The Long Tail Theory was coined by Chris Anderson, editor-in-chief of WIRED Magazine. In a nutshell, The Long Tail Theory is that our culture and economy is increasingly shifting away from a focus on a small number of “hits” in the market and toward a huge number of niche markets.
A common example of The Long Tail Theory is one of the most successful e-commerce websites, Amazon. Since the websites online launch in 1995, the store has had access to a range of cd’s, dvd’s, games, and novels, in just about any genre available. However, Amazon’s Top 10 Bestselling range does not generate the most revenue. Amazon’s huge success is due to them supplying to a niche market with niche items. The company makes far more money from selling one or two hundred copies of a ‘hard-to-find’ product in their niche markets, compared to a few thousand copies of a popular item from their bestselling range. By implementing this business theory, Amazon has a huge advantage over their competitors.
Although, the launch of Amazon has led to the closure of large bookstore businesses such as Boarders due to the low profits in physical stores. The Long Tail Theory is a strategic advantage for online businesses and can be actively seen in companies such as Netflix and Apple iTunes. However, we must be aware of the consequences that online websites create to the physical store suppliers.