The Long Tail business theory

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Long tail is a phrase popularized by Chris Anderson, former editor of WIRED Magazine, in 2004. Anderson compared Long Tail to the blockbuster or hit-driven business models of media and retail companies. Long-tail sellers change the shape of demand from “blockbuster” or “superstars” to selling large numbers of unique, niche items.

As an Amazon employee said at the time, “We sold more books today that didn’t sell at all yesterday than we sold today of all the books that did sell yesterday.”

When does it work:

  • Lower costs to store, distribute, and merchandise- Lower merchandising costs
  • Recommendation engines

A true long-tail business is rare and less universal but it works well for businesses focussing on a niche segment. A lot of this is also because online stores usually have centralized warehouses in which they can keep everything – minimizing multiple costs. Those who are classed as digital retailers (think iTunes) have it even better because they don’t need any physical storage space – everything is digital instead. Therefore, they have even better opportunities when it comes to long-tail items and the marketing that accompanies them.