FastCompany has a great article on exploring the Long Tail and how it exists beyond Amazon. Well I couldn’t agree more.

In my mind the article confirms my suspicions. For the smaller players, and non-VC funded startups, The Long Tail, is really just a Web2.0 Buzword for Niche Marketing.

The Long Whaaa?
So, as a primer for those not caught up in the bubble, “The Long Tail” refers to a phenomena described first in a Wired article by Chris Anderson in 2004. It talks about how product offerings by a business, usually considered to be “unpopular” because of low sales volumes, can make up a significant portion of an online business, because the total volume of said “unpopular” items can be significantly large.

E-commerce had created a business model where this is feasible because of low overhead; when it costs little or nothing to stock these items, it becomes viable to sell them. Example: Amazon and Netflix — large centralized warehouses reduce the cost of carrying exotic and unusal books/ DVDs. Contrast this to your neighborhood Blockbuster: it costs money every month for every square foot of space; because its probably in a visible location in your neighborhood, those costs are probably, per square foot, multiples of what a larger warehouse in the middle of nowhere costs.

Blockbuster MUST be stocking what’s considered mainstream and popular, because they’ve got to get a return on every square foot of sales space they’ve got.

Amazon’s Got a Huge Tail — But How Effective is It?
I think this is where the article hits it on the head.

Young believes that direct-to-consumer commerce is the wave of the future for Long Tail items. Yes, Amazon and other aggregators will sell small numbers of each niche title, but Young is convinced that both artist and consumer benefit when they cut out the middleman.

While the Amazons and Netflixes of the world flex their long tail muscles — because even though its a lower cost to stock and maintain those niche titles, it *does* cost money — I think Chris Anderson’s story doesn’t quite end there.

Their role in the large ecosystem of e-commerce is that these sites will introduce folks to other niche products in the area that they already have an interest in. The best of these sites, after all, were the very first to integrate audience participation in terms of “recommendations”.

While the Long Tail phenomena no doubt exists for larger (and perhaps smaller) online retailers as well, commerce sites that capitalize on these niche markets will also prosper. In fact, the existence of the Long Tail probably helps create and foster niche markets in a way that was not possible before the Internet.

Disintermediating Amazon

“Going to Amazon can get the item to the fan, but going directly to the artist creates a fulfilling, lasting relationship. As a content creator, once you have a direct customer, you can strengthen that relationship with ‘thank you for your purchase’ emails, new release preorders, exclusive tour presales, etc. At the end of the day, building a relationship with your fan is the most important thing to enable the tail to grow and become a sizeable revenue producer.”

Around the time of the first Internet bubble, there was a lot of press / hype around how the efficiencies of e-commerce would enable retailers to disintermediate the supply chain.

One of them, as I recall, was Amazon.

At any rate, disintermediation’s really just a fancy word for eliminating the middle man.

The irony here is that although disintermediation was trumpted by companies like Amazon during the first bubble, smaller independent retailers now on the Internet can harness the same phenomena to disintermediate Amazon.

How? Well, the article quite rightly points out that the evolution of the Long Tail is for smaller e-commerce players, who are closer to their target audience, and can leverage the power of the Long Tail in a different way by catering to their needs in a way that the larger e-commerce players never could …

… precisely because of the Long Tail effect.

Amazon, for a lack of a better example, cannot really focus their efforts in catering to a niche in the way that these smaller retailers can. More to the point, their audience would never associate that undefinable quality that some would call authenticity with Amazon.

Its the same reason why department stores have all but dried up with the exception of the all-mighty Walmart.
Walmart is so large that its able to achieve economies of scale that no other entity is able to — and its able to pass its savings to the customer. But department stores in general — Eatons, in Canada, Woolworth’s in the States — have all but disappeared because of their precise lack of specialization and focus.

More to the point, as with Amazon, there’s a limit to what customers are willing to pay in exchange for a lower price, and the experience is integral to it.

• Its the experience of dealing with a party who has real similar interests.
• Its the experience of dealing with a party who is response and attentive to your complaints or concerns
• And its the experience of being able access products or services in a much more intimate way than a big box dealership or the equivalent thereof simply cannot offer.

The best part?
Customers are willing to pay a premium for it.

Don’t Do the Tail, and You Won’t Have to Compete on Price
And that’s what niche marketing is really all about.
It was (and still is) still a bit of a buzzword in Internet Marketing circles, but as it applies to the Web2.0 trends, it really has applicability in terms of understanding and capitalizing on the Long Tail phenomena.

Small businesses, entrepreneurs and bootstrappers probably don’t have the capital to create economies of scale that make sense from a business model point of view. But, it probably makes no sense for them to do so anyway, because they would really be no different from those business models.

While it may have been impossible pre-Internet to create a retail business with a real storefront, a lease, employees and so on for a niche prouct or site, the cost of doing business now on the Internet has dramatically dropped. Operationally, the cost of building and maintaining an e-commerce site is a pittance compared to the regular costs of an off-line concern.

At the same time, because you’ll be offering something unique and special to your customers, they won’t necessarily be looking for bargains when they hit your site. They’ll be looking for other things — in particular, the experience of dealing with a business who knows them and their product of choice intimately … who they might even have a relationship with.

The value that it all adds to your product or service offering is more than enough to offset any price premium you might have over a larger e-commerce concern, like Amazon. Although clearly you can’t be gouging your customers either.

The keyword is value: what they get / what they have to give.

In order to maximize value and profits, think about the following tips:

1. Remember Your Roots: If you’re an artist, creator or author selling directly to your audience, fantastic — be as real as you possibly can. Your audience is paying for your own unique “voice”. If you’re not, remember your own roots; you’re probably a great fan of those works yourself. Authenticity is the currency of cool, and its not something you can or should fake.
2. Create Great Content: Start a blog, publish articles, do interviews — have fascinating and compelling *stuff* for your site. This has a few reasons. One — its great for search engines; let your audience find *you*. Two — you’ll be creating a great relationship as you’ll allow them to participate in creating commentary to your works. Three — it gives your fans / potential customers reasons to come back. Four — it establishes your own credibility as person / site which is an authority on the subject … particularly important if you’re not the owner/author/creator of those works, yourself.
3. Convert Your Traffic and Follow up: Easier said than done — but its the mantra of direct marketing mavens everywhere. Your potential customers are now warmed up and rarin’ to go, thanks to your following the advice above … which, I might add, distinguishes you from your larger competitors in a great way … and its time to convert those potential customers into actual customers! Don’t just offer the book, CD, or the t-shirt! Show your audience you can offer more! Show them that your business has a better and more intimate knowledge of what they want and need. Offer limited release items not readily available anywhere else; shower them with bonuses and extras that would actually be used; follow up with meaningful email replies. Dedicate special RSS feeds and channels just for them. It goes on and on.

The Long Tail exists in today’s Web2.0 world, and we’ve probably all taken part in it at one time or another. For entrepreneurs who are single or small man operations, the trick is how to take advantage of it. For those individuals, it probably makes the most sense to consider Niche Marketing as the small business’ Answer to the Long Tail – and when applied correctly, it can create a richer experience for all parties involved (pun intended!).