The Long Tail
One of my readers recently asked, “How and why do stores like The Sharper Image and catalogs like Sky Mall survive?” After all, one would think the market for a personal ionic air purifier that you wear around the neck, or a Lord of the Rings incense burner shouldn’t be that large - and if you’re catering to such a small customer demographic, it would only seem logical that the amount of sales generated by these niche products would scarcely be able to cover the operating expenses needed to run the businesses (profitably).
Well, turns out these businesses are able to survive. For example, the Sky Mall has been around for nearly two decades, and the Sharper Image (although it declared Chapter 11 in 2008) operated for over 32 years before its shutdown. The reason for this is a concept called the “long tail.”
What is the long tail, you may ask? I know what you’re thinking, but it’s not part of an animal…
It’s a concept popularized by Chris Anderson in an October 2004 Wired magazine article, which highlights the art of selling less of more. Turns out, in a market with a high freedom of choice, people will gravitate towards the upper 20% of items sold (for example, scented candles v. LOR incense burners, or pop music v. alternative, or CNN.com v. some unknown blog site). The other 80% is much less popular. In business, this is generally referred to as the “80/20 rule.”
You’re probably now wondering, if people only buy the top 20% of items, doesn’t that make the other 80% worthless? Not necessarily.
Even though 20% of the products out there are deemed “bestsellers” or “blockbusters,” products in low demand or have low sales volume (those in the other 80%) can collectively make up a market share that rivals or even exceeds best-selling products. The total sales of these “non-hit items” are the Long Tail. And the trick to capturing this “long tail” (those in the 80% group) is “variety.”
For example, if you only sold LOR incense burners, you would only capture a fraction of the population who liked LOR and incense (and more importantly, the two combined together – a very small population indeed). However, if you sold LOR incense burners and Star Trek coasters, and all other things sci fi, you would broaden your customer appeal to comic book lovers, astronomy aficionados, and nerds/geeks everywhere. And if you broadened your inventory of niche products even further, your customer base would grow even larger.
The long tail is pretty obvious when it comes to a business like eBay (think about the weird things you find there). However, it’s also found in more traditional businesses like Amazon, Netflix, and even Wal*Mart. Amazon used to be just books, but now it’s toys, electronics, appliances – and even niche items like spare cell phone parts and memorabilia. Netflix not only offers blockbusters, but foreign films and artsy films that cater to only a small subset of the population.
So remember, it’s all about variety. As some say, variety is the spice of life, and the long tail proves that true. So, next time you peruse through the Sky Mall catalog and think, “What kind of weirdo would buy that?” Just remember, one weirdo may not make a difference, but a bunch of weirdoes is a powerful thing (because they make up a long tail)…
Well, turns out these businesses are able to survive. For example, the Sky Mall has been around for nearly two decades, and the Sharper Image (although it declared Chapter 11 in 2008) operated for over 32 years before its shutdown. The reason for this is a concept called the “long tail.”
What is the long tail, you may ask? I know what you’re thinking, but it’s not part of an animal…
It’s a concept popularized by Chris Anderson in an October 2004 Wired magazine article, which highlights the art of selling less of more. Turns out, in a market with a high freedom of choice, people will gravitate towards the upper 20% of items sold (for example, scented candles v. LOR incense burners, or pop music v. alternative, or CNN.com v. some unknown blog site). The other 80% is much less popular. In business, this is generally referred to as the “80/20 rule.”
You’re probably now wondering, if people only buy the top 20% of items, doesn’t that make the other 80% worthless? Not necessarily.
Even though 20% of the products out there are deemed “bestsellers” or “blockbusters,” products in low demand or have low sales volume (those in the other 80%) can collectively make up a market share that rivals or even exceeds best-selling products. The total sales of these “non-hit items” are the Long Tail. And the trick to capturing this “long tail” (those in the 80% group) is “variety.”
For example, if you only sold LOR incense burners, you would only capture a fraction of the population who liked LOR and incense (and more importantly, the two combined together – a very small population indeed). However, if you sold LOR incense burners and Star Trek coasters, and all other things sci fi, you would broaden your customer appeal to comic book lovers, astronomy aficionados, and nerds/geeks everywhere. And if you broadened your inventory of niche products even further, your customer base would grow even larger.
The long tail is pretty obvious when it comes to a business like eBay (think about the weird things you find there). However, it’s also found in more traditional businesses like Amazon, Netflix, and even Wal*Mart. Amazon used to be just books, but now it’s toys, electronics, appliances – and even niche items like spare cell phone parts and memorabilia. Netflix not only offers blockbusters, but foreign films and artsy films that cater to only a small subset of the population.
So remember, it’s all about variety. As some say, variety is the spice of life, and the long tail proves that true. So, next time you peruse through the Sky Mall catalog and think, “What kind of weirdo would buy that?” Just remember, one weirdo may not make a difference, but a bunch of weirdoes is a powerful thing (because they make up a long tail)…
Comments