Tailor Your Tactics to Your Distribution Channel

The Long Tail vs. the Re-tail

By Al Ries --Published: November 05, 2007

 

On a recent Saturday, I set out to do my chores. First stop, Walgreen's, but they were out of Lectric Shave, the leading pre-shave lotion. Next stop, Cost Plus World Market, but they no longer carry Niçoise olives.

Still empty handed, I headed for PetSmart to buy dog food, but there was no Hill's Science Diet adult beef on the shelves. After a futile search in the stock room, the clerk came back and asked "Why don't you buy the adult chicken? As long as it's the same brand, your dog won't mind," a remark that undermined my confidence in his understanding of canine eating habits.

So I went home and ordered 24 cans of Hill's Science Diet adult beef from PetFoodDirect.com.

Before leaving PetSmart, however, I counted the stock-keeping units (or SKUs) of Hill's Science Diet. There were 14 SKUs of canned dog food. And, looking around the store, dozens and dozens of SKUs of dry dog food. ( PetFoodDirect.com carries 99 SKUs of Hill's Science Diet for dogs.)

The predictions of Chris Anderson, author of The Long Tail, seem to be coming true: "The future of business is selling less of more." In other words, the one-size-fits-all model is becoming obsolete.
 

Out of stock
I'm not too sure. I wonder how many consumers have had the same experiences I have had. How come, in the face of bewildering variety, the one variety you want is often out of stock?

Simple mathematics can demonstrate the problem. If you have two facings for two varieties of one brand, the most-popular variety is the one variety most likely to be out of stock. (I have no way of knowing, but I wouldn't be surprised if adult beef was the most popular variety of Hill's Science Diet.)

There's no question the packaged goods industry has fallen in love with the Long Tail. It's "shelf warfare" in the strip malls of America. Each additional SKU of a leading brand has the potential of pushing a competitive brand off the shelf. In many companies, the battle has become one of increasing shelf space, not increasing sales. Two facings are always better than one.

Take Coca-Cola, for example. The last time I counted, there were 14 different flavors of Coca-Cola on the market.

Not all flavors are created equal. Two flavors of Coca-Cola (Classic and Diet Coke) account for 87% of sales. Four flavors (Classic, Diet Coke, Cherry Coke and Caffeine-Free Diet Coke) account for 96%.

It's a long tail indeed. At the tail end, 10 flavors of Coca-Cola account for just 4% of sales. In you want to buy one of these 10 losers, you have a chance in a supermarket, but you're probably out of luck in a convenience store.

Some categories are jaw droppers. There are 32 teeth in your mouth if you haven't lost any, but Procter & Gamble still manages to market 46 different varieties of Crest toothpaste. (These are varieties, not SKUs. There might be several SKUs for each variety.) Included in these 46 varieties are:

• Crest Maximum Strength Sensitivity Original Formula Soothing Whitening Paste.
• Crest Tartar Control Whitening Plus Scope Cool Peppermint Liquid Gel.
• Crest Baking Soda Peroxide Whitening with Tartar Protection.

Oddly enough, three years ago Crest lost its toothpaste leadership to Colgate who wisely focused on a single variety, Colgate Total. The package made a "total" claim: "Helps prevent cavities, gingivitis, plaque. Long-lasting fresh breath protection. Fights tartar."

"Colgate Total," I can remember that. "Crest Maximum Strength Sensitivity Original Formula Soothing Whitening Paste" is a mouthful.

After the success of Colgate Total, Procter & Gamble struck back with "Crest Pro-Health," another way of saying we put all the benefits in one package.

According to Procter & Gamble, Crest has recaptured its brand leadership in toothpaste, though Colgate disputes it. Either way, it's been costly. Crest has outspent Colgate nearly three to one on measured media the past year, and it's not clear they could maintain their lead without massively outspending Colgate on media.

Proliferation vs. marketing
Flavor proliferation undermines a company's ability to run a successful marketing program. What do you advertise if you make everything under one brand name? This is the problem of Chevrolet. This is the problem of Ford. This is the problem of Crest. This is the problem of many, many brands.

Jell-O used to advertise its six flavors: strawberry, raspberry, cherry, orange, lemon and lime. Now that the brand comes in 20 flavors, what should the advertising say? "You name the fruit, we've got the gelatin"?

Take Folgers coffee. There are now 45 varieties of Folgers coffee divided into such categories as ground, instant, café latte, cappuccino, pods, whole bean, gourmet ground and gourmet decaf. Confusion reigns.

How many varieties or flavors should a brand have? Like most questions in marketing, the answer is, "It all depends."

It's become increasingly clear that there are two major distribution channels for reaching the consumer. One is physical retailers. The other is Internet retailers.

If I want a used copy of an obscure book that's out of print, I won't go to Barnes & Noble, I'll go to Amazon.com.
 

Right tactics for right venue
The Long Tail certainly applies to the Internet channel. Most Internet retailers seem to be able to stock endless variations of products. Amazon.com, for example, stocks some four million book titles versus no more than 150,000 at even the largest physical bookstore.

Selectivity. That's the advantage of the Internet.

But applying Internet strategy to a physical store creates problems. As product variations proliferate, the out-of-stock problem escalates. In response, more consumers will skip the four-step process:

1. Go to the store
2. Find what you want is out of stock
3. Return home and
4. Order it on the Internet

Instead, they'll simply order it on the Internet without checking the local store first.

Availability. That's the advantage of a physical store. If I want something, I can buy it almost immediately.

The truth is, the more variations a store stocks, the more likely it will be out of stock of the one variation the consumer wants to buy. The answer is not increasing the physical stock (although that helps), but in reducing the number of variations of each brand.

Stock only the most popular variations. Then educate the consumer on your stocking policy.

A Wal-Mart Supercenter carries about 150,000 individual products or SKUs. A supermarket carries about 40,000 products. Costco carries only about 4,000 items. Yet Costco has seldom been out of stock of something my wife and I wanted to buy.

Why? Because you shop at Costco for the basics. You don't go there if you want to buy an odd-ball item.

The Long Tail or the re-tail? It all depends on your marketing strategy.

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In addition to his monthly AdAge.com column, Al Ries and his daughter and partner Laura Ries host a weekly video report on their website: www.RiesReport.com.