The long tail is a business model that not only sells well-selling products, but also has a large number of dead-line products that hardly sell, and matches dead-line products with people who have their needs to increase sales.
Until now, it has been thought that it is the best-selling products that bring profits to the company, not the deadly products, but due to the spread of the Internet , the promotion cost of deadly products is increasing. It almost disappeared.
The long tail was published by Chris Anderson, editor-in-chief of the American business magazine “Wired”. When the sales volume of products on the Internet is graphed on the vertical axis and the products sold are graphed on the horizontal axis, the left end is high and the right end is low. The name comes from the fact that it looks like a dinosaur’s body.
Before the advent of direct sales business models such as the Internet, it was necessary to have products in the limited space of storefront space , and for that purpose, it was necessary to leave the best-selling products and cut the lines to death. However, even rare products that are rarely sold on the Internet, which is not restricted by stores, can be sold stably when dealing with nationwide commercial areas, and in turn, mass advertising in the world of advertising. Only the royal companies can enter the expensive place request, and even small and medium-sized companies that wash the tail can publish. This phenomenon is sometimes called the long tail.
Contrary to the long tail, there is a business model called blockbuster that makes all profits from some of the best-selling products, and this model is adopted by movie companies, ender entertainment companies, pharmaceutical companies, etc. There are many companies.
- Niche product promotion and segment selection
- Streamlining the system to meet customer needs
- Check inventory management and break-even point of sales cost
Advantages of long tail
Stable profits can be made
The point of the long tail is to acquire a wide range of customers by creating a “place where you can get everything” by stocking a lot of deadly products.
Not only the top 20% of top-selling products, but also the bottom 80% of dying products that should be cut off at physical stores can be stocked using the physical sales floor area unique to the Internet, which is stable. Is generating sales. In other words, it means that we will obtain a large and stable profit overall by accumulating profits obtained from products that meet detailed needs.
In fact, Amazon, the representative of the long tail, has earned stable and enormous profits that are comparable to or surpass the sales of top-selling products by accumulating sales of products that were previously deadly.
Meet customer needs
The more products you have, the more you can meet the needs of your customers, and inventory management on the Internet makes this possible.
For example, when it comes to Amazon, it’s not just the best-selling products, but it’s hard to find something that doesn’t exist. For example, when looking for one product, if you look at several sites, you will definitely have Amazon.
Recently, the diversification of tastes has made it difficult to create hot-selling products. Online shopping with long tail models meets needs that were unthinkable in the past , and now it is not just for goods. It has led to the long tail of online distribution businesses such as videos, music, and e-books.
Disadvantages of long tail
Difficult to achieve in a physical store
A good example is a convenience store. Convenience stores are physical stores, and are characterized by a smaller sales floor area than other retail stores. Therefore, it is a retail format that efficiently raises sales by collecting only the best-selling products in each field, which is a sales method based on POS data. Therefore, it is impossible to put “ products that you do not know if they will sell once a year” .
It’s not just about having the same number of items
Even in Amazon, new products and top-selling products still account for the majority of suicide sales.
Sales will not be stable even if only niche products are available at the discretion of the individual.
It is important to balance the product lineup, especially to identify the product lineup that makes it easy to make a profit in the short term and the product lineup that makes a profit in the long term, and to manage the inventory.
If you open a new online shop aiming for a long tail without utilizing such know-how, economies of scale will not work and it will be difficult to manage logistics costs.
The key to long tail success
Niche product promotion and segment selection
There may be certain needs for vintage or lesser-known items.
Inventory costs and distribution costs are also incurred in product sales, but many successful mail-order sites with long tails also adopt platform models, so we are recruiting shoppers from outside our own site to expand the number of products and inventory We keep costs down by leaving the idea to us.
Streamlining the system to meet customer needs
However, niche products have the disadvantage of not being able to generate short-term profits because it takes time for consumers to recognize the product.
Therefore, it is necessary to devise a system like Amazon, which is one of the largest shopping mall sites in the world, to surely reach customers with niche needs.
For example, advanced search and recommendation have been found to be effective in the practice of many companies. In fact, in order to improve the quality of those functions and systems, Amazon and Netflix have a large number of data analysis specialists who analyze the characteristic behaviors of various customer groups.
Check inventory management and break-even point of sales cost
When you have a small amount of merchandise in stock and sell it, it is important that inventory management and sales costs do not exceed sales.
Long tail representative company
Amazon is a bookstore founded in 1995. There was a limit to the types and number of books that could be stocked in a physical bookstore due to space restrictions, but by making it an online bookstore, the stock space is no longer restricted. We also meet the needs of our customers by offering as much as possible a wide range of genres, from accumulating data over many years to selling and dying.
Amazon has a huge warehouse in terms of being an online shopping site. So, for example, in the case of books, there are books that can only be sold occasionally, and there are a huge number of such products in each category, boasting an overwhelming selection of products.
Amazon is the biggest example of the long tail, but in addition to the attractiveness of same-day delivery and free shipping to Amazon, as I will explain later, online content distribution of videos and books is also long. Since it is a tail model, Amazon’s main revenues such as content sales and commerce sales fees, and Amazon’s huge sales of terminal sales of Kindle and Alexa can be supported by the long tail model . It’s no exaggeration.
As an aside, Amazon has only entered more than a dozen countries, so it has the potential to reach billions of people in developing countries with a long-tailed tail.
Video distribution service and electronic content distribution service
Video distribution services and electronic content distribution services are suitable for long-tail models.
The reason is that products can be stored digitally without having a random customer group with diverse tastes and a physical store.
Such video distribution services and other electronic content distribution services include video distribution services Netflix and Hulu, Amazon Prime Video, and electronic content distribution such as music distribution Spotify and Line Music, and electronic distribution of books. There is a kindle of.
Online advertisements provided by search engines such as Google also fall into the long tail.
These online advertisements provide information that matches the interests of the viewer, depending on specific search keywords and the content of the content viewed by the user.
Products displayed with keywords searched by many customer groups are classified as “selling products”, and products displayed with highly specialized keywords are classified as “niche products”.
There is no concept of inventory in ad distribution services, and even if the number of searches is small, we generate ad revenue from various keywords. In the case of search results such as Google and search-linked advertisements displayed on websites, few people may search for information on the product that hits the tail, but those who search for it may buy that product. It can be said that the advertising effect is high because it is high.