Thursday, May 19, 2005

Assignment #8

Wikipedia says the phrase The Long Tail was first coined by Chris Anderson in a 2004 Wired Magazine article to describe certain business and economic models such as Amazon.com or Netflix. The term long tail is also generally used in statistics, often applied in relation to wealth distributions or vocabulary use. It goes on to decribe the relationship of the Long Tail and storage and distribution costs, "The key factor that determines whether a sales distribution has a Long Tail is the cost of inventory storage and distribution. Where inventory storage and distribution costs are insignificant, it becomes economically viable to sell relatively unpopular products; however when storage and distribution costs are high only the most popular products can be sold. Take movie rentals as an example: A traditional movie rental store has limited shelf space, which it pays for in the form of monthly rent; to maximize its profits it must stock only the most popular movies to ensure that no shelf space is wasted. Because Netflix stocks movies in centralized warehouses, its storage costs are far lower and its distribution costs are the same for a popular or unpopular movie. Netflix is therefore able to build a viable business stocking a far wider range of movies than a traditional movie rental store. Those economics of storage and distribution then enable the Long Tail to kick in: Netflix finds that in aggregate "unpopular" movies are rented more than popular movies." Jill delves further into Anderson, staing that the reason places like Amazon are so successful is because of strength in nnumbers, which is very true. When I shop for books the first place that I will go to is Amazon because of its huge selection and the ingenius way they utilize the public. They sell books and other products on their own, but what is great about Amazon is the fact that other people can sell their products and flood the market. Thus, driving down the price and everything is great for the consumer. However, I wonder where or how Amazon makes so much money if they never really get to sell their own product. For instance, a vast majority if not all itms that are sold by sellers are smartly priced cheaper than what Amazon is selling it for, consequently most people would buy the cheaper one. So, if they aren't selling anything where are they making money? Moreover do most corporations for the most part like the long tail or not? Obviously, it has its benefits but not many companies enjoy competition. Chris' Blog is worth looking at because it gives a more humorous view on the idea of the "Long Tail". One thing that Anderson's article about the Long Tail solidifes an idea that we all know, and that's that online shopping is the way to go. Online shopping gives you an immeasurable amount of outlets to shop from. You can do google searches for the items you are shopping for and without the hassle of travel, lines, or weather to get in your way.

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