The premise of “The Long Tail,” the just published business book by Chris Anderson (Hyperion - $24.95), is simple – that the Internet has essentially created the economics of abundance, which is reshaping what people and companies sell in fundamental ways.
While the premise may be simple, the implications are vast and profound…which is why every retailer needs to read this book and integrate its principles into his or her thinking.
This may not seem like a natural fit in the beginning, because much of Anderson’s initial argument focuses on the entertainment industry and the dramatic evolution that has taken place there in just the past few years. The Internet, according to Anderson, has been responsible for the obsolescence of the traditional 80/20 rule in which 80 percent of the business is generally done by 20 percent of the merchandise. But entities such as Amazon.com, Netflix.com and iTunes, because they make everything from recent hits to obscure oddities equally available, have created an environment in which niche products actually are able to generate a considerable amount of business.
The “long tail” is the where these niche products reside and thrive.
“There’s still a demand for big cultural buckets,” Anderson writes, “but they’re no longer the only market. The hits now compete with an infinite number of niche markets, of any size. And consumers are increasingly favoring the one with the most choice. The era of one-size-fits-all is ending, and in its place is something new, a market of multitudes.”
The beauty of a “long tail” economy, Anderson suggests, is that if offers numerous ways in which people and companies can compete with large and seemingly unassailable entities. Wal-Mart, for example, is what Anderson would prefer to as a “short head” company – broad in selection, but not very deep. Retailers that explore the depths that big chains like Wal-Mart are unable or unwilling to pursue suddenly have a possible advantage.
“People often ask me to name some product category that does not lend itself to Long Tail economics,” Anderson writes. “My usual answer is that it would be in some undifferentiated commodity, where variety is not only absent but unwanted. Like, for instance, flour, which I remembered being sold in the supermarket in a big bag labeled ‘Flour.’ Then I happened to step inside our local Whole Foods grocery and realized how wrong I was: Today the grocery carries more than twenty different types of flour, ranging from such basics as whole wheat and organic varieties to exotics such as amaranth and blue cornmeal. There is, amazingly enough, already a Long Tail in flour.”
The “long tail,” of course, doesn’t come without a challenge.
Retailers that want to be successful in exploiting the “long tail” have to be involved in the filtering process, helping consumers sort through the varied and infinite choices suddenly available to them. We have moved, Anderson suggests, from the Information Age to the Recommendation Age, where numerous referrals about virtually every product and service available can be found via the Internet. One of the challenges facing retailers is to use the consumer and product information available to them to make recommendations that are relevant and appropriate.
While the premise may be simple, the implications are vast and profound…which is why every retailer needs to read this book and integrate its principles into his or her thinking.
This may not seem like a natural fit in the beginning, because much of Anderson’s initial argument focuses on the entertainment industry and the dramatic evolution that has taken place there in just the past few years. The Internet, according to Anderson, has been responsible for the obsolescence of the traditional 80/20 rule in which 80 percent of the business is generally done by 20 percent of the merchandise. But entities such as Amazon.com, Netflix.com and iTunes, because they make everything from recent hits to obscure oddities equally available, have created an environment in which niche products actually are able to generate a considerable amount of business.
The “long tail” is the where these niche products reside and thrive.
“There’s still a demand for big cultural buckets,” Anderson writes, “but they’re no longer the only market. The hits now compete with an infinite number of niche markets, of any size. And consumers are increasingly favoring the one with the most choice. The era of one-size-fits-all is ending, and in its place is something new, a market of multitudes.”
The beauty of a “long tail” economy, Anderson suggests, is that if offers numerous ways in which people and companies can compete with large and seemingly unassailable entities. Wal-Mart, for example, is what Anderson would prefer to as a “short head” company – broad in selection, but not very deep. Retailers that explore the depths that big chains like Wal-Mart are unable or unwilling to pursue suddenly have a possible advantage.
“People often ask me to name some product category that does not lend itself to Long Tail economics,” Anderson writes. “My usual answer is that it would be in some undifferentiated commodity, where variety is not only absent but unwanted. Like, for instance, flour, which I remembered being sold in the supermarket in a big bag labeled ‘Flour.’ Then I happened to step inside our local Whole Foods grocery and realized how wrong I was: Today the grocery carries more than twenty different types of flour, ranging from such basics as whole wheat and organic varieties to exotics such as amaranth and blue cornmeal. There is, amazingly enough, already a Long Tail in flour.”
The “long tail,” of course, doesn’t come without a challenge.
Retailers that want to be successful in exploiting the “long tail” have to be involved in the filtering process, helping consumers sort through the varied and infinite choices suddenly available to them. We have moved, Anderson suggests, from the Information Age to the Recommendation Age, where numerous referrals about virtually every product and service available can be found via the Internet. One of the challenges facing retailers is to use the consumer and product information available to them to make recommendations that are relevant and appropriate.
- KC's View:
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It occurred to us as we were reading “The Long Tail” that we’ve spent ore than 20 years covering an industry that:
• Often looks to find ways to edit product selection to the 20 percent of products that do 80 percent of business, and yet keeps adding products (that usually fail) because of promotional allowances and incentives;
• Wants to expand the number of categories it is in (becoming wide but not necessarily deep);
• Tries to compete with Wal-Mart on its price-driven terms, rather than focusing on the things that make it different (an expertise in food);
• And talks about loyalty marketing, but ends up treating all customers pretty much the same because it knows precious little about individual customers.
If the conclusions proposed by “The Long Tail” are correct – and we think they are – it may be that almost all of these assumptions were wrong.
“The Long Tail,” it seems to us, is must reading for anyone wanting to compete in the 21st century marketplace.
