« Update | Main | Does the Long Tail apply outside of media and entertainment? »

July 02, 2005

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Jojo

The problem is that there is TOO MUCH choice in many consumer items these days. It isn't because consumers want so many choices, but because it benefits the sellers to have many choices, as it makes it easy to befuddle the average consumer. If, as a seller, you do a good job of this, then you might just be able to sell a crappy product for a higher price.

With the TV example, you'll find it next to impossible to compare models. Oh sure, there are comparison matrices but the sets are designed so that they all have a slightly different set of features and functionality. It is near impossible to compare apples to apples. This is how the sellers beat the technology of consumers being able to compare prices on the net. This also works to the seller's advantage when they advertise "lowest price". Even with major brands, some large sellers have the manufacturer build models to their specifications and add some letter or number to the model designation. You won't be able to find this model at any other local store and therefore, any guarantee of lowest price is meaningless.

Regardless of technology, the seller almost always maintains the advantage when it comes to selling to consumers.

Vegas Nitro

As hinted in the last paragraph, maybe the long tail requires significantly different features/attributes between each product to really work. But unless manufacturers start to really customize TVs on demand (à la Dell) I don't really see it as a Long Tail problem. It's more like the classic "low margins / high volume" vs "high margins / low volume" marketing concept.

Josh Ray

I wouldn't say this is a weird wormhole so much as an ADVANTAGE of the long tail.

Simply, it's weeding out the knock-offs, junk-models and other products that prey on consumer ignorance.

And this isn't unique for TVs - all electronics have the same issues. Speakers, DVD players, computer accessories, and more all face this copy-cat competition.

To give an example, a friend of mine recently purchased a $40 no-name DVD player (cyberhome ch-dvd300s) at Best Buy which, when popping in a DVD, proceeded to freeze. She returned the piece of junk and spent $80 on Sony's cheapest, yet rock-solid, model.
I tried to advise her to look the no-name up on cnet before buying, but she didn't and now she knows.

I imagine as "review-aggregation" becomes more widespread, these no-name companies with nothing unique to offer (other than a slightly lower price) will quickly lose their uniformed purchaser base and fold.

Interestingly, a GREAT example of the long tail in electronics is high-end audio. While Bose, JBL and others have the main market, there are literally hundreds and hundreds of equipment manufacturers that make amazing gear that costs exponentially more than anything coming out of the big companies - just pick up a Stereophile magazine to see the madness.

Redwineaudio.com is a great example of a small outfit that, through forums and e-mags like 6moons.com, was able to get a foothold in a hyper-competitive industry by selling home-made electronics that simply sound awesome.

Also, here's an interesting example of a custom long-tail TV manufacture:
http://www.hannspree.com/us/

BTW, I discovered your blog through infotalk and love it. I'm sure future books will be seen as, well, unacademic if written in any other way than on a blog.

Josh Ray

Blind me, I didn't notice the hannspree link at the bottom of your post.
Yes, not only do they make heli-TVs, but they also put LCDs inside of flowers, baseballs and stuffed sheep.
Interestingly, crazy electronics like this have found home in Akihabara for years. Now with the internet's global reach, bizarre niche products are finally disseminating into homes all over the world. (I imported a crazy Konica Minolta camera case from Japan just the other day...)

Francis Hamit

That part about the sellers knowing more than the buyers has a neat counterpart called Zipf's Priniple of Least Effort. That means that buyers are lazy and tend to buy an item the first place they find it. That's true for big ticket items as well as the Life Savers next to cash register. Price is less of a consideration than getting on with your life. Electronic databases are a case in point. The same articles available for free at the Public Library cost three dollars per copy and up on Lexis-Nexis, Dialog, Factiva et al. The distribution is done by the same aggregator. So, it is only the brand name of the service that adds value.

Larry Irons

It strikes me that the issue you raise depends on televisions as well as other displays remaining flat. As displays become flexible the variety of ways televisions and other displays mold to our everyday life will make them increasingly personal.

Eric Goldman

This post caught me off-guard, because I would have assumed that the Long Tail theory doesn't really apply outside the context of media content. And that's because I thought the Long Tail develops from reduced manufacturing and distribution costs. While big-box products like TVs may see some incremental benefit from disintermediation, the effect seems wholly insubstantial compared to the disintermediation in media. So maybe the wormhole you've identified is really just the quirks of trying to apply the Long Tail theory too broadly...? Eric.

Francis Hamit

Well, Eric, disintermediation does work for phyisical goods. It is how Amazon captured most of the used book business. There are 800,000* third party dealers selling books though Amazon marketplace. Amazon, unlike eBay,charges nothing until the book is actually sold. Aside from collecting their cut, they do nothing. The dealer handles shipping, refunds and customer complaints. Why dothe dealers play along? Well, the store is always open and you have over 30 million potential customers. They also do auctions and storefronts, but unlike a real store in a physical location, you don't have to be there to make a sale. So, its a win-win, all around. If you do it right you have twice the margin of a regular bookstore too.

Kaleberg

The proliferation of television and related electronics models smacks of a different phenomenon, the Red Queen Hypothesis. Evolutionary biologists speculate that the genetics of a population is in a continuous state of flux in response to predators (e.g. infectious bacteria) and prey (e.g. hosts for bacteria). One has to run as fast as one can to remain in place. (Actually the theory is not that blood thirsty, one also has to co-evolve with one's symbionts or develop alternate strategies).

So, who are the predators, who are the prey, and does the resulting marketplace have power curve, long tail characteristics?

One thing to consider is that certain products have good reputations. There are some companies that cost a bit more, but generally provide better quality. Then, there are the various compromises.

There is also a relatively low cost to adding a model. If Sears, or CostCo, or Walmart wants a line of televisions, a manufacturer can easily change a face plate, add or remove a button or a feature. This was easy enough in the old days, but with software so important now, it has become trivial to add or remove something.

While it is possible to simply change the nameplate, any desire to maintain a pricing system and continue selling higher and lower priced models requires some kind of differentiation.

Consider the refrigerator market in the 1930s. To grow the market, makers wanted to have lower cost models, but the freon piping was more or less the same. Water freezes and food rots at the same temperature levels. When the 1936 "nudes" were introduced, the difference was in the shelves, ice cube trays and crispers.

Consider houses in the late 19th century. The balloon frame construction and general layouts stayed the same, so the competition was in the "gingerbread". In the next century, new features, like hot and cold running water, electrical lighting and central heating systems changed the way people lived, so houses competed on different features.

You get a similar cycle of technical innovation and feature efflourescence in other areas as well. Consider automobiles. The technology soared from 1900 to 1950, then came chrome and tailfins. The 1970s and 1980s produced dull boxes, then came supersizing and cup holders.

Hell, consider software. The innovation has slowed dramatically, so people compete on features.

Is there still a long tail? Most definitely. During the innovative phase, the tail tends to concentrate, as a small group competes to get it right, and all too many competitors just can't figure it out. (I worked for Software Arts, so I remember the early VisiCalc clones, before 123 and Quattro). Then comes the low entry cost feature competition, and there you get your long tail growing.

The Red Queen Hypothesis drives the change, but it is niche market exploitation that drives the diversity. Remember, in televisions manufacturing, the end customer is the distributor or store chain, not the consumer.

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