How would you run your business if you could rent shop fronts for free, paid nothing for delivery, and had products that cost nothing to make? Let me introduce you to Web 2.0 selling and leveraging the long tail of sales.
This strategy for success was proposed by O’Reilly as one of the key patterns for Web 2.0. The secret is to use the internet to remove the physical costs of selling, so the amount of inventory and range of products is unlimited and the market is global. This means business’ can avoid chasing the popular high-volume sales at the front of the sales curve, and capitalise on the niche products and the longer selling window of the ‘long tail’ – and Amazon is a classic example. The Internet is perfect for capitalising on the benefits of leveraging the long tail, as O’Reilly explains:
Small sites make up the bulk of the internet’s content; narrow niches make up the bulk of internet’s the possible applications. Therefore, leverage customer-self service and algorithmic data management to reach out to the entire web, to the edges and not just the center, to the long tail and not just the head.
A classic example of the virtual shop and unique product sales is iTunes and ringtones which cost nothing to sell or deliver and very little to make. The idea of selling ringtones was seen as ‘the next big thing’ back in 2001 and although they faced some challenges they are still making money in the long tail of sales – even though you can create your own!
Image: JISC Infonet
The benefits that the internet offer to leverage the long tail are unique:
> Producers can reach a wider audience with new micro-markets built off small sites
> Customers have a wider range of products not just the popular but also the unusual and niche
> Business and customers profit from reduced costs of online commence and internet delivery
So how do you get some share of the money? One recent example is a spin-off from the Pinterest concept, by a new startup called Luvocracy. Their concept is to ‘find people you trust and shop what they luv’…where social media meets sales in the new marketplace!
Curated shopping at Luvocracy
Luvocracy is a great example of O’Reilly’s leveraging the long tail pattern and meets most of the recommended best practices:
* Use the three forces of the long tail to make the tail longer with an unlimited supply of goods highlighting only those for sale, makes the tail fatter by growing the customer size with the social networking, and drives supply and demand by the recommendations of users and the easy purchase options.
* Use both algorithmic data management behind the scenes to bring product sales to the attention of users and uses an architecture of participation to match supply and demand through their users and their followers networking their finds and purchases which leads to curated shopping – where you buy what others recommend.
* Use low-cost strategies to allow both business’ and users to manage their own accounts and use the low-cost advantages of an online site to reduce business overheads.
Luvocracy seems to have successfully harnessed a lot of the integrated strategies identified by research (Lee, 2010) where retention and co-creation, product reviews, cross-marketing and word-of-mouth all rate highly in the new marketplace.
Although this site is only in beta, there has been some push back on possible issues:
* Lack of attribution to the original content owner is causing some copyright concerns,
* Offers for others to make copies of the handmade originals when they are out of stock seems to breach the original owners rights,
* Opportunities for both the blogger and the product maker to make money is upsetting product makers and opening a new discussion around marketing channels.
So, do you luv it, or not? Let me know what you think.
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More information about the Long Tail:
Hervas-Drane, Andres, Word of Mouth and Sales Concentration (February 13, 2013). NET Institute Working Paper No. 07-41. Available at SSRN: http://ssrn.com/abstract=1025123 or http://dx.doi.org/10.2139/ssrn.1025123
Lee, T. (2010). Head or tail? an integrative analysis of customer value and product portfolio. International Journal of Business and Management, 5(12), 51-61. Retrieved from http://search.proquest.com/docview/821639654?accountid=13380
Bronwyn Shimmin-Clarke 
Hi Bronwyn
Your example for this pattern is great example. Such a instance has been the spin off from Pinterest aspect, through the newer startup named as Luvocracy. Its aspect has been finding people we trust along with shopping what they love in which social media meets sales in newer marketplace. Pinterest has been the technique to collect as well as organize things we love to.
Sami
Yes, Sami, Pinterest was the base for this. Pinterest allows you to collect and organise but the big difference is that Luvocracy only shows items you are able to buy – so they convert browsers into shoppers. One clear business model there straight away! I hope you liked Luvocracy.
Hi Bronwyn
I really like the idea to have unlimited goods for sale which means unlimited choices of goods that I can purchase. In reality it is not unlimited but it should be enough choices for me. If I want a new pillow, 1,000 choices should be enough for me to get the one that I like. Luvocracy has done a good job of leveraging the long tail market. I;ve never heard of it before but it sound very interesting.
Prapat W.
Thanks, Pratap. I agree it is not ‘unlimited’ but if the right site can have enough options for one person to choose from. And with so many people in the global market, there are enough opportunities for lots of sites!
Hi Bronwyn,
The method that Luvocracy leverages the long tail is very interesting. Using recommendation system and suggestion as a way to help customers find trusted sellers. Its a very niche concept where social environment is adapted to help with shopping. Can you help explain the “Buy it for me” concept in Luvocracy?
-Sukshan
Thanks, Sukhsans, it is interesting and innovative…and a few people have got their backs up as the last link in my post highlights.
It is still beta and I think they have been fine tuning their model, but this page has their current intentions: Once you set up your account, anything you want to buy is just a click away. A Luvocracy shopping assistant finds the product at a competitive price from a reputable retailer, places the order, and will assist with any glitches or return needs. If a product is sold out, we will scour the world to find some place it is in stock. If it’s out of stock everywhere, we will let the designer know that you want to buy it and give him or her the opportunity to make more for you if possible. Your credit card information and email address will never leave Luvocracy
I think the ‘Luvocracy shopping assistant’ is another name for ‘outsourced service provider who gets a commission for this task’. It is all on the web and open to the global market. I think it is fascinating!
I loved your first paragraph too Bronwyn! We’re definitely moving towards becoming a share-all society but at least we can use it to our advantage – and as I said in my reply to your comment on my blog post: as long as this is not going on behind our backs. At least it’s all out in the open.
Yes, Eve, it is a ‘share all’ society if we choose to sign up. And I totally agree that people only sign up if there is something in it for them. This site gives you a nice browsing experience AND curated shopping. A personal shopping assistant (or 10) – what’s not to like about that?
Hi Bronwyn,
Great and very detailed information you’ve got there. Very interested in the different small sites that makes up most of the internet. In the country i come from (Singapore), there are many start up businesses that sells fashionable clothes to online buyers. They are known as “blog shops” It is a hit in Singapore! Therefore i do think that start up businesses has a much lower risk as not much capital is being involved like having a physical store.
It is definitely not an easy task to manage the supply and demand. If the supply and demand can be foreseen through social media (facebook), would it mean by that particular organisation requires extra resources in ensuring that the social media sites are being well looked after and are being advertised so as to attract more consumers and grow more customer size? Cheers!
Good points, Jer fen. The online shops have lower overheads to start up…but do you think this raises some concerns with customers that they are genuine and reliable? I think ‘bricks and mortar’ means you can see the shop and the stock – but it comes at a price! I also agree that online sites still have overheads – they don’t need to sweep the shop but they do need to maintain their site and promote the business. Different business models and different challenges!
I like your first paragraph Bronwyn – it really highlights how setting up your own business is accessible to almost anyone through Web 2.0. But I also like how your example of Luvocracy highlights the importance of trust on its main webpage. I think this is a HUGE issue, with ease of accessibility resulting in so many dodgey sites and sellers out there.
I was involved in a research project a little while ago which was looking at how recommendation systems work in sites and trust was one of the main topics of interest. One of the project’s findings was that people tend to trust recommendations more when they come from people they know – firstly, because they know it is a legit recommendaiton and secondly because we often share common interests with our friends. It looks like Luvocracy is all about this – a great example!!
Thanks, Monique. I had a look at your blog on RedBubble and noticed they don’t do recommendations so much and you mentioned they have some opportunities there.
The challenge is to get the mix right. There are some concerns that recommendations put all of your personal preferences on display. Maybe they need to de-identify it a bit…but unfortunately that would break the model that Luvocracy is built on.
It’s hard to make everybody happy!
Definitely understand these concerns; however, if you have specifically defined your interests and you know your profile information is viewable to your friends, the people you added to your network (I think I am probably more talking about Facebook here), isn’t it fine for the interests to viewable to these specific people?
Do you know what connections Luvocracy bases its recommendations off?
Luvocracy explains that you select people to follow and then base your decisions on their recommendations.