The Pareto Principle is Dead – At Least in Online Merchandising

Are we trading the pareto principle for endless choice?Back in the early 2000s, the editor of Wired magazine, Chris Anderson, guessed – like most people – that only 20% of an early online streaming music service’s tracks would be played in any given month. After all, the Pareto Principle – the idea that 20% of everything gives you 80% of results – had long been proven to be true.

But he guessed wrong.

The Rules for Online are Different

It turned out that in any given month, 99% of the streaming music services tracks were played. So he started studying other online services, and found the same thing to be true. In online sales, the Pareto Principle didn’t seem to apply. So he wrote a book about it, called The Long Tail.

Here are the two main lessons learned in The Long Tail:

  1. When it comes to online, niche goods tend to outsell hit products overall. In other words, lots and lots of niche products selling a few pieces each ultimately do better than a handful of hits selling volume.
  2. The “tail” is getting longer and longer, because the barrier to entry for selling online is very low, and lots of people can produce goods and sell them.

It’s Not Just About Price!

Most jewelry businesses assume that the trouble with competing online is that everyone can see the price. While that is true, it may not be the real barrier. The real trouble with competing online is that consumers have so much choice, and they no longer settle for something they “kind of” want, now that they realize they can dig a little further and find what they “really” want. In other words, when it comes to our new digital marketplace, the big commercial hit product is dead. Smart businesses will capitalize on the potential to create future revenue from a long tail of niche products, which allows them to serve even the most esoteric customer needs.

But inventory is expensive, and space isn’t unlimited, so how can you take advantage of this? For retailers, you do this by extending your store experience into an online experience. For dealers, you do this by making your entire catalog available online, and making it visible to as many retailers as possible. There are lots of ways to do this, and ecommerce tools are easier than ever to set up. But of course, we are just a little bit biased – we know that you can succeed in Long Tail Selling immediately by using the VDB App Platform.

Get Your Long Tail Effect Here

The VDB App Platform makes it possible to showcase over 700,000 diamonds, colored gemstones, and jewelry items from hundreds of vendors. Talk about a long tail! And our visual search means that you’re never searching a grid or a spreadsheet – your search filters result in big, juicy pictures of real jewelry, diamonds, and gemstones – just the thing customers need when they’re trying to decide what to buy.

If you haven’t read The Long Tail, we highly recommend it. It explains a lot about what is changing in commerce, and how to take advantage of these changes in your business. Then, get ready to make The Long Tail a reality in your business – before customers start thinking you’re not really in the game.

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