15. The economics of Anderson’s Long Tail for small business

Anderson puts very well, I think, the nature of the Long Tail when he says: “In the tyranny of physical space an audience too thinly spread is the same as no audience at all” and then goes on to show how the web has changed all this. The new economics is that demand keeps on going when you make supply avalable, and the corollary is that it becomes economical to supply obscure products because the demand is there – somewhere.

The problem this gives rise to for small as well as larger businesses is what Anderson calls ‘The Paradise of Choice’ – too much choice can be oppressive. And this puts even more importance on the filters that help you find what you want – better quality search engines and ever more sophisticated feedback and recommendation systems.

Small business may argue they cannot influence at this level and so it is not relevant to them. But if your feedback on E-bay is poor, you are likley to notice it quickly in your sales if you use that medium. And if you do not adequately exploit the search engines – which means understanding a little of how they work and understanding therefore what you can do to influence them in helping your potential customers to find you – then you could easily miss opportunities and be surpassed by businesses with a no better, or indeed a worse, offering.

The economics of the web also encourage small businesses to compete better by partnering. At one level, any appropriate small business can ‘partner’ with massive companies like E-bay and Amazon, and get some access to their massive ‘footfall’ of potential clients. They have both used the economics of the web and the long tail to extend their offering far beyond their usual range – by exploiting the long tail of traders and businesses, who have access each to some customers, they are building their own following, at the same time that they enable these traders to access either more customers or a wide supply of product without any need to stock or administer.

There are obvious gains in this environment for the small business; but also the average small business can be enabled through the web to partner on a smaller scale with similar small businesses where the synergy of two or more coming together provides a stronger offering than either individually.

The world Anderson describes is full of opportunities for the small business, but if it were easy to realise these, everyone would be successful. As usual it comes down to three elements: knowledge: learning and understanding what is possible; planning: creating a sensible operating plan and budgeting resources – time, money etc; and thirdly implementing that plan effectively.