Offer a nearly limitless selection and something interesting happens: there's actually more moneyto be made selling the obscure stuff than the hits. Music service Rhapsody makes more from songs outside of the top 10,000 than it does from songs ranked 10,000 and above. At Amazon.com, roughly 60 percent of books sold are titles that aren't available in even the biggest Borders or Barnes & Noble Superstores4. And at Netflix, over two-thirds of DVDs shipped are from back-catalog titles, not new releases (Blockbuster outlets do about 70 percent of their business in new releases). Consider that Netflix sends out 45,000 different titles each day. That's fifteen times the selection available at your average video store! Each quarter,Netflix Netherlands VPN roughly 95 percent of titles are viewed – that means that every few weeks Netflix is able to find a customer for nearly every DVD that has ever been commercially released.This phenomenon whereby firms can make money by selling a near-limitless selection of lesspopular products is known as The Long Tail. The term was coined by Chris Anderson, an editor at Wired magazine, who also wrote a best-selling business book by the same name. The 'tail' (see figure below) refers to the demand for less popular items that aren't offered by traditional brick and mortar shops. While most stores make money from the area under the curve from the left axis to the dotted line, long tail firms can also sell the less popular stuff. Each item under the right part of the curve may experience less demand than the most popular products, but someone somewhere likely wants it. And as demonstrated from the examples above, the total demand for the obscure stuff is often much larger than what can be sold through traditional stores alone.
Tuesday, 20 March 2012
Subscribe to:
Post Comments (Atom)
No comments:
Post a Comment
Note: only a member of this blog may post a comment.