Business Model - Aggregation of Demand

In our discussion on Business models we discussed 4 models over the last week; we continue further and discuss about one of the most common business model -Aggregation of Demand in today's blog.

Have you ever wondered how does the next door shop keeper make his money?

The Shops in our surrounding are the ones where we generally drop in, if we are short of time to go the distance, and make a random purchase. These shops generally store a variety of stuff of daily use. What is their business model?

In the example I subtle made a mention that they generally have a lot of variety and cater to a particular locality, these are the 2 essential things that these neighborhood shops really provide us. Their locality focus ensures that they have the best market knowledge, and are able to collectively order the stuff that local people ask for (only that this ordering is aggregated). Since there is certain commonality in the choices the local people ask for, this aggregate demand enables the shop owner to bargain for a lower price and ensure he is able to earn a healthy margin for himself.

The variety keeps the consumer happy, and the aggregated demand makes the shopkeeper's purse happy.

We shall deal with a minor variant of the aggregation of demand in the next blog to expand the purview of this Business Model.

Read in Kannada: http://somanagement.blogspot.com/2011/04/b.html