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| October 10th 2007 |
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| The possibilities in the long tail of wine |
by Robert Joseph
Chris Anderson's depiction of the 'long tail' in the book and music markets has challenged thinking about their modes of distribution. Robert Joseph asks if a similar paradigm shift is about to transform global wine retailing.
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Sometimes it's refreshing to be forced to review a logically assembled set of ideas. Since the mid 1990s, it has become commonplace to acknowledge that the consolidation of routes to market have made life increasingly difficult for producers of any product. Music and book stores are full of best-selling titles with heavy marketing budgets – but not the CD or novel you were looking for. The wine sector has followed the same track, increasingly resembling the beer and spirits markets, with a small number of global brands controlling the territory.
But as economists know, plotting predictive graphs based on historic data is a foolhardy process. In October 2004, Chris Anderson the editor of the influential high-tech magazine Wired, wrote an article that looked at the statistics in a different way – and changed the way many people thought. Anderson's visual image of the market is a chart in which the horizontal x axis represents all of the products that exist while the vertical y axis covers sales. For most products, there is a steep mountain – the 'short head' – on the left depicting the mass of fast-mover sales, while to its right there is a shallow, nearly-flat, line – the 'long tail' – for those with less call.
Focusing his attention on the music and book market, Anderson reveals that, in 2004, only 25,000 of the 1.2m books tracked by Nielsen Bookscan in the US sold more than 5,000 copies. While 1,150,000 sold fewer than 1,000 copies, the sales figure for a staggering 950,000 was under 99. Similarly, he points out that the top 200 albums make up 90% of Wal-Mart's sales.
What caught Anderson's attention, however, was not the fact that so many books and records sold so poorly, but the sheer size of the number of titles that were selling at all. While hundreds of thousands of people are downloading the latest Harry Potter, a few are quietly ordering books of obscure Albanian poetry.
The length of the long tail
At the download site Rhapsody, music tracks that rank between 100,000th and 800,000th in sales represent 16m downloads a month: and over 15% of Rhapsody's income. At Amazon, a quarter of the book sales come from titles that fall outside the top 100,000.
The wine industry, with its hundreds of thousands of labels potentially has one of the longest tails of all. But it's easier to exploit the long tail of music downloads in which no stock needs to be held or delivered. In the wine industry these requirements are complicated by limited shelf-lives, legal problems and tax issues. s plenty of high profile failures have proved, simply setting up an online retail wine site with a vast range has not often proved to be a good strategy. All too often, SKUs have been slashed in order to avoid stocking wines that move too slowly. But, when Tesco, the UK's biggest retailer, added 370 wines to its range recently, its spokesman specifically referred to the long tail |
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as part of its rationale.
Tesco increases range
Tesco avoids slow-moving bottles as much as any of its competitors, but the supermarket has several advantages. The chain not only boasts outlets from neighbourhood shop to megastore, but it also runs wine fairs, has a vibrant online business and a wine club, which picked up half a million members within months of its 2006 launch. In other words, Tesco could move slow-moving wines into slots where they are likely to perform better.
Creating systems like this, however, requires significant investment and maintenance and still only accommodates a far smaller number of wines than are contained within the long tail. Nor does it remove the problem of funding slow-moving stock.A British retailer called Edwin Booth presciently addressed the long tail issue two years before Chris Anderson wrote his article. Booth, who is chief executive of a regional supermarket chain with 26 outlets and an annual turnover of £210m, had already shown his skill as a wine retailer. Why not, he wondered, replicate the Amazon model by taking everything on a sale-or-return basis. Working on consignment has enabled Booth's everywine.co.uk to offer its customers 44,173 different wines without costing him a penny in stock. Better, every wine is sitting in storage facilities paid for by its importer, who also handles delivery.
Booth charges no listing fees to those importers, for whom everywine offers an attractive means of offering retail customers wines that might otherwise only be available in restaurants. Booth will not reveal his turnover, beyond annual growth of 37% over the last five years, but it has been credibly suggested that it is at least £5-10m. Everywine is, however, one of the least visible entities in the market. As Booth says, all of his promotional efforts are directed where he thinks it matters most: online. If you google an obscure wine name such as Favorita from Italy, or a small Burgundy winegrower, everywine's name will come up, largely because of the focus Booth has placed on search engine optimis-ation. Winesearcher.com lists over 37,000 of everywine's products.
Hunters not browsers
Booth's business differs in one significant respect from other models: "we're all tail and no head". Every-wine's customers, "hunters not browsers" in Booth's words, don't use the site as a source of popular wines, so his top 20 sellers move only imperceptibly faster than the others. "The last 8,500 wines we added to the site," he explains, "represented 18% of July's orders."
But there's another way in which everywine differs from other long tail models, and this is arguably one of its failings. Booth is avowedly giving his customers what they want. Other long tailers are capitalising on giving them what they don't know they want, but are likely to appreciate. Amazon invented this notion by revealing |
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what other people who bought the book you did also put in their baskets.
The cleverest use of this "if-you-like-that-why-not-try-this" is seen at last.fm, an online service that creates tailor-made music radio stations for millions of individuals, based on the kind of music they download on their computers. "Last.fm tracks what you listen to, learns what you like, and gives you better music".
Scrobbling
Online wine retailers vary in their use of what last.fm calls 'scrobbling' and others have termed 'collaborative filtering'. At Chateau Online, for example, visitors hit a brick wall once they have found a wine. At bbr.com, the online arm of Berry Bros & Rudd, however, there's a 'similar' button to hit beside each wine, leading to appropriate alternatives. True long tailers would say that bbr.com's 'similar' wines are too similar. The ideal, they claim, lies in making clever leaps, introducing a Gevrey Chambertin fan to an Austrian St Laurent or an unusually rich Loire Gamay rather than simply pointing them in the direction of another Burgundy or an Oregon Pinot Noir. But the principle is there. As it is at winelog.net which seeks to mimic last.fm in recommending wines based on the tastes revealed by users.
Terms like the long tail and collaborative filtering may seem arcane. In fact, all they are referring to is the way an old fashioned retailer personally used to deal with his customers. But in an online age, and with millions of confused consumers and hundreds of thousands of wines, anyone who ignores them and their associated techniques, does so at their peril.
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