The Long Tail in Ecommerce: Opportunities and Challenges
India’s consumerist boom is well documented and studied; shoppers, delighted by the explosion of choice in brick and mortar stores, have taken to shopping en masse. That’s Wave One, if you will, with best-selling products (or hits) being sold in large quantities, and ‘misses’ losing mindshare. This is inherent to the physical nature of shopping in India- stores only have so much shelf space, and any product stocked needs to justify its ‘rent’ on that space by selling a requisite amount. This is the short head, with large-volume, mass market products accounting for the majority of the market.
But most of us want more than just these blockbusters. We may conform in some areas, but everyone’s taste departs from the norm somewhere, when we explore niche alternatives. Sadly, these niches have been relegated to the junk pile by the combined double-whammy of mass marketing and physical space limitations.
Enter the Long Tail. Essentially, the unlimited choice afforded by online stores means that niches that aren’t popular can be explored by consumers.
Online shoppers were posed a simple question: what percentage of the top 100,000 books on Amazon sell at least once a month? Most replied with something like 20%. They couldn’t have been more wrong. Fully 99% of the top 100,000 books sell in some volume; there’s someone, somewhere who reads the rare titles.
ALF, a TV show about a furry alien, was one of the mainstays of my childhood. It was also impossible to find in India, and I had to beg relatives in the US to hunt down box sets in seedy shops to get my ALF fix. A DVD store, like any other physical store, in addition to being encumbered by space constraints, is also geographically shackled. It only ever gets customers from a five or ten mile radius, and can therefore only stock ALF if there are enough ALF watchers in that area. The unfortunate truth is that there are maybe a hundred ALF fans in all of India, and they’re spread so thinly that no single store could dream of justifying the cost. The Long Tail makes no economic sense in a physical world.
E-Commerce changes that. It costs Amazon nothing to put ALF on its catalog, and sell a couple every week; sure, it may never become a best-seller like Harry Potter, but some sales in the long tail add up to a significant market size. The Long Tail, surprisingly, is longer than we think; iTunes makes half its money from albums outside the Top 40- proof of the power of this untapped market.
When is the Long tail market viable?
Exploiting the Long Tail implies providing unlimited choice to consumers. Clearly some industries are better suited to this model than others. Products that can be stocked with zero or near-zero inventory cost, like digital movies, books and music, can benefit massively from the long Tail. Netflix and iTunes have done this to great effect. However, it’s unviable to fill warehouses with every conceivable variant of a product if only a few units might sell.
Inventory-led models like Amazon and their Indian versions try to play a mix of the blockbusters (e.g. mobiles) and long-tail digital products (e.g. digital books or music). For physical products, true long-tail comes when the product is sourced or produced on-demand. Services like Koolkart* aim to address this need by connecting shoppers to online and offline designers and retailers, with a zero inventory model.
Okay, I can buy anything. But what should I buy?
While the first wave of e-commerce involved selling high volume, commoditized products along with cut-throat price competition between the likes of Flipkart and Homeshop18, there’s a marked shift happening currently. There are many e-commerce sites opening up every month and many of them are in long-tail categories of Fashion and Home Decor. The consumer suddenly has plenty to choose from – and in most cases too much choice.
With the Long Tail, there’s always the danger of customers feeling lost in the deluge, having excess choice. The key with long-tail is to enable product discovery in a meaningful and efficient fashion. This is where social discovery and personalized e-commerce comes in. People tend to take their friends’ opinions about products into consideration while shopping. Also, a person has his or her specific interest areas. The next wave of e-commerce sites will have to factor in more elements about the the consumer to stay relevant.
India is headed towards being a mature, e-commerce market in the coming years. These are some of the consumer centric strategies that will be relevant for good players in the space. Ecommerce players will start mixing social discovery and interest based personalization to enable shoppers to discover long-tail products.