The aggregator model – rise, challenges, and scope of this approach in India

Ashok Vashist

The aggregator model refers to a business approach utilized by various enterprises in the e-commerce space, wherein such businesses gather information on specific goods and services from various competing sources in the market through their online platform. Typically, the goods and / or service providers are the real customers of such aggregator based businesses. In return, the aggregator helps these service providers gain more customers, usually for a certain fee or commission. In India, this model has been utilized by many new and existing businesses, and is being adopted by various startups from multifarious industries, especially those in the transportation and logistics space.

The birth and rise of Aggregator model in India

Aggregation in transportation & Logistics space has been prevalent since many years however the concept in car rental or taxi segment was actually tested and used in full scale when it was introduced by me in year 2001 wherein the concept of Driver Cum Owner (DCO) and “Vendor Development Program (VDP) were actually tried and tested that the demand can meet the capacity. Today the entire disruption is possible in this segment since the model proved to be workable.

Over the past couple of years, the Indian subcontinent has witnessed a gradual rise in on-demand transport aggregator startups that cater to both individual and / or corporate mobility requirements, and are playing a significant role in transforming the Indian urban mobility space. A far cry from the typical Mom and Pop cab services, these on-demand aggregators have begun to disrupt the transportation space with their unique products and services.

According to a report published by TechSci Research – a research based management consulting firm, one of the major upcoming industries that has begun to successfully utilize the aggregator model in India was the India Radio Taxi Service Market. The report suggests that this sector is expected to witness significant growth due to increasing adoption of aggregator business model. The market analysis also stated that revenues of the radio taxi services market are projected to grow at a CAGR of over 25 per cent during the period of 2014-2019. The growth of this market is expected to be led by rapid urbanization, increasing demand from corporate sector, and growing per capita income; coupled with various benefits offered by Radio Taxis like: enhanced passenger comfort & security as well as GPS/GPRS & internet connectivity.

Challenges

The aggregator business model was initially introduced within the transportation and mobility segment to meet the demand for services that can facilitate both on-demand commuting as well as logistics. However, the biggest challenge that comes with aggregator based mobility services is the fact that such business are usually driver centric, i.e. they provide more benefits for the driver rather than the end consumer due to the possibility of gaining more loyalty from cab drivers.

To eliminate such issues, some aggregators have begun to provide various discounts and subsidies for both drivers and customers.

Future scope of Aggregator model in India

With the steady rise of e-commerce in India and growing demand for on-demand services, the aggregator model is playing a key role in bringing structure and equilibrium within the organized space across various industries. While still at a nascent stage, it can be concluded for now that the aggregator model will witness greater adoption among numerous market players in the near future, enabling the creation of an ecosystem that benefits all parties involved.

Today any ecommerce business is thriving on the subsidies and incentives that they give customers and suppliers to gain market share and traction.  Even he major players will not sustain if the trends continue to remain.

The aggregators will have to actually test the model by eliminating subsidies and incentives and then figure out whether it’s doable or some twigging is required in the model.

The author is the Founder & CEO of Aaveg, a Delhi based Employee Transport Management Company with PAN India Presence.

Updated Date: Jan 03, 2017 14:03:01 IST