Title:	DO RETAILERS BENEFIT FROM THE LONG TAIL PHENOMENON?
Author(s):	ochen Eckert, Christine Ebling, Bernd Skiera, Oliver Hinz
ISBN:	978-972-8939-24-3
Editors:	Sandeep Krishnamurthy, Gurmit Singh and Maggie McPherson
Year:	2010
Edition:	Single
Keywords:	Long Tail, Assortment Size, Additional Consumption, Substitution, Video-on-Demand, Electronic Commerce
Type:	Full Paper
First Page:	93
Last Page:	99
Language:	English
Cover:
Full Contents:	click to dowload
Paper Abstract:	The Internet and related technologies have vastly expanded the variety of products that can be profitably promoted and sold by online retailers. As a result, while in most offline markets, a few best selling products (blockbusters) generate the bulk of demand, online demand for blockbusters is often accompanied by sales for a huge number of less-selling products (niches). In response to emerging long-tailed sales distribution patterns, Anderson (2004, 2006) coined the phrase Long Tail to describe the phenomenon that niche products can gain a significant share in total sales. Most important from a retailers’ perspective is whether additionally offered niche products mainly substitute former existing ones or if consumers expand their demand. While the latter can generate additional profit, substitution is only beneficial if substitutes have higher margins than products that were purchased before. By using a unique data set of a monopolistic video-on-demand operator in Germany that covers all individual sales since its launch from December 2004 until August 2007, we disentangle demand for additional offered films into substitution and additional consumption. Our results reveal that demand of additionally offered films is driven by on average 86.10% additional consumption and only 13.90% substitution, suggesting huge profit potential for retailers by increasing their assortments.
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