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Niche markets flourish online
The internet has cut prices for consumers, but an even greater benefit, it is said, has been the ability to locate, evaluate and purchase a much bigger variety of products than via bricks-and-mortar retailers.
For example, 30%-40% of Amazon's book sales are of titles that wouldn't normally be found in a retail outlet. Other markets where this 'long tail' phenomenon has been identified include music, films and the media. Lower stock-keeping costs, lower initial cost hurdles from made-to-order production and the ability to deliver some products electronically have driven its development.
Meanwhile, the internet's ability to aggregate demand on a global scale has delivered the necessary business scale. The danger is that consumers can become overwhelmed by such choice (and may reduce purchases as a result), so it is critical that retailers provide tools to discover products.
From niches to riches: anatomy of the long tail,
Erik Brynjolfsson, Yu 'Jeffrey' Hu and Michael D Smith,
MIT Sloan Management Review, summer 2006, Vol 47 No 4
Review by Steve Lodge
This article was first published on World Business
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