Niche markets flourish online
By MIT Sloan Management Review Wednesday, 13 September 2006
The internet has cut prices for consumers, but an even greater benefit, it is said, has been the ability to locate, evaluate and purchase a much bigger variety of products than via bricks-and-mortar retailers.
For example, 30%-40% of Amazon's book sales are of titles that wouldn't normally be found in a retail outlet. Other markets where this 'long tail' phenomenon has been identified include music, films and the media. Lower stock-keeping costs, lower initial cost hurdles from made-to-order production and the ability to deliver some products electronically have driven its development.
Meanwhile, the internet's ability to aggregate demand on a global scale has delivered the necessary business scale. The danger is that consumers can become overwhelmed by such choice (and may reduce purchases as a result), so it is critical that retailers provide tools to discover products.
From niches to riches: anatomy of the long tail,
Erik Brynjolfsson, Yu 'Jeffrey' Hu and Michael D Smith,
MIT Sloan Management Review, summer 2006, Vol 47 No 4
Review by Steve Lodge
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