What does the distribution of products look like in the future of retail? This is the question Chris Anderson sought to answer in his bestselling book, [amazon-product text="The Long Tail" type="text"]1243265818[/amazon-product]. Anderson’s answer is that hits will become less significant and niche products will become more important, with millions of products selling a couple copies adding up to a big business.
To succeed in this new economy, Anderson offers two strategies for modern, or is that postmodern, businesses:
- Make everything available.
- Help people find what they want.
Simple right? In concept? Sure. In practice? Uh, where does a business start.
Solving the problem of helping people find exactly what they want is perhaps the greatest problem facing business. It’s why Netflix is offering $1 million to anyone who can come up with a better recommendation algorithm, and why Google is the 8-ton Tyrannosaurus rex of search—they’ve solved the algorithm better than anyone else. But even Google admits, they’re only about 5% of the way there.
Algorithms aside, Anderson’s model is affected by two other factors: Anderson’s admission that even the biggest sellers of retail online don’t expect sales to pass ¼ of the sales of brick-and-mortar shops for decades, and data presented by Anita Elberse in Harvard Business Review: Nielsen SoundScan data for 2007 reveals that of the 3.9 million tracks sold in 2007, 24% sold only 1 copy and 91% sold less than 100 copies.
If online sales are expected to remain a fraction of the sales of real-world stores, what’s the incentive for traditional brick-and-mortar retailers to invest in algorithms that help customers find what they want? Is it more beneficial to open up a new store, or improve the way all of the retail locations do business, or to invest in the Long Tail? If costs of production are diminishing, leading to a greater raw number of tracks selling few or no copies (i.e., products that are likely to have no strong link to any popular product—a key element in the navigation from the head to the tail) what is the likelihood that products will get lost in the Long Tail?
These, and others like them, are the types of questions that Anderson’s Long Tail generates. The Long Tail provides an accurate measure of what the world looks like, but gives little insight in where to go.
The most useful conclusion that can be drawn from Anderson’s work isn’t that millions of niche products will add up to big business, but that helping people find what they want will add up to big business. And, this is as true for brick-and-mortar retailers as it is online retailers. With increasing time pressures, efficient buying is becoming more and more important to consumers.
How many sales are you losing in your operation because consumers can’t find something they need that you have? What are you doing to make their likelihood of finding what they want to improve?
Tags: No Comments
0 responses so far ↓
There are no comments yet...Kick things off by filling out the form below.