A Short Tale about the Long Tail
If you haven’t been in a Best Buy store lately, you’ll be surprised to find that – almost on a weekly basis – the Blue Ray/DVD department just seems to be shrinking right before your eyes. My guess is that - among all the big retailers - it’s now a flat-out race to the bottom (and to the mid-aisle disk dumping bins) between the BD/DVD guys and the CD department heads whose in-store footprints are also approaching Lilliputian dimensions (not just at BBY, but in every other consumer electronics retailer as well) although the space share shift in the audio department seems to be slightly offset (or disguised) by the huge growth and substantial variety of new offerings in the headphones department. Thank God for Beats.
I think that Best Buy’s management is basically giving it up – waving the white flag - and just conceding that they’re fighting a losing battle on too many fronts to continue the war. But they may be missing the boat because they’re playing 100% defense (cost-cutting) instead of trying to get ahead of the curve and repositioning themselves to serve the new needs of their customers before their few remaining customers abandon them entirely. This isn’t anything new in the category of Business Management 101 – the demands of customers are always changing and you either change with (or ideally ahead of) them or your customers go somewhere else. What has changed is the speed of the changes going on and how quickly you need to anticipate and then react to those changes in behaviors, attitudes and demands.
Here’s what we know for sure today. Companies that have effective online and offline channels consistently and significantly outperform their competitors who are still using only a single channel – typically bricks and mortar. It’s all about the interplay between the channels and about the mix of offerings in each and, most importantly, it’s about the need to continually innovate and add new functionality, products, services and solutions to both channels rather than starving one and trying to double down on the other. Honestly, I think that the big box retailers bought into the inevitability arguments which were constantly being promoted by Amazon’s press and PR blitzkrieg a little too soon and much too completely. As a result, now that the boat has pretty much sailed, I think we’ll see that 2015 will be known hereafter as the year in consumer retail when the “tale of the long tail” really came true, but only because the major retailers helped stage their own funerals instead of fighting back.
And, as convincing as the long tail arguments seemed to be on the surface, it’s turning out that the infinite inventory and instant availability attributes of the long tail were only part of the causes of the retailers’ ongoing difficulties. These superficial factors masked - to a certain extent - another major contributing behavior. The hidden problem was that these freaked-out retailers are killing themselves slowly. They were trying to catch a knife and each concession that they made to reduce their in-store inventory exposure and their overall physical merchandise offerings turned out to make the overall situation even worse because – from the standpoint of even the most willing consumer – this process quickly became a self-fulfilling prophecy.
No one wants to waste a trip to the store once they’re convinced that what they want won’t be there anyway. This is the old Blockbuster paradox coming back to life – Blockbuster always had loads of empty display boxes for all the popular films and plenty of old product, but none of that week’s hottest hits in stock. In other words, they had everything you didn’t want and nothing you needed. And, what is also very clear today is that, while we’re not watching any fewer movies or TV shows or listening to any less music (or – in fairness to my good friend Don Katz – consuming less “audible” content including music), we are increasingly accessing and absorbing whatever the desired content may be in virtually every manner except sitting in one place and “playing” a physical object on a fixed and immobile device.
So the critical underlying issue isn’t decreased demand. I think that it has a lot more to do with portability. The rise of mobile computing and the ubiquity of constant connectivity has definitely put extra pressure on the old delivery systems and technologies and the big box retailers haven’t done any more to address this transition than the booksellers. In a world where everything wants to be streamed, Best Buy needs to think of their stores as digital gas stations and provide fast, cheap and exclusive fill-ups on new music for their customers on the spot – in the store and online too. The music is the real message, not the medium of delivery. We don’t need shiny disks to share our sounds any more. Best Buy should stick to selling fans and fridges which won’t be going digital any time soon. Phones and headphones will probably sustain them for a while because these objects (of both necessity and desire) remain highly personal, tactile and touchy-feely tokens in our lives. If you don’t believe me, ask yourself how totally reluctant you are to ever hand your phone to someone else. You’ll show them stuff on it all day, but sharing it with someone else is another story.
Right now, we’re in the age of IG (Instant Gratification) and the immutable law of IWWIWWIWI. I Want What I Want When I Want It. Every industry (even relatively new and fairly digital ones) will be changed significantly as we continue to move from the analog world to a world of digital everything. And new major businesses will be built in the cracks and the gaps created every time the big guys fall asleep at the switch.
Take gift cards, for example, and consider the very rapid rise of Raise (www.raise.com) which runs an online, mobile-enabled, exchange that sells partially used gift cards to consumers at a discount. And they don’t just sell you the cards while you’re sitting on the couch at home; they sell you the exact gift card that you need at a discount while you’re standing in the checkout line at the store. Exactly what you need; precisely when you need it; and instantly. They sell you a Target gift card at a discount to the face amount of the card while you are standing in line getting ready to pay for your purchases at Target. Can you stand it? Can you even believe it? Well it’s true. Right in the store. Right on the spot. And there’s much, much more to come.
Your job is to anticipate how these kinds of game-changing shifts will impact your business because your business may be next in line. There are no simple answers, but there are a few things to watch for and to try to get in front of instead of waiting until it’s too late and then spending a lot of costly and painful time playing catch-up.
(1) You need to constantly monitor and dynamically adjust the dollar allocations of your commitments to each of the channels you are using to reach your customers in as close to real time as possible. And the more channels you effectively employ, the higher your likelihood of ultimate success – especially because the vast majority of digital distribution channels are relatively ridiculously inexpensive to use.
(2) You need to monitor the ongoing migration of the traditional products and services in your sector or industry as they move from the analog and physical world into the new digital economy. Some will survive the transition; some will morph into new offerings; and some will cease to exist, but managing the life cycles of all of them will be crucial to your success.
(3) You need to watch for the emergence of new delivery channels and systems for both your own products and services and, more importantly, for the sale and delivery of competitive or substitute goods which may be better priced, more readily accessible, easier to use; or more easily incorporated into the ways in which your customers are now conducting their own businesses.
(4) You need to watch for new consumer behaviors which are probably the most difficult to anticipate and also the most rapidly disruptive because of the speed and ease with which massive numbers of consumers can migrate to new solutions with virtually no switching costs or training requirements.
The bottom line never really changes. The customer has a constantly increasing array of choices, a limited attention span, and a relatively fixed amount to spend on whatever you’re selling. The winners in the competition for those dollars will be the players who are most attentive to the customer’s changing desires and most immediately responsive to their demands.
In the end, notwithstanding the appeal and power of the long tail, it’s not a game of vast volume, it’s always about the ultimate connection you build to your customers and the concrete value which you deliver for them.
PS: “You Get What You Work for, Not What You Wish for”
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