Monday, July 11, 2011

What I'm Listening to Today: The Long Tail: Why the Future of Business Is Selling Less of More (Audible Audio Edition): Chris Anderson, Christopher Nissley: Kindle Store

I was referred to this book through my last Audio-book listen by author Tony Hseih, Zappos Co-founder in his book Delivering Happiness: A Path to Profits, Passion, and Purpose . It is one of several books he recommends, and I have a stack from my public library of the others lined up for listening.

I am mid-chapter 5 right now, and so far my takeaway notes are 6 pages long. The most important point of the book, and the origin of the title is that the old 80/20 rule of product sales is no longer a valid merchandising rule in the digital retail era

Chris Anderson
The new rule, the "Long Tail" is a 98% rule. The author Chris Anderson, a former editor at the Economist and the Current Editor of Wired Magazine provides numerous examples of the lost sales opportunities which were caused by the fixed resources of brick and mortar retail of shelf space, inventory, and distribution. In order to make profits through inventory turns only the better and best sellers are inventoried. 

However, in the digital world, the niche products market through 'new math' incremental sales multiplied by massive quantities of products equal 1/4 of revenue for companies like I-Tunes, Amazon, and Netflix. They have found that the more titles they add sales increase, rather than divide. 

My big questions mid-read/listen:

  • This concept great for digital, but how can this rule apply to durable consumer goods, like Furniture? 

  • How can smaller brick and mortar stores benefit from this digital attack on the big box retailers? 
  • How can furniture designers benefit from the Long Tail sales opportunity. (Etsy!!)
So far, Chapter 4 did a great job of summarizing the history of the shift from one of a kind manufacturing and local sales to mass production and mass distribution sales. His emphasis on the emerging technology, new distribution networks, and manufacturing are 3 key elements in the creation of a new business model. Through seeing the history from Sears (NASDAQ: $SHLDto Amazon (NASDAQ: $AMZN), I have already started to see major missed opportunities for and threats to today's big retailers including the behemoth Wal-Mart (NYSE: $WMT). I'll write more about that right now but for now I'll say that the song "Video Killed the Radio Star" has been running through my mind since I listened to Chapter 4. The parallel I'm trying to figure out is, if we know what killed the radio star, what will kill the 'big box retailer'? Because I believe that is a possibility based on their current business strategies.

Author's Summary
Our world is being transformed by the Internet and the near limitless choice that it provides to consumers; tomorrow's markets belong to those who can take advantage of this. The Long Tail is really about the economics of abundance, an entirely new model for business that is just starting to show its power as unlimited selection reveals new truths about what consumers want and how they want to get it. The record business has been transformed by iTunes and Rhapsody; a similar transformation is coming to just about every industry imaginable.

What happens when everything in the world becomes available to everyone? When the combined value of all the millions of items that may sell only a few copies equals or exceeds the value of the few items that sell millions each? When a bunch of kids with no profit motive can record a song or make a video and get the same electronic distribution for it as the most powerful corporation?

Chris Anderson, editor in chief of Wired magazine, first explored "The Long Tail" in an article that has become one of the most influential business essays of our time. Using the worlds of movies, books, and music, he showed how the Internet has made possible a new world in which the combined value of modest sellers and quirky titles equals the sales of the top hits. He coined the term "The Long Tail" to describe this phenomenon, a phrase that's since appeared in boardrooms and media around the world.

"In short, though we still obsess over hits," Anderson writes, "they are not quite the economic force they once were. Where are those fickle consumers going instead? No single place. They are scattered to the winds as markets fragment into a thousand niches." ©2006 Chris Anderson. All rights reserved; (P)2006 Hyperion. All rights reserved.

Editorial Reviews

From Publishers Weekly

Wired editor Anderson declares the death of "common culture"—and insists that it's for the best. Why don't we all watch the same TV shows, like we used to? Because not long ago, "we had fewer alternatives to compete for our screen attention," he writes. Smash hits have existed largely because of scarcity: with a finite number of bookstore shelves and theaters and Wal-Mart CD racks, "it's only sensible to fill them with the titles that will sell best." Today, Web sites and online retailers offer seemingly infinite inventory, and the result is the "shattering of the mainstream into a zillion different cultural shards." These "countless niches" are market opportunities for those who cast a wide net and de-emphasize the search for blockbusters. It's a provocative analysis and almost certainly on target—though Anderson's assurances that these principles are equally applicable outside the media and entertainment industries are not entirely convincing. The book overuses its examples from Google, Rhapsody, iTunes, Amazon, Netflix and eBay, and it doesn't help that most of the charts of "Long Tail" curves look the same. But Anderson manages to explain a murky trend in clear language, giving entrepreneurs and the rest of us plenty to think about. (July)
Copyright © Reed Business Information, a division of Reed Elsevier Inc. All rights reserved.

From Bookmarks Magazine

In The Long Tail, Chris Anderson offers a visionary look at the future of business and common culture. The long-tail phenomenon, he argues, will "re-shape our understanding of what people actually want to watch" (or read, etc.). While Anderson presents a fascinating idea backed by thoughtful (if repetitive) analysis, many critics questioned just how greatly the niche market will rework our common popular culture. Anderson convinced most reviewers in his discussion of Internet media sales, but his KitchenAid and Lego examples fell flat. A few pointed out that online markets constitute just 10 percent of U.S. retail, and brick-and-mortar stores will never disappear. Anderson's thesis came under a separate attack by Lee Gomes in his Wall Street Journal column. Anderson had defined the "98 Percent Rule" in his book to mean that no matter how much inventory is made available online, 98 percent of the items will sell at least once. Yet Gomes cited statistics that could indicate that, as the Web and Web services become more mainstream, the 98 Percent Rule may no longer apply: "Ecast [a music-streaming company] told me that now, with a much bigger inventory than when Mr. Anderson spoke to them two years ago, the quarterly no-play rate has risen from 2% to 12%. March data for the 1.1 million songs of Rhapsody, another streamer, shows a 22% no-play rate; another 19% got just one or two plays." If Anderson overreaches in his thesis, he has nonetheless written "one of those business books that, ironically, deserves more than a niche readership" (Houston Chronicle).Copyright © 2004 Phillips & Nelson Media, Inc.
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