Anatomy of the long tail: ordinary people with extraordinary tastes

The success of "infinite-inventory" retailers such as Amazon.com and Netflix has been ascribed to a "long tail" phenomenon. To wit, while the majority of their inventory is not in high demand, in aggregate these "worst sellers," unavailable at limited-inventory competitors, generate a significant fraction of total revenue. The long tail phenomenon, however, is in principle consistent with two fundamentally different theories. The first, and more popular hypothesis, is that a majority of consumers consistently follow the crowds and only a minority have any interest in niche content; the second hypothesis is that everyone is a bit eccentric, consuming both popular and specialty products. Based on examining extensive data on user preferences for movies, music, Web search, and Web browsing, we find overwhelming support for the latter theory. However, the observed eccentricity is much less than what is predicted by a fully random model whereby every consumer makes his product choices independently and proportional to product popularity; so consumers do indeed exhibit at least some a priori propensity toward either the popular or the exotic.

Our findings thus suggest an additional factor in the success of infinite-inventory retailers, namely, that tail availability may boost head sales by offering consumers the convenience of "one-stop shopping" for both their mainstream and niche interests. This hypothesis is further supported by our theoretical analysis that presents a simple model in which shared inventory stores, such as Amazon Marketplace, gain a clear advantage by satisfying tail demand, helping to explain the emergence and increasing popularity of such retail arrangements. Hence, we believe that the return-on-investment (ROI) of niche products goes beyond direct revenue, extending to second-order gains associated with increased consumer satisfaction and repeat patronage. More generally, our findings call into question the conventional wisdom that specialty products only appeal to a minority of consumers.