Technology and the Long Tail Theory

     According to author Chris Anderson, all new technology pass through four stages in their lifetime. This includes technology within every field imaginable. From new prescription drugs and medical procedures to electric motors and digital downloadable music. In this theory, Anderson uses graphs that compare the price of the new technology to the percent of the market that has adopted the technology. For example, he uses the DVD as an example. The first graph he shows illustrates the very high prices of the DVD when it was first released. As an effect, the sales of DVDs were very low in the beginning. Eventually the DVD sales reached what Anderson calls "critical mass". This means that DVDs made up for 20% of the market. As the sales continued to grow, the DVD technology then reached the third stage of technology, which is when the new technology replaces the old technology. DVDs then began to sell significantly more than VCRs and soon controlled the entire market. The fourth and final stage of the long tail theory is when the technology commoditizes. This means that the technology becomes nearly free. As the DVD took over the market, other smaller companies find a way to make the technology even cheaper and therefore create competition in the market, which continuously drives the prices down. Today, consumers can rent DVDs for $1 per day.

     Another technology that this theory could be applied to is online shopping. Online shopping has become a new phenomenon. It is a much more convenient way of shopping, especially since the distance of the physical store is not a factor. This means that consumers can shop at stores that aren't even found in their country. Unfortunately this new trend has begun to negatively effect well established retailers. Stores like Sears, Belk, and Dillard's have begun to notice the changes that this technology has influenced in the market. These huge brands have begun to reduce the number of locations that they have and turn to online sales to remain in competition. According to the Long Tail Theory, Online shopping has entered the second stage of technology. It has reached critical mass and is growing everyday. It will be interesting to see how this technology changes the market. Personally I don't think online shopping will ever replace retail stores, but it leaves the door open for some interesting changes in the way people shop.