The Key to Establishing a Long-Tail Merchandising Strategy
Society has shifted to the point where retailers can no longer offer only mainstream products or best-sellers to consumers. Today, demand for niche product offerings is potentially bigger than those that are offered in traditional brick-and-mortar stores.
Chris Anderson coined the term "long tail" in his book, "The Long Tail: Why the Future of Business is Selling Less of More," where he looks at the business strategies of companies like Amazon.com that offer best-selling products along with niche or unique items in order to appeal to a larger group of consumers. When thinking of a long-tail strategy, Anderson says to picture an animal where the head represents products that are extremely popular (i.e., best-sellers), which are carried in most stores and subsequently have lower margins. The tail, on the other hand, represents products that yield much higher margins. These offerings are typically niche or unique and are available online but not in stores.
How an Endless Aisle Can Deliver Endless Profits
The long tail is also commonly referred to as the "endless aisle" or "infinite shelf space" because it converges digital and physical channels and allows retailers to offer a larger variety of products and services to consumers. Let's face it, physical shelf space is costly, so at the end of the day companies are always going to have best-sellers on the shelf.
The concept of endless aisle is about offering consumers more products than the typical "movers" that are displayed in brick-and-mortar stores. This gives the seller an opportunity to increase average shopping cart revenue. In fact, by recognizing the huge profits that can be realized by adopting a long-tail strategy, other industries such as manufacturing, distribution and even consumer goods manufacturers are following retailers by broadening their offerings using a combination of physical and online channels.
5 Challenges to Executing a Long-Tail Strategy
Despite the benefits of a long-tail strategy, numerous challenges exist due to the number of data-related issues that can arise. Therefore, before embarking on a long tail-driven strategy or deciding on whether to create a private marketplace (when one or more large enterprises maintain an open trading channel for strategic trading partners across the entire supply chain), it's important that retailers pay attention to the most common information challenges:
- Onboarding supplier information: As retailers add more products to their portfolios or create private marketplaces, they have to manage a much larger number of suppliers. Moreover, the very act of onboarding and managing information from these suppliers is not only time consuming, but it can significantly slow time to market.
- Managing a large variety of categories: When product assortments expand, retailers are often forced to manage a large variety of categories, attributes and associated assets. When they receive this information from multiple sources, it most likely will be incomplete and inconsistent, resulting in numerous requests and time lost to compile more accurate product information.
- Classifying and standardizing information: Once products are uploaded into a system, retailers need to define both the classification and standardization of the information. If done manually, this process is time consuming, repetitive and error prone.
- Publishing product information to multiple channels: Publishing consistent product information to all online and offline channels is not an easy task, especially when information is typically managed and stored in separate silos across the enterprise.
- Data governance and data quality: Any increase in the amount of product information requires retailers to add new processes for governing and maintaining the quality of their data to ensure consistency and reliability.