As the e-commerce world continues to grow, many smaller companies take after larger companies and their approach to selection within the stores. Netflix, the leader in online streaming movies, has taken an approach that one would believe hard to replicate, called “long tail”. The “long tail” approach in the context of Netflix means being able to offer a near unlimited selection of movies, TV shows, documentaries, and other video, while still making money off of the most obscure least watched titles. This “long tail” approach can usually only successfully be used in online stores due to the limitations of having inventory in a physical store.
In Professor Gallaugher’s textbook, he mentions Netflix as a huge success story of the “long tail” approach but makes no mention of small companies. This approach is not at all unfamiliar to me. Over the past couple of years I have witnessed first hand the building of an e-commerce website that has utilized this approach as well. My dad started Ballastshop.com out of our house a couple of years ago. It is a small business that sells an obscure product, ballasts, which are “a device intended to limit the amount of current in an electric circuit” for lamps and other products. Within this niche, there are obviously more popular products as well as much less popular products. What I have seen happen with his company, and my role in the summer entering in products and other relevant information is what we’ve learned as the “long tail” approach.
The way the company is set up is that Ballastshop.com does not touch the product. It is essentially a middleman, but unlike other businesses it is an essential middleman. The website carries a variety of companies. Each company has it’s own ballast specialization or just carries a small array of ballasts. What Ballastshop.com does is carries ballasts from many different companies to put together a vast collection of ballasts, something each individual company could not do. In turn, Ballastshop.com takes the orders, connecting the customer with the company, essentially outsourcing shipping to USPS or UPS at a flat rate (to the customer), and delivers the ballasts to the customer without ever touching the product.
Why not just sell the most popular products? Because without having overhead cost of physical inventory, it makes the most sense to have the widest array of products possible without any added cost to Ballastshop.com. Whether the product is sold daily or once every couple of years does not matter, Ballastshop.com takes the same cut on the sale and it doesn’t cost anything to have the product on the site. Other non-inventory holding companies can take this same approach because they do not store the product and the more selection of product they have, the more site traffic is driven due to the meta data attached to each individual product. In turn this drives up sales and other sources of revenue, such as advertising. For such a niche product such as ballasts, where each complimentary product requires a specific ballast, it pays even more to have a larger selection. There is also little disadvantage with having so many options because many customers are coming to the site with a specific request or purpose in mind, rarely getting lost in the sea of ballasts.
The link below is to an outdated TED talk, but it introduces the “long tail” approach to the tech world all the way back in 2004. It’s really interesting because it showcases how new this term is but how quickly technology is changing.
This just goes to show a small company in a niche market such as Ballastshop.com can take advantage of the same “long tail” approach used by a large multi-billion company such as Netflix.