$UCCESS ONLINE - SELLING LESS OF MORE

29-Jan-2010 by Damian Watson


If you are starting a business now – and whether you are selling a product or many products – you will be thinking about how you can sell through an online channel. Selling online can greatly reduce your overheads, allowing the smallest of producers to compete in a global market. 

Whilst reduced overheads are an important advantage in “pure play” online retailing (ie, no high street presence), in this article I want to look at an even more valuable element, the “long tail”. 

First of all, let’s imagine a book store, before the internet, called Sports Books. It’s in Rugby. It is a specialist bookstore focussing on (you guessed it) sports. It stocks four thousand sports books that have been supplied by a handful of publishing houses (distributors) each of whom have their specialisms. 

John lives in Rugby and is a keen fisherman. He wants to buy a book on fly fishing so asks a fly fishing friend, “Where can I get hold of a book on fly fishing?” The friend replies, “Well there’s that sports book shop isn’t there, on the high street.” So, John goes into town to see if he can find a book he’d like at the shop. Oh no! He discovers they haven’t got any books on fishing. 

As a rule, this is how retail used to operate. Shops get products from distributors. People go to town and buy things in shops. What people buy is limited to what’s in the shops – and what the shops stock is limited by the distributors with whom they have relationships. 

The problem as experienced by J R Hartley

In 1983 one of the most popular adverts ever was aired in the UK (it was recently voted 13th in Channel 4’s “100 Greatest TV ads”). It featured an elderly gentleman looking for an old book on fly fishing by the author J R Hartley. He travels around all of the book shops in town looking for the book only to be turned away empty-handed each time. Eventually his daughter gives him a copy of the ‘Yellow Pages’ and he finds the number of a specialist book shop that has the book. They ask him for his name and he replies, “J R Hartley”. If you’ve never seen it then search for J R Hartley on YouTube, it’s rather charming! 

The message from ‘Yellow Pages’ was that using their business directory would save you time in the search for things you wanted and needed. J R Hartley spent energy trying to find his book the “old-fashioned” way by traipsing across town having to visit individual shops. He was disappointed and frustrated in his search. His daughter, representing the new way of doing things, solved his problem by handing him the directory. 

Only ten years on... 

Staying on the subject of books, let’s skip forward just a decade to 1994. This was the year Amazon started selling books online and started a revolution in retail. 

Before Amazon, if you went to a book shop and couldn’t find what you were looking for, the store had to check their retail catalogues to see if they could get hold of a copy. If they couldn’t you would have to go elsewhere. Having a copy of the ‘Yellow Pages’ improved on the situation by organising the names of stores in your local area, but you still had to call all of those stores and what if they couldn't get hold of a copy of the book either? 

What Amazon did was to build relationships with book distributors all over the globe. They compiled a catalogue of all of the books available from those retailers and allowed you, the buyer, to search that catalogue without even having to leave your home. 

Amazon’s store fixed the J R Hartley problem completely. Now if John wants to find JR’s book on fly fishing, he simply types in a search for “J R Hartley fly fishing” and there it is. He can now buy the book and the whole process has taken him five minutes. Oh, and they suggested a CD of fly fishing music, an umbrella and some waders to go with it. Great! 

Where I’ve been leading you to in this story is that Amazon and the other mega e-tailers succeed because of the huge product catalogues they are able to pull together because they do not need to store stock in a physical location. 

A traditional book store stocks books that it thinks people will buy. It has a limited amount of space and so builds partnerships with enough distributors to fill the store. It will sell lots of books, but within a relatively small number of titles. It will not stock books that it doesn’t think will be popular with its customers. 

Pure play online retailers are so valuable because not only do they sell large quantities of things that are held by other stores, they also sell lots of things, in small quantities, that other stores don’t stock. They sell less of more! The diagram below illustrates this. 

'Fly Fishing’ by J R Hartley is a specialist interest book (well, actually, the book was written after the advert and was very popular, but let’s pretend otherwise!). The local book store doesn’t have a copy because it can’t sell enough of it. The local store’s catalogue is represented by the red part of the graph. Amazon sells the “red” books too, but also can sell all of the specialist “green” books that fewer people want to buy.  

Now compare the size of the two areas and you can quickly see the potential value of the long tail. It extends way beyond the value gained from infrastructure savings. So what does this mean to you? 

If you aim to sell other people’s products online then you should be looking to develop as many distribution relationships as possible. Aim to sell less of more and build out your long tail of products. Be interested in the things that don’t interest you!

If you are a producer of products then a healthy part of your online activity should be geared towards finding the right people to sell your products for you. Sure, you can build your own store, but then you’ve got to generate an audience. A retailer with a substantial long tail is likely to have a substantial audience to go with it. Let them do some of the legwork for you!