Leveraging “The Long Tail”

The Long Tail is a concept in marketing and economics that has been getting far greater attention recently than ever before. For those of you who don’t understand the concept, I’ll explain.

The related underlying concepts such as the 80/20 rule are not new (see Pareto Principle, Power Law) but what has given this concept widespread attention recently is it’s near ubiquitous use in the world of web 2.0.

Sticking to tradition, I shall quote Wikipedia for a concise definition:

[The Long Tail] refers to the statistical property that a larger share of population rests within the tail of a probability distribution than observed under a ‘normal’ or Gaussian distribution.

Translated to English in the context of Web 2.0, this basically means that for any given set of items (e.g. Music, Clothing etc.) there is a large market share for just the top items, but more importantly there is also a sizable demographic for the remaining items. In case you’re confused, look at the following graph I have prepared:

Leveraging The Long Tail of eBay

Leveraging The Long Tail of eBay

Needless to say, I will be using eBay as an example to demonstrate what The Long Tail is really about, hence the graph being tailored to eBay. The dark grey portion of the market refers to those items that are main stream and are available from regular retail outlets such as brick mortar stores. This comparatively small range of items comprises “the head” of the graph and essentially controls a large portion of the market. However, the light grey portion, which is referred to as “the long tail” is comprised of all other items which, although individually do not sell much, as a whole, comprise a sizeable market share. This situation can be summarized below:

Dark Grey: Few types of products, each sell high number of units

Light Grey: Large types of products, each sell low number of units

Now, if it isn’t obvious, the reason why the Long Tail is of a comparable size is because of the sheer number of non mainstream products out there. Although each individual product will not have a big market, it will have a Niche Market. The number of such Niche Markets adds up considerably to form this concept of “The Long Tail”. As a business, eBay has done a rather excellent job of cultivating this.

Here is an example of a product that might be found in a retail store:

Harvey Norman – PS3 120GB Gaming Console

And the same product on eBay

eBay – PS3 120GB Gaming Console

This would be a typical example from the dark grey section of the graph.

But what about a rarer product or something less known? I very highly doubt the following items are easily available through regular brick mortar stores (if at all):

eBay – Bizarre Chinese old animal shape LOCK *****Collectible

eBay – Tibet Man-Made coral engrave buddha snuff bottle+++++++

eBay – Xact XTR-1 Sirius Satellite Receiver Remote RARE

eBay – Haunted Powerful Utukku Demon Djinn Ring of Wealth

As you can see, there is not a big demand for these seemingly random (and sometimes bizarre) items, but their sheer number makes their combined market share a sizeable one.

This “potential” in the long tail had previously been left untapped. This was due to many reasons, such as the small physical reach of traditional Brick Mortar stores, cost of purchasing inventory, storing and distributing the products. Only recently have these factors become negligible in cost, and have therefore allowed the tail’s potential to be recognized and cultivated.

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4 Responses to Leveraging “The Long Tail”

  1. amielazim says:

    Hey, interesting blog you have here! You’ve clearly explained what leveraging the long tail is all about. How odd, people are actually selling spiritual items on ebay. I mean it’s no doubt that the business is leveraging the long tail but, do people actually buy it? is there any sort of evidence?

  2. rodh257 says:

    I’d imagine they buy it, or people wouldn’t be selling it. I guess its the supply and demand part of the long tail! You could probably watch the auctions and see if they sell too.

    Great post,

    Rod Howarth
    http://rodsramblings.wordpress.com

  3. shravan15 says:

    Hi guys,

    Thanks. With eBay you can follow a listing like rod has said, and sometimes it even says “history: x amount sold” for a particular item.

    Cheers,
    Shravan

  4. gazza says:

    Hi,

    I stumbled onto your blog while looking for a PS3. While I think you have a point with the long tail niche market taking flight, I believe it’s also a huge amount of effort to go about and source such a large range of products with a shallow supply of each. So I think that while there is a market for the long tail, most customers will stick to the discounts that the short tail brings when a seller orders 100,000 units from a manufacturer.
    Check out http://www.dealextreme.com for a massive list of cheap niche products, they seem to be doing well but not many people at all are going get nearly as many inventory products. It’s a not an easy area.

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