Monday, October 27, 2014

Market aggregators - waste management edition

The Times has a story on Rubicon Global, which has emerged as the pioneering market aggregator in the business of private waste management in the US. Rubicon, using its proprietary software, Ceasar, acts as a hub connecting businesses with waste haulers, landfill owners, and trash recyclers. Times writes,
Across the country, millions of companies are creating trash, including food waste, cardboard, plastics and various other materials. These companies hire waste management firms to pick up their trash and truck it to a landfill. Two big national companies, Waste Management and Republic Services, dominate the market, owning fleets of trucks and hundreds of landfills. Thousands of smaller, regional trash haulers fill in the gaps. Rubicon, based in Atlanta, isn’t in the business of hauling waste. It doesn’t own a single truck or landfill. Rather, companies hire it as a kind of waste consultant. It begins by holding an online bidding process for its clients’ waste contracts, fostering competition among waste management businesses and bringing down their prices.
Rubicon also studies its clients’ waste for novel recycling opportunities, connecting businesses with the recyclers who see hidden value in their junk. For a national pizza chain, Rubicon determined that much of its leftover dough could be processed into ethanol. For a regional supermarket, Rubicon discovered that 400,000 old company uniforms could be shredded and resold as a stuffing for pet beds. Insulated containers that carried seafood for one business were repurposed to transport bull semen for another. So beyond saving money for its clients, Rubicon can nudge them toward environmental responsibility by diverting waste from landfills into recycled goods.
Its promoters claim that Rubicon is the "uber of waste". Two observations,

1. The advances in ICT over the past decade has facilitated the emergence of a distinct class of business service providers, market aggregators, who help consummate all kinds of transactions - buying and selling, erranding, renting, sharing etc. Commentators have christened them brokers in the sharing and renting economy. In the initial phase, these aggregators have been confined to services which could be delivered online through the internet, as evidenced by the success of agencies like Priceline and Expedia in purchase of airline tickets and holiday packages, and iTunes and Spotify in delivering music.

In recent years, it has spread to other parts of the economy, broking retail merchants and deal seekers, vehicle drivers and ride-seekers, errand seekers and chore suppliers, grocery chains and delivery agencies, employers and free-lance workers, and so on. This trend has just started and has a long distance to play out, covering large parts of the economy. All these platforms lower inefficiencies and waste, thereby benefiting both buyers and sellers. Fundamentally they have the potential to lower market inhibiting frictions, thereby easing market transactions and expanding the market.

2. Rubicon aims to help its clients divert 100% of their waste from landfills to recyclers by 2022. Rubicon's ambitions on recycling, motivated by the business opportunity there, is an example of how appropriate alignment of incentives among market aggregators and their clients can help attend to many social and environmental problems. There is window for public policy makers and non-profits to seek out these opportunities and influence the design of these markets in a manner that advances public interest without compromising on their growth.  

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