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Theory could mean more online-purchasing Oklahomans


August 21st, 2008

Imagine shopping in a huge store with an unlimited selection. Would you indulge your curiosity and buy a multitude of items with which you're unfamiliar? Would you buy just items you know? Or, would y...

Imagine shopping in a huge store with an unlimited selection. Would you indulge your curiosity and buy a multitude of items with which you're unfamiliar? Would you buy just items you know? Or, would you try a few new items and fill the rest of your cart with things you've bought many times before?

TAKING THE 'TAIL' TO TASK
DEMISE
BRICKS AND CLICKS
WEB-BASED COMMERCE
WHAT IS THE LONG TAIL?

In the book "The Long Tail: Why the Future of Business Is Selling Less of More," Wired magazine Editor-in-Chief Chris Anderson argues the almost unlimited variety of goods available for sale on the Internet means an increasing number of people will move away from buying mega-selling, mainstream hits. These established items " which occupy what Anderson calls "the head" of the demand curve " will be replaced by more unusual items in growing niche markets, which he has dubbed "the tail," an area of the demand curve occupied by a huge number of items that may individually sell in very small numbers.

Anderson, who uses digital music sales and online video rentals to support his theory, claims this marks a fundamental shift in the public's buying patterns. He points to a flattening of the demand curve that businesses should take into account as consumers buy more in specialty markets.

"The Long Tail" started out as an October 2004 article published in Wired before morphing into a best-selling 2006 business book that has garnered considerable attention, both positive and negative, among economists and business leaders. "The Long Tail" was recently released in a revised paperback edition.

TAKING THE 'TAIL' TO TASK
Among those who have cast a dubious eye on Anderson's assertions is Anita Elberse, an associate professor at Harvard Business School. In an article published in the July 2008 issue of the Harvard Business Review, Elberse found that despite Anderson's claims that the demand curve is flattening out with greater numbers of consumers straying into niche markets, ""¦ the tail is likely to be extremely flat and populated by titles that are mostly a diversion for consumers whose appetite for true blockbusters continues to grow."

Elberse's skepticism is shared by technology and business writer Lee Gomes, who commented in his July 2, 2008 Wall Street Journal "Portals" column that the long tail springs from the " "¦ template of many Wired articles: take a partly true, modestly interesting, tech-friendly idea and puff it up to Second Coming proportions."

Rajiv Dant, who holds the Helen Robson Walton Centennial Chair in Marketing Strategy at the University of Oklahoma's Price College of Business, said in a recent interview that, given the vast variety of shopping choices the long tail provides, the tastes of most people won't shift to niche markets in any great numbers.

"Idiosyncratic demand has always existed," Dant said. "The only difference is, with the Internet, since it's easy to navigate and browse, you may be alerted to things that are new to you.

"But that's not socialized demand " that's based on experimentation " and let's face it, most of us have so many other things going on in our lives that spending a lot of time doing experimental shopping is not something we do. Research suggests that most people's tastes in movies and musical genres are set by the time they start college."

DEMISE
Although Anderson's theory argues the retail industry may be looking at the demise of many brick-and-mortar stores, Dant said retailers are countering with a growing "multi-channel" approach: a strong online presence that offers a vast variety of items, coupled with brick-and-mortar stores stocked with their most popular items.

"The way retailers are handling this long-tail phenomenon is the following: The inventory they have in the stores, because of physical limitations, is far, far more limited than the inventory they have on the Web, because the Web is pretty much costless," Dant said. "Once they have the Web site going, whether you put 10 items there or 100,000 items there, the cost is the same."

Dant gave Wal-Mart as an example. "If you go to Wal-Mart and you're looking for a movie and the DVD is not available, a salesperson is very likely to tell you the best way to find what you're looking for is to go to the Web because, on the Web, you can pretty much buy any movie title you want from Wal-Mart."

And as a result of stores having Web sites, Dant said, consumers can more quickly and easily shop for lower prices at the actual store locations.

"I've gone to the stores and their prices are higher and I tell them, 'Hey, I just checked your Web site and the price is lower,' and they're very happy to give me the Internet price," Dant said. "If retailers are sensible, they will recognize this as the way to sell, because (customers) could just as easily do the same thing with one of their competitors."

BRICKS AND CLICKS
W.W. Grainger, which sells a huge array of products to business customers, has adopted the multi-channel approach, Dant said. With physical stores in Oklahoma City and Tulsa, Grainger sells more than 870,000 products " everything from adhesives to motors " from 3,000 suppliers to 1.8 million business and institutional customers in 150 countries.

"Grainger's primary focus is in the tail," said Robb Kristopher, Grainger's regional director of corporate media relations. "In our case, the tail is in the unplanned maintenance repair and operating supplies category. If you're a manufacturer and you have something that's critical to keeping your lines up and running, you could come over to a local Grainger branch and quickly pick up that item or product that you need," Kristopher said.

"Say you're a maintenance professional responsible for maintaining a hotel. You may previously have been working with dozens, if not hundreds, of different suppliers. By consolidating "¦ you're able to just drive a lot of efficiency in the procurement process. The tail, by definition, has so many different product niches and needs that might arise," Kristopher said, "then Grainger brings all those suppliers to the table in one unified platform."

Chris Jones, Grainger's regional district branch services manager, said the company makes a studied effort to address the needs of specific local customers and stocks approximately 37,000 items in their Oklahoma City location.

"We have a customer that works on oil rigs and they supply tools to drilling companies in the Oklahoma City market," Jones said, adding that the customer has asked Grainger to keep a list of specific tools on hand.

"The tail is where we live and breathe," Jones said. "Grainger has used 'The Long Tail' to help us understand both the head and the tail, and it has helped us make stocking decisions that we may need to make for our customers."

WEB-BASED COMMERCE
Dant also noted that Web-based commerce has greatly improved the chances of small companies to place successful bids on contracts with partners halfway around the world.

"If you're Ford Motor Company, you might be buying upholstered leather seats or engines or whatever, and those things can now be sourced internationally," Dant said. "So you might have a bid from Taiwan, one from Jakarta, one from Australia and one from India, all for the same thing."

Ultimately, Dant said, Anderson's long tail theory is anything but new.

"What I find difficult to accept in Anderson's theory is he that is suggesting that the Internet is the reason that the long tail has come to be," he said. "I'm saying, no, the socialization was always there, there have always been idiosyncratic people who have very unique tastes. There's nothing new about it."

While consumers may now more easily rent a dizzying array of movies or buy music directly from thousands of independent musicians scattered around the world, local retail stores are very unlikely to disappear any time soon.

 "Being tongue-in-cheek for a moment," Dant said. "(Anderson's theory) is like what they say about doctoral dissertations: that they are old skeletons disinterred from graves and dressed in new clothes." 

WHAT IS THE LONG TAIL?
Imagine shopping in a huge store with an unlimited selection. Would you indulge your curiosity and buy a multitude of items with which you're unfamiliar? Would you buy just items you know? Or, would you try a few new items and fill the rest of your cart with things you've bought many times before?

In the book "The Long Tail: Why the Future of Business Is Selling Less of More," Wired magazine Editor-in-Chief Chris Anderson argues the almost unlimited variety of goods available for sale on the Internet means an increasing number of people will move away from buying mega-selling, mainstream hits. These established items " which occupy what Anderson calls "the head" of the demand curve " will be replaced by more unusual items in growing niche markets, which he has dubbed "the tail," an area of the demand curve occupied by a huge number of items that may individually sell in very small numbers.

Anderson, who uses digital music sales and online video rentals to support his theory, claims this marks a fundamental shift in the public's buying patterns. He points to a flattening of the demand curve that businesses should take into account as consumers buy more in specialty markets.

"The Long Tail" started out as an October 2004 article published in Wired before morphing into a best-selling 2006 business book that has garnered considerable attention, both positive and negative, among economists and business leaders. "The Long Tail" was recently released in a revised paperback edition."C.G. Niebank

 
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