Netflix Long Tail Approach for Small Businesses Too

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.

netflix_interface-1

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.

Long Tail Approach

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.

Ballastshop.com Homepage

Ballastshop.com Homepage

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.

TED Talk on Long Tail Approach

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.

Advertisements

7 thoughts on “Netflix Long Tail Approach for Small Businesses Too

  1. I found this blog post to be really interesting because you related a topic that has only been discussed in the context of large companies to something personal. I had never heard of the “long tail” approach and it sounds like it can only be used by certain types of companies that do not hold inventory. Typically we only hear about companies trying to minimize their inventory or have quick inventory turnover because it is expensive to store and means the company isn’t making money. With the “long tail” approach companies are encouraged to hold a great variety of inventory to always have it available for when customers come looking for it because it costs very little to hold the inventory and satisfies customers who look for obscure products.I also found another blog that directly relates this approach to retailers and marketing: http://sparkstoneweb.wordpress.com/2012/07/31/the-long-tail-approach-applied-to-retail-and-marketing/. It looks like some retailers are able to utilize this model if they stock huge amounts of inventory by buying in bulk through strong vendor relationships and are provided with a diverse inventory. Even so, shelves can only be piled so high, so there is still some cost with inventory. Online companies can use this model more easily because they don’t need to worry about store layouts for customer browsing. I enjoyed learning about this topic and how it relates to your family’s business!

  2. It is so interesting that your own dad has experience with a business based on the long-tail effect. Netflix is a great example of so many instances of leveraging tech to enhance a business. Netflix also is the perfect model for the subscription based revenue stream that is becoming very popular.

  3. Your blog and your dad’s experience is proof that technology is making it easier for entrepreneurs to thrive. Start up costs 20 years ago were immense, and nowadays a company can be started in our own home, just like your dad’s. I find that fascinating. I really enjoyed reading about your dad’s company and how it relates to long tail approach. Being able to read about your personal experience related to the text and what we will discuss in class tomorrow is engaging. I also found it interesting that the “middle man,” as you discussed your dad’s business served as, can now be a simple website. I normally picture a middle man as a blue collar worker who does the “dirty work”, per say. Now, it can be a website creator who does this “dirty work” online. Technology is changing the business world in ways we never thought possible. There is a great positive in this because although people worry about technology taking jobs, your dad is a real life example of technology creating jobs. The only thing missing I felt was a broader, more general explanation of why small companies anywhere can now thrive using the long-tail approach.

  4. i thought it wass really cool how you connected this blog post to ideas that we go over in class and somebody you knows personal experience. I think you did a great job and really liked how you incorporated so many aspects into this blog post. This blog post was my favorite one this week because it was able to really show the changes and effects that technology is having in commerce. Great Work.

  5. I enjoyed this blog mostly because it did a great job at explaining the “long-tail” approach that is sometimes confusing. Netflix is clearly the cover-company for this long-tail approach, but it is cool to see a small company use what they may have learned from Netflix and other similar companies in order to become successful at a smaller level. The graph displayed about the existing demand shows why the long-tail approach, if done right, can be very successful. This was overall a very interesting view on the subject, and your Dad seems like he did a great job.

  6. This blog proves that with a little drive and a URL anyone can start a successful business. I find it incredible how much easier it is to start a business today than it must have been twenty years ago. The advantage obviously of doing things online is that you can take advantage of things like the long tail and never have to hold inventory. It’s amazing how people used to have to open up a store to start a business and now they can start one from their own home using the internet. The whole way we look at businesses and how they are run is always changing, but now more than ever seems to be a particularly unique period of this transformation. Good job with this blog and thanks for bringing the topic up because it really is crazy to think about how pretty much anyone is capable of starting their own business.

  7. Very good blog post. It relates to what we talked about in class on Netflix and its use of the “long tail” approach. You did a great job of explaining the “long tail” approach and your example supported your claims very well. Using your dad’s website is not only really cool, but allowed you to write a very interesting blog post as you had access to such relatable information. As technology continues to grow more important in every company, I see the “long tail” approach becoming a much more common term that has only existed for a short time.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s