Chase the bestsellers, or the long tail?
A kirana store lives on twenty products. An online shop lives on twenty lakh.
Mental models
Pareto principle
Put your effort where sales are.
Roughly 80% of results come from 20% of the effort. A kirana store’s top few products often bring in most of its sales. Start there.
- Right when
- When shelf space, cash or attention is limited. Every slot given to a slow item is taken from a fast one.
- For example
- A kirana store stocks 500 products, and 100 of them bring in ₹3.2 lakh of its ₹4 lakh monthly sales. Those 100 must never run out. A rare spice that sells one packet a month would take the shelf of a product that sells ten a day.
- Wrong when
- When keeping an item costs almost nothing, so the slow sellers can pile up without crowding out the fast ones.
Strategy
Long tail
Many small sellers add up.
A shop shelf only has room for bestsellers. Online, millions of items that each sell a little can add up to more than the hits.
- Right when
- When there is no shelf to fill, so listing one more item costs next to nothing and each sale is pure gain.
- For example
- Say an online bookshop lists 10 lakh titles. The hits sell thousands, but the typical obscure title sells just 2 copies a year at ₹300. That is 10,00,000 × 2 × ₹300 = ₹6 crore from books a shop would never stock.
- Wrong when
- When each extra item still costs money to hold, ship, return or explain. Then the tail eats the profit.
What decides it
What does one more item cost you to keep?
On a physical shelf, an item that sells slowly pushes out one that sells fast, so the hits deserve your effort. When keeping an item is nearly free, the slow sellers can add up. Work out the cost of one more item, and you know which side you are on.
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