tools to get deeper insights into their target audience, understand their pain points and demands, and accordingly offer more personalized offerings. They can also take advantage of chatbots, voice bots, and other tools to deliver tailored, timely support that delights a customer and keeps them coming back for more.
Summing Up
The aggregator business model creates many advantages for customers in terms of convenience and the standardization of product prices and quality. The model is also beneficial for brands since they can piggyback on the aggregator’s brand name to boost their own reputation. They can also focus on product quality, customer interactions, and customer experiences, while the aggregator provides critical marketing, sales, and technological support. All these key features can empower brands to exponentially improve their sales outcomes and boost their financial position.
As brand builders for the past 15 years, we know too well how this works. We, at Ergode, support brands with advanced technologies, marketing solutions, a 3PL network, and a solid brand name, so they can reach a bigger market and get established in the e-commerce industry. To know how we can help your brand scale, grow and succeed, please contact us.
