Behind the concept of the Long Tail lies an economic theory that describes the increasing economic importance of niche products in online based sales. The basic idea of the efficient online sale stems from Jeff Bezos (Amazon), its scientific classification was done by Chris Anderson.
Anderson traces the transformation of an economy that develops from a "top seller machine" into a broad market, which consists largely of a wide range of niche markets.
For example, businesses with restrictive shop space or cinemas with limited screening times experience limits trying to sell their products and services, and are therefore encouraged to follow to the mass culture and the corresponding high demand in order to survive economically. According to Anderson, there are now three technical factors that influence the sales volume of such niche articles in internet-based markets. This includes, firstly, the reduction of the production costs, in particular of digital offerings, secondly the emergence of sales platforms which can include an unlimited number of products in their catalogues, and, thirdly, the reduction of the search costs for customers on such platforms, thereby fostering the demand for niche products.
The consequences of these three mechanisms are the increase in product diversity, the increase in the demand of the individual articles as well as a shift of supply and demand from a few top sellers to many niche offers.
These developments can be seen on classic e-commerce platforms such as Amazon, Ebay or Zalando. Above all, they especially apply to intangible goods, such as digital music, films or books, where production costs are marginal and no storage or transport costs are incurred. Anderson illustrates this in his book "The Long Tail. niche products instead of mass market" an example for the music industry:
"The music industry ceases to exist with fewer than 60,000 songs from the point of view of a business like Wal-Mart. For internet providers such as Rhapsody, however, the market is seemingly infinite. The titles on the front 60,000 seats at Rhapsody are downloaded at least once a month, but the same applies to the titles ranking up to 100,000, [...] 200,000, 400,000, 600,000 and even exceeding rankings above 900,000. Rhapsody cannot add songs quickly enough. Every song finds its customers, even if it’s only a few people per month around the world. " (p. 24)
According to Anderson, the sales of such niche items can be identical to the sales of big hits. Thus, products ranking low can generate a decisive part of the total turnover and thus legitimize their existence in the online trade.