Bricks, Clicks, Blockbusters, and Long Tails: How Video Rental Patterns Change as Consumers Move Online?

Networks, the Internet, and Cloud Computing, Internet and Search and Advertising

Article Snapshot

Author(s)

Cuneyd Kaya, Michael D. Smith and Alejandro Zentner

Source

Working Paper, 2012

Summary

This paper examines changes in the rental behavior of DVD consumers who move online from brick-and-mortar stores.

Policy Relevance

Facilitating movements of retail stores away from traditional physical outlets to online venues may make it easier for all consumers to find products that more precisely match their needs.

Main Points

  • “Long tails” are a common feature of internet retail; relative to brick-and-mortar retailers, niche products that sell at a low volume make up a large share of total sales.

    • An example: A shoe retailer may sell several hundred popular models of shoe. Amazon.com, with a quarter of a million shoe listings, may sell individual models at a low volume but cumulatively they add up to the majority of shoe sales.

    • Retailer costs are a major factor.  Online retailers do not need to allocate shelf space and experience lower stocking costs, so they can cheaply provide a wider variety of goods.

    • Consumer experiences online are also amenable to long tail commerce:  searching for obscure items is a matter of using precise search terms rather than hunting through a physical space.  

    • On the other hand, reviews and bestseller lists may concentrate sales in popular items; obscure items will not be listed and may not be reviewed. 
       
  • It’s difficult to determine the extent to which Internet commerce permits consumers to consume niche goods in which they were previously uninterested; it’s possible, instead, that consumer behaviors have not changed, except that consumers with a preference for niche goods choose to shop online at a relatively high rate.

  • An unnamed major DVD retailer and rental service provided data to the authors as they closed brick-and-mortar stores and moved to an online model.

    • Consumers who moved online were much less likely to rent popular titles than they were when they shopped at local retail outlets.

    • This seems to support the possibility that their preferences changed and they became more interested in niche goods when obtaining such goods became easier.

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