What is meant by the long tail in online retailing?

The long tail is the very large number of products that each sell in tiny quantities but which together account for a substantial share of an online retailer's sales.

Why can an online retailer profitably stock a product that sells only a few times a year?

It holds one central inventory with no shelf-space constraint, so the cost of listing an extra item is tiny and even rare sales add to profit.

Why could a traditional high-street shop never serve the long tail?

Its shelf space is limited and expensive, so it must stock only the fast-selling items that justify the space they occupy.

How does a recommendation system help a firm sell long-tail products?

It puts obscure items in front of the particular consumers most likely to want them, creating demand that browsing alone would never generate.

State two ways selling online widens a firm's geographical market.

It reaches consumers anywhere in the country without opening branches, and it allows sales to overseas customers without any foreign presence.

Edexcel A-Level Economics B 9EB0

Scarcity, Choice and Potential Conflicts

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Business Growth and Competitive Advantage

The long tail and wider geographical markets

3 things to know
Papers 2 and 3

Overview

The long tail in online retailing, stocking slow-selling products, why high-street shops cannot serve it, recommendation systems, consumer welfare, how selling online widens a geographical market, niche survival and economies of scale, obstacles to overseas sales, wider competition, record labels and publishers, and third-party marketplaces.

What you need to know

Answer each one before you reveal it.

Your recallNot started

Key term

How does the long tail affect consumer welfare?

Key term

Why does selling into a wider geographical market help a firm achieve economies of scale?

Key term

What two obstacles does a firm still face when selling online to overseas consumers?

Questions from this subtopic

Each one with the model answer underneath.

1
What is meant by the long tail in online retailing?
Model answer
The long tail is the very large number of products that each sell in tiny quantities but which together account for a substantial share of an online retailer's sales.
2
Why can an online retailer profitably stock a product that sells only a few times a year?
Model answer
It holds one central inventory with no shelf-space constraint, so the cost of listing an extra item is tiny and even rare sales add to profit.
3
Why could a traditional high-street shop never serve the long tail?
Model answer
Its shelf space is limited and expensive, so it must stock only the fast-selling items that justify the space they occupy.
4
How does a recommendation system help a firm sell long-tail products?
Model answer
It puts obscure items in front of the particular consumers most likely to want them, creating demand that browsing alone would never generate.
5
How does the long tail affect consumer welfare?
Model answer
Consumers gain access to products matched far more closely to their tastes, which raises the satisfaction they get from a given amount of spending.
6
State two ways selling online widens a firm's geographical market.
Model answer
It reaches consumers anywhere in the country without opening branches, and it allows sales to overseas customers without any foreign presence.

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ABorrowing becomes dearer and saving more rewarding.

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