The Butcher, The Baker, The Candlestick Maker
Monday, January 5th, 2009I was introduced to a book a couple of years ago by Chris Anderson entitled “The Long Tail: Why the Future of Business is Selling Less of More
While I usually find data and numbers extremely boring and it can make my head spin, Chris did an excellent job of injecting enough “layman’s speak” that kept my interest. I do enjoy reading about both business models and the men, (or woman in e-Bay’s case) who ran these successful businesses.
If your unfamiliar with just what The Long Tail is, and your in YTB, it’s best that you have a basic understanding of why this transition is important. In a nutshell, our culture and economy is increasingly shifting away from a focus on a relatively small number of mainstream products and markets at the “head” and toward a huge number of niches in the “tail”.
There are certainly examples of “heads” that are extremely successful, such as Wal-Mart for the mass appeal, or someone like a close friend of mine Nick McCulloch, who owns Link Your House, a specialty Home Automation and Security company. Here’s the rub concerning “real world” retailers. (Brick and Mortar) Due to exorbitant costs for space, you either need to select items that have a mass appeal, or scale back to reduce costs and attempt to focus on a niche market and hope there is enough of a local market to support your niche.
An average movie theater will not show a film unless it can attract at least 1,500 people over a two-week run; that’s essentially the rent for a screen. An average record store needs to sell at least two copies of a CD per year to make it worth carrying; that’s the rent for a half inch of shelf space. And so on for DVD rental shops, videogame stores, booksellers, and newsstands.
In each case, retailers will carry only content that can generate sufficient demand to earn its keep. But each can pull only from a limited local population – perhaps a 10-mile radius for a typical movie theater, less than that for music and bookstores, and even less (just a mile or two) for video rental shops.
These costs however, drop dramatically in the digital world. Look at music stores like Rhapsody, a purely digital services with no manufacturing costs and minimal distribution fees. Because all music is stored in “bits and bytes”, The Who “Eminence Front“, a song or album that makes one sale per year has the same margins as a someone like Bruce Springsteen, “Working on a Dream” who will sell millions of copies after it’s debut at the end of the month. A hit and a miss are on equal economic footing because both are just entries in a database which are called up on demand. This make BOTH equally worthy of being offered due minimal or no cost, while increasing profits. In The Long Tail, popularity no longer has a monopoly on profitability. Unlike the Wal-Mart’s of the world with a little sliver of space to hold a CD that equals a cost associated with the space, and even that little CD needs to help pay the rent.
In “Brick and Mortar”, if you had to pick between a 1982 version of an old rock classic, and a new hit that’s already getting buzz due to President Elect Obama, which CD would you be stocking your shelves with?
Unlimited selection is revealing truths about what consumers want and how they want to get it in service after service, from DVDs at Netflix to music videos on Yahoo! Launch to songs in the iTunes Music Store and Rhapsody. People are going deep into the catalog, down the long, long list of available titles, far past what’s available at Blockbuster Video, Tower Records, and Barnes & Noble. And the more they find, the more they like. As they wander further from the beaten path, they discover their taste is not as mainstream as they thought (or as they had been led to believe by marketing, a lack of alternatives, and a hit-driven culture).
Combine enough small, obscure sales on the Long Tail and you’ve got a market bigger than even “The Boss” can produce.
Likewise, in the case of books, the average Barnes & Noble carries 130,000 titles. Yet more than half of Amazon’s book sales
In other words, the potential book market may be twice as big as it appears to be, if only we can get over the economics of scarcity. Venture capitalist and former music industry consultant Kevin Laws puts it this way: “The biggest money is in the smallest sales.”
At this point, your asking yourself, “What in the world does that have to do with YTB?”
Take a look at all the niche sites this company offers in it’s digital arena. I know Travel Store Owners who specialize in Weddings and Honeymoons, others who specialize in Golf Packages, and still others like me, who specialize in cruises. Specialization is great, and I highly recommend that you find a couple of areas to specialize in when it comes to travel. But there are times when I run into areas I have no interest or knowledge in, but a potential customer or client may have a passion for.
A perfect example for me would be hunting. Honestly, I’d rather watch paint dry, but my In-Laws who I spent part of the Christmas break with are avid hunters. They also live about an hour and a half away from the nearest Bass Pro Shop. Is it out of the realm of possibility that they might have an interest in a new Hunting and Fishing web site that has comparable prices, that saves them both time and money?
That’s The Long Tail at work. I’m certainly not going to get rich off camouflage sales, but what did it cost me to carry the line as an Travel Store Owner?
Not a penny more than it did before I started…to sell cruises.
Let’s go back to Amazon
Are you thinking they might have lost it? Are they getting out of books because they’re making a mint off coffee and light bulbs? Or are they beginning to get the concept of The Long Tail?
Like Amazon who branched out in it’s distribution to capture ancillary sales, YTB is now moving into Food and Gifts, Home Decor, Financial Services, and Apperal and Accessories. Does that mean my passion has changed from cruises to carrot cake? Do I now need to be an expert or even remotely care about thread counts on pillow cases?
Hell no. Besides, if I did care about something like wellness and beauty, I could have gone with a century old MLM called Avon. (Unlike my love for a good steak or carrot cake, I don’t do makeup.)
I realize there are some who could never accept this shift in distribution. You need to remember, they’ll still hanging on to their “brick and mortar” theories and beliefs. Others will attempt to outwit and outsmart an experienced economic mind like Chris with their own excuses as to why this model simply won’t work.
So be it, if that’s their case. Just smile, nod your head, and say “Thanks for sharing”.
On a completely different note, and simply a followup on a previous post concerning Joystar just after Christmas.
It appears that a number of Agents have filed an involuntary bankruptcy case against Joystar in US Bankruptcy Court on Friday. They are seeking more than $150,000 in unpaid commissions that the agents claim are owed to them.
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Doug & Ronda Bauknight AKA: TravelPro Travel Agent / Networker Phone: 678.458.5812 |
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