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China’s global impact on U.S. sellers is ‘a huge piece of the Amazon story’: Professor

Northeastern University Assistant Professor of Communications Studies Moira Weigel joins Yahoo Finance Live to talk about the impact Amazon is having on third-party sellers.

Video transcript

DAVE BRIGGS: Tech stocks holding on despite widespread layoffs in the sector. The NASDAQ coming off four weeks of gains, on pace for its best January since 2001. Amazon up 17% this year. The tech giant set to report fourth quarter earnings on Thursday.

And our next guest has a new study out on how third-party sellers have transformed Amazon's retail business over the last two decades. Moira Weigel is an assistant professor of communication studies at Northeastern. She joins us now. Moira, nice to see you.

In this study, you compare Amazon's small businesses to day traders. Why?

MOIRA WEIGEL: Thanks so much for having me on. So the language of day trading, like a lot of the language in my study, came from the sellers themselves whom I interviewed. Third-party sellers sell most of what anyone buys through Amazon.com. It's about 60%. Given that Amazon captures about 40% of all online sales, that's a huge percentage of everything sold online.

And several of the folks I interviewed who do this work or have these businesses use this metaphor saying, you know, what I do is-- not me, Moira, but what they do is less like running a corner store than day trading.

And I think that metaphor captured a few things for them about the nature of their work. One is the way that they're often selling many, many different SKUs, sort of speculating on looking for opportunities within this global infrastructure. Other aspects have to do with how much it's mediated by screens, the quick pace of it, and perhaps also the promise of a way to sort of make money from home, make money while you sleep, which did and did not play out as expected for different characters I spoke to.

SEANA SMITH: Moira, for those who maybe weren't as optimistic-- they weren't as appreciative for what Amazon had done to their business. They took more of a critical tone. What did you hear from that side?

MOIRA WEIGEL: I heard a lot. It's a really interesting question. And going into this research a couple years ago, I thought that I would hear a lot about Amazon copying seller products, which I think is something we've heard a lot about in the public in general during these past few years of growing interest in possible antitrust action against Amazon. I actually heard relatively little about that.

I'd say I heard a lot more about phenomena that I think of as belonging more to the category of platform problems-- so failures of automated management of the platform, failures to prevent abuse by competitors like, say, you know, buying fake ratings on your product or knocking off your product and so on.

And then a huge piece of the Amazon story that I think has not really been told or emphasized is how profoundly the entrance of China into Amazon's global marketplace has transformed the business for US sellers. Amazon opened its platform to Chinese merchants in 2015-2016, and that had profound consequences for small- and medium-sized businesses using the platform in the US. Nearly 50% of sales by volume through the marketplace are directly from China to the United States with no other intermediary besides Amazon. So that was a big change that a number of the US sellers I spoke to spoke about. I did also interview merchants in China who have their own perspective, but those are a few highlights.

DAVE BRIGGS: What surprised you the most concerning your assumptions going into this? And as you go out, do you feel better or worse about shopping on Amazon?

MOIRA WEIGEL: I will say I try not to shop on Amazon. I do shop on Amazon sometimes. I have a three-year-old and a one-year-old, and time is tight.

I think-- and this is one of the main themes of my report-- that the way the conversation has often been framed in public is Amazon critics saying Amazon is bad for small business. Amazon is saying, what are you talking about? We give this great infrastructure to small businesses to connect with consumers they couldn't otherwise.

My argument is that neither of these is the right frame. Amazon is transforming what it means to be a small business into something more unstable, much more vulnerable to Amazon's whims, and largely dependent on its data and its infrastructure.

So I think it's really a big question for society of how much power we want concentrated in this one firm over small business, if that makes sense, and trying to reframe the question from just good or bad to really think about this profound transformation and where the things we live with and buy come from.

SEANA SMITH: Yeah, certainly very, very important and valid points there and really makes you second guess, really, your view of Amazon because I'm with you, Moira. I have young kids, and I buy a lot of my stuff on Amazon. I wish I didn't, but it's the convenience factor that gets me every time. But certainly they do have a massive, massive impact on small businesses across the country.

Moira Weigel, thanks so much.