All of that meaning that long tail SKUs together increasingly really add up to something meaningful, and could be increasingly profitable individually and collectively when sold through ecommerce. The "80/20" principle would no longer hold.
Those thoughts as a prelude to some recent musings I have had on how supply chain generally and Amazon specifically are impacting long tail thinking and execution.
So consider Home Depot, which carries I believe more than a hundred thousand SKUs in its giant stores. Many of those are long tail, slowing moving products, but Home Depot carries many marginal SKUs because it knows if customers come in and can't find what they are looking for they may not come back the next time.
But in recent years Home Depot has built three ecommerce DCs, which stock something like one million SKUs. These hundreds of thousands of additional SKUs are by definition long tail products, but now demand for them is aggregated across three major facilities.
But while those three ecom DCs gave Home Depot two-day ground shipping to an huge percent of the US population, that wasn't enough in Amazon world.
So now Home Depot is building out almost 200 local fulfillment centers that can provide next day or same day deliveries in many markets - for fast moving SKUs in the head not the tail, though I assume there will also be some cross docking capabilities as part of that mission.
An interesting application of long tail thinking indeed. I will also quickly reference the "endless" aisle concept and vendor drop shipping that add even more SKUs to a retailer's assortment.
But then you have Amazon, ever pushing the envelope. I suspect but do not know that Anderson's long tail vision imagined these slow moving and niche SKUs being fulfilled from centralized distribution facilities.
That would imply shipping of at least a couple of days, and cost for faster service.
But then Amazon stands that model on its head, with its tremendous build out of its fulfillment center network, now at something like 400 facilities of various kinds in the US alone.
In April, Amazon announced it was transitioning its Prime service benefits to offer next day shipping for free, from the previous two-day program. It also just spent $800 million just in Q2 to build the needed capabilities.
Almost hard to fathom, Amazon is saying as the program rolls out, 10 million SKUs will be available in many markets for next day or same day delivery.
How is this even possible? So rather than aggregating demand across the nation and shipping more centrally, Amazon is positioning millions of SKUs very close to the customer and fulfilling rapidly, almost as fast as going to a retail store to get what you want - which they likely wouldn't stock anyways.
It's like it is following the long tail model, but turning it upside down.
I recently had a laptop power cord go out on a Saturday morning, and was flying out of town Sunday night. Amazon had the laptop family-specific power cord nearby, and got it to my house by mid-Sunday afternoon, in plenty of time for my trip.
I almost could not believe that was possible.
And add one more thing: As Art Mesher, inventor of the "Three V's of Supply Chain" noted a couple of years ago at a CSCMP conference the role of Amazon algorithms in determining what products are displayed and an what sequence, with search result that are no doubt what is best for Amazon.
With Amazon controlling give or take about 50% of US ecommerce, that means a vendor's long tail - or even fast moving - products will thrive or shrivel depending Amazon presentation of the search results.
Those search results (including "customers also bought, etc." are in fact the new shelf space allocation.
All of which is to say Chris Anderson's innovative thinking on the long tail is being morphed in ways he likely didn't imagine by the supply chain.
We are in a logistics era comparable to the sea change from Henry Ford and the assembly line.
What is your view of the Long Tail? Is Amazon turning it upside down? Let us know your thoughts at the Feedback button below.
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