Aug
4
As I discussed in my last post, eBay’s early success can be traced to the fact that the online auction was an early facilitator of the Long Tail economy. For decades, marketing efforts have concentrated on developing introducing products and services with mass-appeal due to the constraints of limited shelf-space and limited demand.
The internet provided merchants of niche products the opportunity to “aggregate demand [for these products] on a national or even global scale.”* eBay in particular was important to the development of the Long Tail economy because their online marketplace satisfied several important factors identified as key to the success of the Long Tail economy.
These factors are detailed in an MIT paper called, “From Niches to Riches: Anatomy of the Long Tail” and are divided into “Supply Side Drivers” and “Demand Side Drivers.”
Supply Side Drivers
As I noted above, traditional merchants were limited “by the same basic constraints: how many products can be provided in a limited amount of shelf space, and how many consumers in the local geographic area are willing to pay for these products.”* Brick-and-mortar businesses were confined to storefronts in expensive locations and could, therefore, only sell products that appealed to the mass-market. Niche items that had limited marketability to the consumers in their area were not a profitable use of their expensive shelf and warehouse space.
eBay helped change that. Merchants no longer needed to work out of high-rent storefronts in high-trafficked areas. Long Tail marketers could stock products of interest to niche communities in their garage or basement located in some remote part of the country. As long as they had a way to ship the products and access to the internet, niche sellers could use eBay market to a broad base of customers without the concern of the expense of a high-rent location.
Purveyors of Long Tail goods could count on eBay to promote their products to a global market. They were no longer constrained to the limitations imposed by traditional marketing venues such as print, radio and television advertising which would only reach limited audiences despite the significant expense involved.
Demand Side Drivers
eBay satisfied several key demand side drivers by providing consumers a centrals source and the mechanisms required to find the niches products that interest them. eBay accomplished this through organization and effective search tools. Before there was such thing as an effective search engine, eBay provided the central destination on the internet where consumers could browse for Long Tail products by category and sub-categories and/or conduct queries for specific items or features using their search feature.
There are several passive demand side drivers identified in the article which eBay has attempted (half-heartedly) to implement that are also important to Long Tail marketing. “Sampling tools, such as Amazon.com’s samples of book pages and CD tracks, allow consumers to learn more about products in which they might be interested.”* User reviews and recommendations also take some of the risk out of the equation for the Long Tail consumer. Additionally, “recommender” services such as NetFlix’s are an effective way of developing the niche marketplace based on the experiences of other consumers with similar tastes (eBay’s version needs some work! ). An eBay interested in developing into a mature Long Tail marketplace would certainly be well served expending some resources in developing and marketing these tools.
Where Does eBay Stand Now?
Alas, given the factors identified as significant to the success of the Long Tail marketplace, eBay seems content to implement policies and field technologies that move the auction site in the opposite direction.
Best Match is optimal for listings with mass-market appeal - not collectibles or niche items. This is in direct contradiction to the circumstances that made it popular and as the original niche marketplace to begin with - the effective organization and search.
eBay has tested the waters of user reviews and recommendations (so successful on Amazon), but has not devoted a significant amount of corporate effort into making these tools a significant feature on the site.
By implementing policies that are designed to encourage the listing and sale of products with mass-market appeal, eBay is implicitly discouraging the Long Tail market. The management has recently created a special category of Power Seller that provides special treatment for super sellers of mainstream products such as Buy.com. Additionally, eBay’s most recent promotion was aimed at increasing the number of fixed-priced listings - a selling format that is much more common in the mass-market product arena than the Long Tail market.
It’s ironic that as eBay implements changes to make it more like Amazon.com, Amazon is broadening their market to encompass more niches. Good thing for Amazon, especially since they have the tools to accomplish the task!
* Brynjolfsson, Erik, Hu, Yu Jeffrey and Smith, Michael D.,From Niches to Riches: Anatomy of the Long Tail. Sloan Management Review, Vol. 47, No. 4, pp. 67-71, Summer 2006
Available at SSRN: http://ssrn.com/abstract=918142