The Long Tail: A Successful Model for Future Business

The long tail of manufacturers

We should note that the long tail describes a market phenomenon as a whole, not from an individual perspective; from a retailer's perspective, not from a production from a business perspective. For a certain manufacturer, it is unlikely that they can provide all kinds of books. For example, in the book market, no book publisher can publish all books of a certain category. Many companies work together to create an extremely rich variety of books. market, and the same is true for the music market. We understand that any business idea is to apply it, so for most companies, applying the long tail is to ask the following question: How can manufacturers survive in the long tail market?

There are three possible strategies: The first is to develop into the long tail and provide a wider variety of products. Enterprises should go beyond market segmentation and produce as many product varieties as possible. Taking a mobile phone as an example, to produce a variety of models of mobile phones, each model also provides a variety of subdivision products with different configurations, and each mobile phone provides several or even more than a dozen shell colors for customers to choose from.

Second, avoid being the middle category. This is because the long tail can actually be read as a "fall in the middle": companies that have been offering multiple models in the past have relatively few varieties compared to companies that have started to massively increase their product variety, neither of which Popular, not slow-moving, always in the middle. Such companies have done well in the past, but they are most at risk in the long-tail world, which is the fastest shrinking market. As the variety of products increases, these products can no longer sustain sales.

Third, build a product pyramid structure. Provide more categories of products than in the past, enterprises can make profits and survive, but to achieve better and more sustainable business performance, enterprises need to form super popular, popular products in various categories and multi-variety products such as pyramids Product portfolio structure. This is because super hot items have a sensational effect and a pulling effect: without super hot items, it is difficult for a company to establish a strong brand and market position; hot items can drive the sales of various products under it. This is why looking at a popular commodity alone may be completely disproportionate to input and output, but many companies still invest heavily. Only when a product pyramid structure is established and a multi-variety foundation can be invested in popular commodities to obtain maximum benefits.

The long tail of the manufacturer: offer a variety of products, avoid the middle, and build a product pyramid Why Chris Anderson finds the long tail of blogging, Amazon, Google, and eBay, but in the subtitle of the book he says: The future of business lies in "more categories, fewer sales" ( selling less of more). The successful model of future business is no longer to sell a large amount of a few kinds of commodities, but to sell a larger variety of commodities, which can also achieve economic scale effects.

This is a new lens through which we view the business world. Any innovation lies in finding a new reference standard that can explain the changing world, and the long tail phenomenon is such a reference standard. An experiment by Canadian psychologist Otfried Spreen revealed this truth: "Our perception of the real world depends on past patterns - our reference standard, which affects our perception of the real world. perception.” The long tail, or “more categories, fewer sales,” is the pattern behind all complex social and commercial phenomena.

ZARA: Fast Fashion

ZARA is the most successful trend clothing brand in recent years. It has created a business model called "fast fashion", and its success is a long tail phenomenon. Different from the traditional garment industry's model of "small quantity, large quantity", ZARA is characterized by "fast, small quantity, and many styles". It launches tens of thousands of garments every year, and the styles are synchronized with fashion. Lang Xianping predicted in "Model: Strategic Thinking and Development Model of Retail Chain Industry" that the fashion industry will develop towards the "ZARA model" in the future. He analyzed that in the previous concept, a small amount of money is the only way for enterprises to achieve economies of scale. Therefore, most traditional clothing companies adopt the strategy of small amount of money, large-scale procurement, and large-scale production to achieve economies of scale and reduce the cost of goods. average cost. After studying the financials of ZARA and H&M, another typical fast fashion company, he found that a variety of small ZARA and H&M also achieved economies of scale.

"Various and small quantities" is the form presented by ZARA. The operating mechanism behind it makes this model profitable. The feature of this operating mechanism is the word "fast".

ZARA's retail is in a positive cycle of "fast stocking" and "fast selling": branches place orders twice a week based on sales, which reduces the need for discounts to deal with inventory It also reduces inventory costs; the fast style update enhances the sense of freshness, attracting consumers to keep repeating; the rapid updating of the goods in the store also ensures that they can meet the tastes of customers, so they can be sold.

ZARA's "fast" also includes quick response to fashion trends, fast design process and supply chain adapted to the fast mode. Neither ZARA nor H&M try to be fashion creators, but to be quick responders to fashion trends, Lang Xianping analyzed in "Mode", "When fashion trends just appear, accurately identify and quickly launch corresponding clothing The advantage of this is: "There is no need to guess fast and volatile fashion trends, and the gestation period of design is greatly shortened under the condition of reducing inventory risk."

ZARA's rapid design process is reflected in Extremely short "lead time" compared to other peers. In the apparel industry, lead time refers to the time it takes for a garment to go from design to sale. ZARA has greatly shortened the lead time. It can be completed in two days from design to production at the fastest, and the lead time is as fast as 12 days. In contrast, Gap’s design gestation period alone is two or three months. Clothing depreciates rapidly over time, by 0.7% per day, and computer products by 0.1% per day. Shortening the lead time thus has multiple benefits: increasing the value of clothing, reducing inventory costs, avoiding the production of off-trend items, and reducing the loss of discounted sales.

ZARA's supply chain is characterized by the fact that the fabrics it purchases are all undyed, but dyed according to real-time demand. ZARA allows its factories to only do highly automated work, using high-tech production equipment for dyeing, cutting and other work, while outsourcing labor-intensive work. In order to respond quickly, ZARA's procurement and production are carried out in Europe, and only 20% of the most basic styles of clothing are produced in low-cost regions such as Asia. ZARA has a high-tech automatic logistics distribution center, which can be guaranteed to arrive within two days by truck in Europe, and for the US and Japanese markets, ZARA even uses air freight to improve speed at all costs.

Supermarkets: Beyond the paradox of more and less

When we walk into any supermarket, we see an almost endless variety of choices. In fact, even the shelf of a hypermarket is limited, but the choices it can hold have exceeded our perceived limit. For example, there may be 200 kinds of crispy cookies on the shelf, and we need only five or ten at most. . From ordinary supermarkets to hypermarkets, the categories have grown hundreds of times. For example, the Wal-Mart Superstore in North America provides more than 150,000 SKUs (product variety units, retail terms). In fact, supermarkets are already in the real economy. A typical representative of the long tail phenomenon. Of course, this long tail phenomenon is for a single store. For retail companies with multiple chains, there is still a scale effect based on sales volume behind it. The future of supermarkets, on the one hand, is to develop on the Internet to provide more varieties, that is, to make the tail longer; on the other hand, to provide better screening mechanisms in the real economy to meet the needs of shoppers, which is to make The long-tail part of the run works better. Let's take a look at how supermarkets do it.

80% of Tesco's shoppers in the UK use loyalty cards, giving it a wealth of accurate shopping information. According to Tesco, the typical household buys no more than 300 SKUs of FMCG, and many of those are 300 substitutes for a particular item when it is out of stock. Tesco Extra provides 80,000 varieties, that is to say, for a typical consumer, 99.6% of the goods in the hypermarket have nothing to do with him, and he must choose from thousands of items that he does not own. Pick out the products you need from the products you need.

Therefore, the question facing supermarket shoppers now is not whether there are enough choices, but how to balance the time required for shopping, the convenience of purchasing and the cost of purchasing. As consumers, consumers probably have the following choices: you can easily buy higher-priced and limited-variety products at a nearby convenience store such as 7-11, which usually has 1,500 SKUs; you can also spend a little more time. Go to a community supermarket, which has a little more variety and lower prices, such as Tesco Metro, which usually has 5,000-10,000 SKUs; go to a standard-sized supermarket, which usually has 40,000 SKUs; of course Or go to hypermarkets that are usually located in the suburbs and are farther away. In addition to these, there are also discount warehouse stores, which have fewer categories. For example, Costco in the United States has about 3,500 SKU varieties. Each of its varieties has a large package, but the average unit price will be extremely low. We can also shop online, which has an almost unlimited assortment, but pays for delivery.

Tesco's approach is to bring all of these retail stores together to "deliver what you really need, where you need it". Due to unified procurement, the cost difference between different types of stores is very small; because of the combined distribution, there is almost no difference in logistics cost. Its storefronts include the mini-sized Tesco Express, the smaller, downtown Tesco Metro, the traditional Tesco Supermarket, and the super-large Tesco Extra, and Tesco.com for online shopping.

There are specific things that Tesco has done to make it happen. For example, users can order goods through online shopping, and then pick up the packaged goods on the way home or at a convenience store near their home, which is actually the realization of putting those goods in large and far-flung stores into Sold in small and close shops. Store clerks help pick up online orders when in-store transactions are not too busy, which avoids the cost of building a large logistics distribution center for online shopping. Its logistics fleet uses the famous "water spider" system similar to Toyota's factories to achieve efficient and flexible distribution.

James Womack and Daniel Jones, the proponents of lean production thinking, recently extended lean thinking to lean solutions, and they commented on Tesco's system: "With this arrangement, every retail store format is There are two functions. First, it provides direct shopping sources for those customers who have the time and interest to choose their own goods; In supermarkets, clerks pick out the items on the shelves and deliver them to the final consumers. This also meets the needs of door-to-door shoppers with different time values and tastes.”

“Treasure Hunt” consumers

Alibaba named its C2C website "Taobao", two words that best describe the shopping mentality of today's consumers. Consumers are on a "treasure hunt," a term coined by Boston Consulting Group's Michael Silverstein to reveal "the truth about what customers buy." He writes, “Consumption has become a treasure hunt – an inexhaustible search in the world’s vast and ever-changing marketplace of goods and services with the expectation of great returns. Various pricing. For consumers, the market is like a huge bazaar, and there are always discoveries and secret joys everywhere.” Changed consumers, that is, changes on the demand side, are the most fundamental driving force for the long tail phenomenon. force.

Silverstein divides the consumption characteristics of consumers into two types: lower consumption and higher consumption: "Lower consumption of low-priced goods and services, and better quality of high-priced goods and services. Consumption, while avoiding the increasingly boring, low-value mid-end goods.” The so-called “increasingly boring and low-value mid-end goods” are exactly the goods that manufacturers produced in large quantities in the past. If you don't use "high quality and high price" to define trending consumption, but use "more in line with consumers' own needs" to define it, it can better echo the long tail phenomenon of increasing commodity types.

Just as the long tail is only a phenomenon that is gradually taking shape, consumers' "treasure hunt" has not yet become a common phenomenon, but it has appeared in the distribution of consumers' "disposable money". The word discretionary means? It means "free choice" or "free decision", and it does not necessarily have to be used for specific expenses such as food, daily necessities, housing, etc. For example, consumers intend to buy a silk scarf and finally buy it back It's a kitchen gadget. Looking at the consumer's discretionary money alone makes all the almost completely irrelevant goods part of the consumer's choice of goods, all competing for this discretionary income.

Silverstein calls eBay the world's largest treasure hunt, where shoppers don't buy groceries or necessities, they dig for treasure. Marge, a 56-year-old professional, said: "I'm not here for serious shopping, but for fun. I usually buy things that I don't usually find: out-of-print china, lost or broken pieces. Glassware alternatives, discontinued cosmetics.”

Traditional stores have limited shelves, but they also have ways to cater to treasure hunt shoppers. European coffee retailer Tchibo, in addition to selling coffee and coffee supplies, also offers non-coffee products, most of which are household items. What makes Chaobao different is the way it offers its merchandise: it launches around 15 items each week around new themes, for a limited time. None of the items are available at other retailers, at least not exactly the same. It thus creates the effect that "customers know they'll always get the coffee they want at Chubo, but never know exactly what surprises they'll get when visiting the Chubo store or browsing its website." A long-tail pattern modified by constraints in physical space in the real world.

What is the long tail?

The "long tail" focuses on depicting the world beyond the hits. Our economy and culture are shifting from a few mass markets to countless niche markets. Distribution channels with unlimited capacity (or "endless shelves") can finally offer consumers an incredible variety of merchandise. In the past, the variety of goods was greatly limited economically and physically by traditional retail and broadcasting. People tend to focus on the "head" that protrudes high on the left side of the demand curve, but after we can offer everything, the sum of the niche products on the "long tail" on the right will be able to compete with popular products.

The Nine Laws of the Long Tail

Rule 1: Keep Inventory Concentrated or Decentralized

Rule 2: Engage Customers in Production One Product Doesn't Fit All

Rule 5: One Price Doesn't Fit All

Rule 6: Share Information

Rule 7: Consider the "and", not the "or"

Rule 8: Let the Market Do It for You

Rule 9: Understand the Power of Free

The Long Tail on the Internet

In 2004, of the 1.2 million titles tracked by Nielsen BookScan, 950,000 The sales volume of 200,000 titles did not reach 1,000, and only 25,000 titles passed the 5,000 mark. In the UK, about 200,000 books are published every year, of which only 20,000 are "lucky ones" to end up in bookstores.

That is, about 98% of the books have little or no commercial value. So why do so many people want to join the army of publishing books? Or, to split the question - how do the authors of these hard-to-reach books afford the costs of publishing? Then, where do their distribution fees come from? Even if the above two problems are solved, how can these niche books attract the attention of readers? Will they have a market?

Endless options

In traditional business thinking, these questions are often easily filled with "impossible" answers: 20% of top sellers drive 80% of sales, and the rest are niche The market is like a tasteless chicken rib that cannot make much profit at all. But today, when we use the concept of "The Long Tail" to observe the current market, we will find that the so-called "best-selling" actually only accounts for a part of the front in the statistical chart of the market, while " After the head", there is a long "tail". Summing up the commercial potential accumulated on the long tail, the power often easily surpasses the top ten on the best-selling list.

Wired magazine editor-in-chief Chris Anderson published an article titled "The Long Tail" in the magazine in October 2004. At about the same time, Anderson started the Long Tail blog, shared his insights with readers, and continued to refine his theory, and later published the book "The Long Tail". The two lines on the cover of the UK edition of the book sum it up: "How Endless Choices Create Infinite Demands" - "Endless Choices" benefit from advances in information technology, while "Infinite Demands" are ultimately in business society reflected in.

Hastings, chief executive of movie rental site Netflix, links 'The Long Tail' to 'The Tipping Point' in testimonials as they both talk about how the internet is transforming business and opportunities. But the difference between the two is that "Tipping Point" focuses on turning small products into big phenomena, and trivial things will become popular in an instant like a virus. And "The Long Tail" is based on the fact that the sum of the value of the infinite niche market will be no less than those of the popular commodities.

The Force That Fuels the Long Tail

The idea for the "Long Tail" originated in an interview with Wired magazine. Robbie, chief executive of Ecast, a digital music company, was in his office asking Chris Anderson to guess what percentage of the 10,000 albums they sold would sell at least one single per season. Anderson thought about it and said 50%, but the correct answer was 98%.

Anderson named this discovery "the 98% rule" to show that there is a lot of market potential on the long "tail". In the face of infinite supply, our past positioning of bestsellers and niche products has become completely wrong. In the past, rare things were more expensive - if there were only so many limited spaces in bookshelves and radio waves, they had to be filled with the best-selling items; but now, with the growing popularity of the Internet economy, all goods have become accessible If they are accessible, then they are all likely to become the choice of customers on the same platform.

You can find what you need

So it sounds like the "long tail" is like the terminator of the "80/20 rule". In traditional storefronts, making 80% of 20% of the turnover is barely profitable due to high inventory costs. This makes it easy for people to be trapped in the mindset of the Internet age and ignore niche markets that seem to be worthless.

However, in the Internet economy, the products on the website do not need to be placed in shops built with reinforced concrete, so the cost is greatly reduced.

Take the book market as an example. First of all, due to the popularization of content production tools, the cost of creation is reduced, and the production process is no longer the patent of large companies - in addition to the "head" that is flooded with popular products, the "long tail" is due to the emergence of countless niche products. and live. A good example is Lulu.com, which Business 2.0 magazine praises for "freeing publishing." Lulu.com assists many obscure authors to obtain official ISBN numbers, register and sell them in online bookstores, and they generously give back 80% of the profits directly to authors, while traditional booksellers give authors up to 15%.

Secondly, no matter how many good things there are, it only makes sense if producers can sell them and consumers can buy them, and the reduction of sales costs just solves this - after the outline of the "long tail" quietly appeared, It is gradually enriched due to the lowering of the channel threshold. Amazon's online bookstore's solution is "print-on-demand": until a niche book is ordered, it is kept in the database as a digital copy, and once the order is placed, it is printed immediately. In the past, the biggest cost for book publishers came from dealer returns. By convention, publishers must accept all unconditionally, and then return to the furnace to pulp.

In China, the long-tail market created by lower production and sales thresholds is the most familiar to the public. In C2C sites like Taobao, netizens can own their own online stores without spending a penny to trade second-hand goods or homemade handicrafts. The instant messaging software, integrity security system and payment protection provided by the trading platform all make the risks of buyers and sellers as low as possible. Sun Xiaojuan, who refers to herself as "Sister Basin" on the Internet, majored in finance in college and has never received formal art training, but is famous on Taobao for her hand-painted handbags. "I thought it was just for fun, and I didn't do it very much. But if you want to make money from this, it would be easy." Sun Xiaojuan said, "My hand-painted paintings are all the same, and I don't like to draw the same ones. pattern, so each piece is unique, and many people are willing to pay several times the price of ordinary bags to buy."

Finally, new channels have emerged between the demand side and the supply side, and the flow of information has been sluggish for a long time. The chasm of the market can be filled up - consumers' attention and purchasing power are diverted from the "head" to the "long tail", and niche products are more favored by eyeballs and wallets. In this regard, there is no better example than Douban.com, which is "on the edge of the best-selling list". Founder Yang Bo believes that most of the popular content on Douban is not popular on the best-selling list. Douban is composed of various "interest groups", with individuals as the core and related to each user's own interests. It does not push information on a large scale like a portal, but relies on everyone's spontaneous pull. Through this platform, people's vision gradually shifts from the known field (hot item) to the unknown field (niche item), forming their highly regarded "discovery" function.

Click on the page of a book on Douban. In every corner, users can at least directly discover other books related to it through the following channels: "People who like this book also like to read books", " Douban members commonly used tags", "who reads this book", "group frequented by people who like this book". And this mechanism is also effective on Douban.com's music channel. For example, young netizens who like Zhang Jingying's new album will find the "Fashion Alliance (Makeup Companion)" group in the "Group frequented by people who like this album". Then discover the books, movies, and music your peers are watching.

The subversion of the shelves by online stores also allows niche products to get more opportunities to be discovered by "right-to-market" customers. Film critic Zhou Liming used to worry about his work: "This 'Hollywood Apocalypse' is always put on the shelf of 'movies' by bookstores, but it should be classified as 'commercial'." Open the catalogue, readers will The chapters in the book are as follows: "Film Industry Pattern", "Film Income and Funding Sources", "One-Side View of Film Production", "Film Marketing, Distribution and Screening", "Interpersonal Relationships and Power Politics", "Chinese Films" With the international market" - the core topic is to discuss "business", but it is also closely related to "movie". In traditional stores, shelf resources are scarce, and a book cannot appear on two shelves at the same time. In a number of categories that are not mutually exclusive but generally coincide, the final choice of which to discard should be considered a "last resort".

But look at the dazzling array of books and audio-visual products on Amazon's online bookstore, they are not only given a variety of genres (Genre) and keywords (Keyword) by the administrator, but users can also label it with their favorite labels ( Tag). In a market with "endless choices", where each product meets a specific need, it is difficult to categorize products with a single standard. The "good" and "bad", "excellent" and "inferior" in the past should be replaced by "suitable for me" and "not suitable for me". The signal in one person's eyes becomes noise in the eyes of another, and this signal-to-noise ratio will continue to decrease as the long tail extends - what is perfect for one person, is not in the eyes of everyone else. Produces a tailored-like effect.

Amazon is to traditional stores what Google is to libraries. While libraries used the "Dewey Decimal Classification" to place books, Google completely broke the concept of classification. In the long-tail market, because of the new information dissemination channels, consumers can find their favorites in the massive information, and those products that may have been ignored due to improper classification or information blockage can be found in the market. Stand out from the endless "long tail market".

Another Long Tail: Abundant Creation

Right now, a new trend on the Internet is obvious to all, that is, everyone is involved. Or, summed up with a rather loud advertising slogan a few years ago - "the power of gathering people online". We are saying goodbye to the network society where the centralized production is carried out by the portal website and entering a new ecological circle. Here, the website is just the platform, and the user's participation makes these interactive programs self-sufficiently run at high speed and create value.

YouTube.com can be considered a classic example of this new type of Internet. So what makes it the hottest video site in the world today? At the very least, YouTube has made itself a massive success, now worth $1.65 billion, in three ways: First, YouTube has made it very easy for users to upload video files—people don't need to install a client to upload a video, and they don't need a website to upload a video. The required format is compress-encoded for the video; second, YouTube converts all videos to a uniform format that can be played online by the ubiquitous Flash player—a move that eliminates the dilemma of users who don’t have the latest media player plug-ins, enabling True cross-platform sharing; more importantly, they have established a good community system - where users can easily rate, comment or have group discussions, and even respond to others' work with homemade videos.

These three innovations make it easier for netizens to play the three roles of content producers, consumers and disseminators, thereby realizing a complete push chain, allowing all content to have the opportunity to reach the most suitable audience . So, what are the ratios between the three groups?

Earlier this summer, YouTube reached the milestone of 100 million daily video views. In the data released at the time, it can be found that on average, only about 65,000 people uploaded videos every day. If you divide the two numbers before and after, the producers of the content only account for about 0.07% of the entire active user base. This phenomenon also exists in Wikipedia. According to founder Jimmy Wales, 0.7% of users create 50% of Wikipedia content, and if the user base is expanded to 1.8%, then the works created by them cover 72% of Wikipedia articles. Similarly, in the Yahoo community, 1% of users are building a community or creating a topic, 10% of users will participate in the interaction, and the rest of the users just "pass by" but never speak (Figure 1 on the previous page).

A similar proportion also exists in Douban.com. Douban now has nearly 300,000 registered users, and its daily traffic is about 10 times that of registered users. If we take the number of times that all users of Douban are added as neighbors (Figure 2) and the number of people in all Douban groups (Figure 3) as the vertical axis, we will also find that most users and groups are not very active in terms of interaction. , the relevant indicators are only at the single-digit level. But each of them is creating value, even for simple visitors, the backlinks and access logs created by them are also contributing analysis samples to the content platform, and various forms of participation behavior support new "participation" type" business ecology.

From this, a series of curves similar to Chris Anderson's "Long Tail" emerges. If Chris Anderson's "long tail" focuses on content commodities in the digital age, the other "long tail" now is the application of Power Law from the perspective of user engagement - very few Creative users contribute the most value to the content platform. Active users who participate in the interaction allow these content to be sorted out and delivered to the public. The vast majority of visitors enjoy the products jointly delivered by the above two. In the early days of the Internet, people mostly gathered at the tail to move their eyeballs, but with the derivation and popularization of new technologies (from the past BBS, chat rooms, forums to the emergence of various blogs, podcasts, and vlog platforms), Internet participation As the speed continues to increase, ordinary netizens have to move their heads and begin to gradually try to use their hands and brains.

The so-called "best-selling" products actually only account for a part of the front in the statistical chart of the market, and there is a long "tail" after the "head". The sum of the value of the infinite niche market will be no less than those of the hot commodities that are in full swing.

From the Economic Observer.