Retailers have jumped onto this phenomenon of selling as they make a profit through the retailing of unique goods in small volumes. Type long tail into Google and almost every search result will mention Amazon.com at some point. They have increased the profit of niche marketing and created a long tail marketing process. Another example can be seen when discussing the shelf price of clothing. If a company is paying large amounts for distribution costs, it makes sense for them to only sell high profit generic items. As opposed to a company operating under a long tail approach, they have an equal cost on shelf space, allowing the way for unique items to hit the shelves and cerate profit.
This is particularly prevalent in online shopping where items can be searched for. Take e-bay for example; its bidding function has the ability to place a hefty price on relatively cheap items. And keep customers coming back for a chance to a one-of-a-kind piece.
Okay, so I’m still a little bit unsure of how to actually get the long tail idea into words. If anyone has a bit of a clearer description, would love to read it!
You're definitely on the right track Naomi. Basically it's catering for niche markets through offering a wider range at lower prices.
ReplyDeleteThis is generally only viable in an online environment. An online retailer has the benefit of storing much more in a warehouse for a lot cheaper than a retail store in the real world which is confinded by in-store space and shelfing sales.
Therefore, the online retailer can supply a much wider range of products (books, cds, etc) which the off line store physically can not. The online retailer makes money from catering to the niche markets, rather than the mass market. The thousands of niche markets make up the 'long tail' of the diagram (Where it's having an orgasm) and in many ways becomes a more successful retailer because of this.
I hope this hasn't confused you further!
My understanding of this topic differs to you both, well kind of at-least. I'm sure it touches on aspects you have both mentioned.
ReplyDeleteWhat i derived from this graph, is that at the base of the tail (i.e. the highest point) is basically all the generic products, or the products with the most mass-appeal (Think taylor swift). This means that they have a higher purchase rate which is the reason for the height in the graph. It is when the online consumer stores start offering 'related products' or 'products you may like' that the niche marketing comes to fore (try and imagine an underground country singer similar to taylor). This means that the consumer is going down the tail towards a more segmented audience which has lower purchase rates.
Hope this helps.