Posted on August 19, 2019 by staff

UK entrepreneur: Amazon marketplace model is broken


“Amazon is not being well received by sellers or buyers as a trustworthy entity.”

UK tech entrepreneur Cas Paton doesn’t mince his words when it comes to the American eCommerce giant – and he’s seeking to do something about the perceived injustice with scale-up OnBuy.

Based in Poole, Dorset, OnBuy is one of the world’s fastest-growing marketplaces and sits somewhere between the C2C model championed by eBay and B2C model of Amazon. CEO Paton has personally invested £500,000 into the angel-backed business and took aim at Jeff Bezos’ company in an interview with BusinessCloud.

Paton launched OnBuy in November 2016 and has built it up to host 16 million products in more than 6,000 categories, with plans to hit 100m by 2022. More than a million people a month visit its website.

As it does not have product lines of its own, OnBuy does not compete with the sellers that list on its platform.

“Sellers want to make a margin, see their reports and have a marketplace they can work with to cater for their businesses more efficiently,” said Paton. “Unlike Amazon, we’re not creating new rules that have sellers suspended all the time.

“And we’re not competing with those sellers just to steal their market share, meaning they can operate ethically and without risk. That will translate to better pricing and better retention for our buyers.”

One trend among eCommerce retailers is to hold back stock for their own platforms to prevent Amazon from capitalising on the sales data. There has been an increasing backlash against the way Amazon treats its sellers, with the EU recently launching an investigation into allegations that it misuses sensitive data from the sellers on Amazon Marketplace.

“I think sellers have become very aware that they shouldn’t list all of their inventory on Amazon,” said Paton. “Amazon monitors what sells then seeks to acquire alternative products to move those sellers off those top spots. In a lot of cases, it even manufactures products under its own brands.

“You could come up with the concept for a product and invest hundreds of thousands of pounds in it, only for Amazon to manufacture its own version of that product, rank it higher than you – and your sales disappear overnight.

“The ultimate result is that sellers are continuously seeing the erosion of their sales because Amazon is seeking to use the sellers’ information to find opportunities for their own retail company.

“OnBuy will never, ever sell products. Sellers can sell their own inventory and not feel that we’re trying to steal market share off them – so there’s no harm in a brand listing all of their products.”

Copycat products are another problem. There have been media reports of sellers resorting to tactics such as leaving fake one-star reviews and sending false reports about counterfeit products in order to compete on Amazon.

Paton said: “We’re giving buyers the opportunity to buy products from OnBuy at a lower cost potentially than Amazon because we charge our sellers less in fees. We have a fixed price structure for them so they know exactly what it costs to sell a product through OnBuy – and that is always less than selling a product through Amazon.”

The company has secured big name brands including Mars – along with its associated Pedigree and Whiskas pet food brands – and Babyliss for its platform and is “in talks with major audio companies”.

Buyers can see the multiple retailers selling a particular product while their purchases are protected by PayPal. “Although we’re a growing platform and we don’t have every product yet, our pitch to buyers is quite simple: before you buy, check OnBuy,” said Paton.

“Some products on OnBuy are exceptionally priced.”

The company is planning further investment rounds and is set to begin an expansion programme in October. The ambitious plan is for OnBuy to launch in 140 countries around the world, which dwarfs the 17 country-specific eCommerce sites hosted by Amazon.

“7.8 per cent of online orders on our UK site are overseas at the moment and that’s climbing at a rate of about 15 per cent a month,” revealed Paton. “We see huge opportunity internationally.”

OnBuy has raised £2.7m investment to date and is looking to raise another £2.5m in the next 18 months to fund its expansion plans before a potential £15m Series A round before the end of 2022.

“We’re at £12m GMV at the moment and are forecasting £150m by 2022, when we expect to have 100m products on our website,” added Paton.

“But it’s the start of a journey: all we’ve done is shown people that it’s possible. Now the acceleration has started – and it’s very quick.”