The Long Tail (Part 2)
I still believe (as the office skeptic / curmudgeon) that “The Long Tail” may be the candidate for this year’s most irritatingly obvious buzzword. Upon reflection, however, I must admit that the term provides a kind of comfort that it’s predecessor — “the 80/20 rule” did not offer. Namely, the visualization of a long statistical tail makes it easy to think of each instance on the tail as a blog, or a website, or some other little business struggling to (if you’ll forgive me) get its piece of the tail. The “80/20 rule” always seemed to imply that 80% of whatever you do or sell is wasted and ignored… which is the opposite of comforting. Maybe that’s why I smiled when I read about the new Internet Retailer report providing data on the current online retailing landscape. The headline is that the top 100 online merchants account for 53% of all online sales, compared with the offline world in which 63% of all retail sales are dominated by only 100 merchants. I smiled because I couldn’t help thinking about all the online merchants at the tail-end; small, specialized, probably struggling, but surviving because the Internet makes it possible to survive down there where the tail is thin.
My smile fell a bit when I read about the “browser satisfaction” index that had been contributed to the report as a result of surveys done by ForeSee. The index purports to rate online merchants from the point of view of browser satisfaction — apparently as a proxy for willingness to buy from a particular merchant. I probably have a variety of objections to this assertion, but I have ordered the report and will hold my tongue until all the facts are in. But one obvious “huh?!” bears mentioning. The top-rated site in this index is NetFlix… Last time I checked, NetFlix, as a subscription-based service, has a very different browsing / buying dynamic than, say, Amazon. NetFlix members have a powerful incentive to find something on NetFlix: they pay their monthly fee whether they order videos or not. Plus, NetFlix only “sells” one thing (DVDs), as opposed to Amazon that sells, what? a gadgillion things? Like I said, I’ll read the survey results in more detail and report back, but it seems plain wrong to include NetFlix in any such comparisons.
NG
June 10th, 2005 at 11:53 am
An interesting side note here: amazing that the difference between online and offline merchants in terms of online sales concentration is only 10%. Somewhat alarming, actually. In theory, it’d be far less concentrated on the Internet, if only because it’s a younger medium. Nick believes and I agree that we’re better off without this kind of concentration online. About the only immediate benefit I can see to it is that presumably those 100 top online merchants are simply doing what they do better, have better reputations and more to offer. But when I see sites like that of the Vermont Country Store, I really wonder.
June 13th, 2005 at 12:27 pm
Brand vs. Network Effects
First, not that either is mutually exclusive. But in the online world, network effects for “platform” based e-commerce sites (ebay & amazon) is more important than brand while offline world the brand drives more value. We all know that network effects “ramp up” on the value curve much faster which drives up concentration of online retailer. Countered by low switching cost of online shopping experience probably explain why its ONLY 10% less than offline where brand is actually re-enforced by “committment” (10M drive to my local B&N so I better buy something if I go)
Side note, if eBay and Amazon is not included in the survey as TWO retailer but conglomeration of their sellers I bet you’ll side the tail you are looking for.