Can Be Reality for Traditional Megabrands
A decade has passed since Chris Anderson wrote The Long Tail: Why the Future of Business is Selling More for Less, and his theory is being proven as reality. However, he didn’t give the heads-up to most of last century’s traditional megabrands and retailers that they might also participate and accelerate their growth by implementing the theory. So it’s timely to revisit the theory and suggest how current struggling brands such as Gap, Levi, and other megabrands might stimulate some new growth by incorporating Anderson’s theory into their brand strategies. In fact, some current megabrands already have, without consciously calling it their “long tail” strategy.
Anderson’s long tail is a theoretical rationale for the explosive growth in numbers of niche apparel brands across all retail sectors. At the same time, many of the 20th century megabrands, such as Levi, Gap, Lee Jeans, and others, have slowed — and in many cases declined. However, his theory, which is largely based on the power of the Internet, overlooks the reality of how distribution and brand proliferation has evolved in the apparel/retailing industry. And this evolution predated the scale provided by the Internet.
The long tail theory predicates that the Internet has spawned an unlimited number of retail sites that are quickly, easily and cheaply accessible to consumers. Likewise, on the supply side, the Internet provides a parallel level of accessibility to an unlimited array of vendors and their products/services. Anderson’s theory argues that because of this unlimited distribution and total supply/demand accessibility, a huge paradigm shift has occurred.
In short, the shift is away from the few dominant blockbuster megabrands favored by consumers during the mass market and mass media era of the mid-20th century to the millions of small niche brands/products/services made possible by the unlimited distribution capacity and precision or niche marketing capability of the Internet in the 21st century.
Anderson says that mid-20th century companies focused on creating the next bestselling novel, chart-topping rap song, or megabrands, like Levi and Gap, because the cost of distribution and limited shelf space in physical stores meant that profitability depended on a high volume of sales. Conversely, today the Internet provides unlimited, cheap and global distribution, affording the “nichers” and specialists to take share (in the aggregate) away from the megabrands.
Both the loss in share and declining growth of the megabrands would lend credibility to his theory, if not for the fact that many of these brands are not losing solely to Internet retailing.
Brand Proliferation Is Not Just About the Internet
Anderson’s theory is visually represented in the accompanying long tail chart: blockbusters and megabrands on the vertical axis (called the “Head”) are distributed through traditional retailers such as Walmart, Macy’s, Neiman Marcus and others. An infinite array of smaller, niche brands are spread across the horizontal axis (called the Long Tail) and distributed through the Internet.
Anderson posits, “…a very, very big number (the products/brands in the tail) multiplied by a relatively small number (the sales of each) is still equal to a very, very big number. And the very, very big number is only getting bigger.” In fact, he claims that the number of available niche products outnumber the “hits” or megabrands by “several orders of magnitude.”
However, by focusing his theory on the Internet, Anderson misses a critical and perhaps more important reason for the proliferation of niche brands through the traditional distribution channels of retail stores. Online apparel retailing only accounts for less than 10 percent of total U.S. apparel sales, albeit growing faster than traditional retail. So-called “pure play” apparel retail websites represent even fewer online sales.
It’s About Overabundance and Unlimited Selection
The “Old-Fashioned” Way
From a historical perspective, following WWII (before the Internet), there were only a limited number of national retailers such as Sears, and JCPenney, plus a lot of small local “moms and pops” and department stores. There were also a limited number of major national brands during this period. At the same time, this was the debut of the era of mass marketing through a limited number of broadcast and print mediums.
With the new broadcast media play, the few megabrands just got bigger (in line with Anderson’s theory that they alone could afford the costly marketing and distribution system). Then as population growth began to slow down in the 60s, counterintuitively, the growth of so many new brands and retailers took off. How could entrepreneurs stand by and not do anything when they saw a few mega-retailers and brands rake in all that money and literally grow to the sky?
So, pre-Internet, old-fashioned distribution exploded. Regional shopping malls were launched across the country, sparking rapid expansion of Sears, Penney’s and department stores to anchor them. The apparel specialty retail model was introduced. Walmart, Target and Kmart were all born in the 60s, and all the big-box, category killers shortly thereafter.
With all of this new shelf-space available in new distribution channels, the first beneficiaries were the well-established, traditional megabrands. They grew even bigger, faster. However, the problem for these megabrands ultimately became one of the overabundance of both retail stores and the stuff in them, relative to consumer demand. Since consumers didn’t need all the available stuff, they became more selective, choosing only those products they really desired.
Brand Proliferation Catches Up With Distribution
The Long Tail Pre-Internet
So, ironically by adding to overabundance, the increase in distribution capacity in the low-barrier-to-entry apparel industry finally prompted new brand proliferation. Therefore, the megabrands like Levi, Gap and many others, who were already fighting for growth through the necessity to capture a greater share of a slow-growing market, now were facing thousands of new and smaller competitors, including the accelerated launch of new niche specialty retail brands including Hollister and Abercrombie from A&F, WHBM and Soma at Chico’s, Aerie at American Eagle, and many others. Essentially, the long tail theory was playing out in the real physical world even before the Internet made its impact.
In fact, if the Gap had understood the long tail theory as it applied to its own industry, they might have avoided their train wreck by anticipating that their Gap brand could not be for everybody, all the time and forever. They did launch Old Navy and Banana Republic to capture opportunity in other market niches, and they did foray into other brands. Some of these efforts were moderately successful, but others failed.
It’s Not Too Late for “Niching” Among the Megabrands
It’s Called Segmentation
Major wholesale players and retailers like VF Corporation, PVH, Ascena, Macy’s, HBC and others, all understand that slow organic growth in an oversaturated “share wars” market is here to stay. Thus, a major growth tactic includes making strategic brand acquisitions. The proliferation of private brands among the major retailers is also a part of identifying new markets for growth. Therefore, they are all creating their own long tails. While The North Face, Timberland and others at VF; and Tommy Hilfiger, Calvin Klein and others at PVH; or the strategic acquisitions of other big players are not what would be called upstarts or small “nichers” in Anderson’s long tail, they are nevertheless niche brands.
In fact, these giants could reposition their acquisition strategies as their long tail strategy. But there’s no reason to promote Anderson’s cool-factor theory when they have been doing long tail well before the Internet became the big disruptor.
The long tail theory is absolutely correct. The reality of its fragmented, unlimited distribution tail also defines the apparel retailing industry. The mass market has become a mass of niches. However, it occurred differently and for different reasons than Anderson reported, and certainly predated the Internet.
However, the biggest “aha” of the long tail theory, either pre- or post-Internet, is that technology is simply accelerating the biggest shift in commerce throughout the world. The 20th century paradigm towards centralization, consolidation and massification is being reversed engineered into this long tail or whatever you want to call the structural move to decentralization, de-massification, disintermediation and personalization.
As I have said, the new landscape will be an infinite number of finite market niches being served by an infinite number of finite brands and retailers.