This article is a good economic lesson on how to be a successful
Internet retailers. It discusses the long tail demand for multimedia
products and publications, which essentially says there is not only a
small amount of "hits" that traditionally contributes to large amount of
sales but a large amount of "non-hits" or "misses" also have sales as
significant as the "hits", if not more.
I think the primary reason that drives the long tail is that online
retailers no longer requires physical space to show their products. All
they need for a product is some disk storage space to make a product
available for sale. Given the cost to present a product to the customers
is cheap, the online retailers can make more products (legacy and
non-popular ones) available. Since the marketing folks also want to see
some benefits from selling non-popular products, they create the
recommendation system (which is essentially another form of
advertisement based on immediate browsing behaviour) to show the buyers
more and more products. All it needs is to attract each buyer to
purchase a non-hit item besides the hit item that they originally plan
to buy to create the long tail phenomenon.
The question I have is that does it worth the hassle to sell the
unpopular physical products. First, these products do not have a
guaranteed sale. It is unpredictable how a "miss" can couple with a
"hit", and this issue makes stocking a big challenge. In addition, there
are a large variety of "miss" products to carry. Even if a retailer is
willing to have one stock for each item, the capital cost will be a lot
higher than to stock the "hit" products. I am not an economist so I
cannot answer this question. My intuition is that only giant retailers
like Amazon.com have financial power to drive the long tail but not
those with a smaller scale.
Received on Mon Nov 28 2005 - 09:18:34 EST
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