Offline Businesses Cannot Compete in The Long Tail

long tailSeth Godin reports on his blog that Borders has increased its sales figures 9% by reducing its stock by 10% and thus being able to present more books with the front to customers as opposed to presenting the spine. He goes further to state that this contradicts the long tail theory that a broader choice increases sales. Seth concludes the article by saying you can either try to stock the largest selection possible (long tail) or you can try to present the best selection possible (‘marketing’ books).

I am not really sure what to say about this analysis. I think it has some limitations and several thoughts came to my mind.

My first thought was that this is a problem of specific search vs. recommendation-based search vs. ‘I want a book now”.

Let me give you some background. I am a very avid book reader. I guess I read about 50 books a year or so. I visit book shops a lot, both online and offline. Thinking about the 250 books that I have bought in the last 5 years, I can only recall three ways of buying them.

Specific Search. I know exactly what I want. I know I want to buy Book A. I usually don’t mind whether I get that book today or in three days, but it must be that exact book. In this case, I go to Amazon and buy it online, because I am 100% sure that they have it. This is the shortest, fastest simplest way of getting exactly that book.

Recommendation-based search. The second mode is, when I am searching for a book on a topic that I don’t know that well, but I want to buy a book that is high quality. For example, I want to buy a good book on graphics design. In this case, I rely on online recommendations to find a good book on a given topic. Again, I use Amazon for this.

I want a book now. The third case is the typical: “I need something to read for the plane trip/this evening/this weekend; which book should I buy?” situation. In this situation, I have a rough idea of what I want, but it is not specific. I usually go into a shop and browse the selection. I peruse the relevant categories in the shop and choose the book that I like the best. Key is that I can take the book with me and start reading immediately.

BTW, can anybody explain to me, why ‘airport specials’ are always these massive, large, heavy books? Who came up with that idea?!

My second thought was that physical shops and online shops have different abilities to compete in these scenarios.

Specific Search. Physical shops will always have much more limited space that online shops. This means that physical shops simply cannot compete with Amazon on coverage. Amazon will always stock 10x or more than they do. So, the old business model of the super-large book shop is simply outdated. Amazon is the ultimate bookshop. Regardless of how large a physical bookshop is, it will always be smaller than Amazon. Amazon wins in specific search. Of course I could walk to the shop and order the book, but why should I go through that hassle?

Recommendation-based search. I have bought several books online that came recommended. I never did in a bookshop. They simply have no way of displaying the recommendations. Or maybe they do, but I have never seen it. So, maybe shops can compete here, but they currently don’t do this beyond best-seller lists and ‘our staff recommends’. Also, I still have a specific search requirement in this scenario and book shops cannot list recommendations as well as Amazon can. So they loose, Amazon wins again.

I need a book now. The bookshop wins. Every time. Amazon cannot compete on this. I am sure if you did a poll in the bookshop, 80% of customers would say that are looking in this kind of way. They want to have a book now, but don’t mind so much which one, as long as it roughly fits some criteria.

My third thought was this. Given that bookshops only compete in the ‘must have a good book now’ category, what matters to them is to offer customers a sufficiently broad selection in each category and to make that selection easily accessible.

In this scenario, I know roughly want I want, say a thriller or a business book, but I don’t have an exact requirement. I don’t mind whether it is book A, B, or C, as long as it is one of them.

What does that mean? What I mean is that it simply doesn’t matter whether a normal physical bookstore has 1,000 cookbooks or 10,000 cookbooks. (Note, the exception are specialist stores like BooksForCooks where they only have cook books and also cook their favourite recipes: what a fantastic shop!) The reason is that I won’t be able to browse them all anyway. What matters is to have a sufficiently large selection so I can browse a sufficient number of books and find at least one that matches my criteria. However, it probably won’t make much difference, whether I find 5, 10 or 15 that match. Because I will only buy one, maybe two books maximum, anyway, the rest is just surplus to requirements.

Conclusion

So, I disagree with Seth. Physical shops (not just book shops, but any shop) don’t compete along the long tail, this is simply an illusion. Large physical shops out-compete small shops, because they have a higher probability of being able to offer at least one item that is relevant to the buyer. Making items easier to browse by displaying them better and in such a way to maximise revenue, reducing the stock that nobody buys, and making sure stock that is frequently bought is present in sufficient quantities and is quickly re-stocked, is therefore a logical move. However, there is a point where having more stock simply does not deliver additional return. The shop is simply overstocked.

I think they key for book shops, or any shop really, is to understand how their customers buy, what the strategic drivers are that allow the shop to compete well in order to meet customer demand, and then to optimise their offering accordingly. The long tail is an online strategic competitive advantage that offline shops have to deal with, but where they can’t win. And why would you focus your business on an area and in a way where you can’t win?

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2 thoughts on “Offline Businesses Cannot Compete in The Long Tail

  1. That is a great point!

    Thinking about it the other way round, Amazon probably doesn’t need to give dicount on long tail books, where else would you get them from?

    So yes, charge more where you are competitively strong and give discount where you are weak.

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