HenryPerformance is limited due to a scarcity of resources. Where supply cannot reach demand (in particular, big retailers)E-commerce helps supply meet increased demand
Jo (lady gaga example)
JamesBlockbuster's 3000th most popular title may only sell once or twice peryear. But for Blockbuster, there’s no 3001 or any further titles.Therefore, the tail is shortened and so only accounts for up to 20%.If you extend the tail from 3000 to 40,000; no matter how little the further 37,000 titles sell they'd add up a lot more overall sales at the end of the tail.
Product Variations:For example, Chris Anderson talks about a cleaning product that is available in over 60 different colours. But most high street stores roughly stock only 3.At the start of the year, high street retailers will try to guess which colours will be most popular for that year ad try to offer those exclusively. With the hope thatthey will be the most popular colour. However, if you order online you can choose from all 60 colours. Extending the long tail and allowing those less popular colours to mount up to a higher percentage of overall purchase.
Henry – Conclusion
The long tail
THE LONG TAILHenry Teall, Jo Chapell and James Goley
INTRODUCTION The Long Tail Theory was developed and coined by Chris Anderson The rise of the internet paved way for the development ofChris Anderson‟s „Long Tail‟, as the availability of niche products expanded alongside the growth of e-commerce websites.
‘THE POWER LAW’„The Power Law‟ is the broader umbrella in which „The Long Tail‟exists power law n. Math. a relationship between two quantities such that the magnitude of one is proportional to a fixed power of the magnitude of the other. - Oxford English Dictionary -
EXAMPLE OF THE POWER LAW There are many countries and cities thatcontribute to world wide fashion, however when it comes to fashion week, only four cities really count, New York, Paris, London and Milan. Hollywood films vs. the rest of the industry.
THE LONG TAIL Chris Anderson‟s Long Tail theory describes the online retail market. It explains how the desire for high demand products is rivalled by consumers desires for niche products.Aretailer may sell a large number of one popular product, whereas they may sell many more small quantities of a niche. Collating to a number that rivals the sell of the mass product.
THE GROWTH OF THE LONG TAILThe long tail came to exist as online retailers had „infinite self space‟.It is a lot cheaper for online retailers to store products inlarge warehouses than it is for traditional shop keepers to stock goods in high-street stores. Hence online retailers can offer a larger range on niche products.
THE 80 – 20 RULE A general example… 20% of the elite population own 80% of the land,Whereas 80% of the general population only own 20% of the land.
THE LONG TAIL IN PRACTICEIn the next graph, the vertical axis shows the percentage of demand for a particular film.The Horizontal axis show the popularity ranking of the film.Between 2000 and 2005, over 13,000 titles were added to the Netflix library. This graph show that as a result of this growth, demand for the “middle” increased.
THE LONG TAIL EXAMPLE A typical Blockbuster stocks around 3,000 titles. However, Netflix; without spacial limitations, has over 40,000.If you apply the 80-20 rule, roughly 600 titles account for 80% of Blockbusters overall sales.
LONG TAIL EXAMPLE… Blockbusters 3000 th most popular title may only sell once or twice per year. But for Blockbuster, there‟s no 3001 or any further titles. Therefore, the tail is shortened and so only accounts for up to 20%.If you extend the tail from 3000 to 40,000; no matter how little the further37,000 titles sell theyd add up a lot more overall sales at the end of the tail.
THE LONG TAIL: THE MUSIC MARKET Niche products – insignificant?Can amounts to thesimilar volumes of goodsBuild market shareAmazon and iTunes have adopted this strategy
GROWTH OF THE LONG TAILAs the use of e-commerce has risen over the years, the idea of The Long Tail has become more easily accepted. By using the internet as a way of selling your products, you are allowing yourself an „infinite‟ amount of shelf space. This allows for not only a range of different products but perhaps moreoptions to personalise your purchases. It also allows for the supply of product variations.
CATERING FOR WIDER AUDIENCE TASTESConsumer power – seek out products that are not available Allows niche markets to exist Obscure products are now easily available to us The “misses” become as profitable as the “hits”