eBay/Long Tail
Long tail is the entrepreneur's word for the 20/80 rule.Notice I said 20/80, not 80/20.
Traditionally, business analysts argued that 80% of a company's sales came from 20% of its products.
The same applied to people2people enterprises, like consulting.
You had a customer base and then you had a customer base -- those who bought and bought repeatedly. Those were the 20% you didn't want to disappoint.
They were the lifeblood of your business.
Long Tail takes the inverse as its mantra.
Amazon sells roughly 2.3M books and that the average Barnes and Noble retail store stocks 139,000 books. So, Amazon stocks roughly 2.2M more books that Barnes and Noble.I don't think the 80/20 rule is a myth, but it is definitely being questioned and tried by contemporary consumer behavior.
No surprise here. That’s the benefit of an online storefront. Massive inventories housed in ultra-low-rent areas that are fronted electronically.
The astonishing figure is the percent of sales that comes from the “long tail” of books (books that Amazon carries but that Barnes and Noble doesn’t).
57%.
57% of Amazon’s sales come from books you can’t even buy at a Barnes and Noble...This runs totally counter to the traditional 80/20 rule in retailing – that 80% of your sales come from 20% of your inventory. In Amazon’s case, 57% of their book revenue comes from 0% of Barnes and Nobles inventory.
Business analysts need to rethink their forecasting methods in the face of such striking irregularities.
Because soon they won't be irregularities.
It's clearly a case of human behavior upsetting Pareto's nostrum.
It was that Italian who came up with the 80/20 rule.
But I doubt Pareto ever downloaded an MP3.
In other words, you don't sell or offer what everyone else is, but what they aren't.
This is not just a virtue of online booksellers; it is an example of an entirely new economic model for the media and entertainment industries, one that is just beginning to show its power. Unlimited selection is revealing truths about what consumers want and how they want to get it in service after service, from DVDs at Netflix to music videos on Yahoo! Launch to songs in the iTunes Music Store and Rhapsody. People are going deep into the catalog, down the long, long list of available titles, far past what's available at Blockbuster Video, Tower Records, and Barnes & Noble. And the more they find, the more they like. As they wander further from the beaten path, they discover their taste is not as mainstream as they thought.The advent of the internet is of course responsible for such a seismic shift in buying eclecticism.
An analysis of the sales data and trends from these services and others like them shows that the emerging digital entertainment economy is going to be radically different from today's mass market. If the 20th- century entertainment industry was about hits, the 21st will be equally about misses.
The internet leapfrogs phyiscal and spatial constraints.
A brick and mortar bookshop couldn't risk carrying an obscure title.
An online storefront faces no risk -- inventory is a number flashing across an LCD. Whether or not that obscure title is sold is negligible.
Business will go on. And both alternative and mainstream tastes can be accomodated.
This is the Long Tail -- niche tastes satiated across worldwide fiber optic cable, the glue of the internet.
That sounds a lot like eBay -- treating the individual as such and satisfying off-the-wall desire.
Mass customization, as Walter Benjamin theorized it, at least, is wacked at the knees.
And so it would seem to me that eBay is the internet company par excellence, interrupting and re-defining the calculus of convinience.
You want a synonym for globalization?
It's profligacy.
Everything should be inventoried because everything sells.
Just ask Netflix.
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