The Long Tail theory proposes that niche products collectively can build up a market that rivals the relatively few current bestsellers. But according to the Pareto Principle, only 20% of the products should account for 80% of the sales.
On the surface, those two well-known theories contradict each other. But are they really opposed? Can't we find a 20% in the long tail?
The Pareto Principle
The Pareto Principle states that roughly 80% of the effects come from 20% of the causes. This theory was named after Italian economist Vilfredo Pareto. He published a study in 1896 to prove that 80% of the land in Italy was owned by 20% of the population.
Since then, his principle has been used as a rule of thumb in many fields besides agriculture.
For example, Microsoft discovered that by correcting 20% of the most reported bugs, it could eliminate 80% of the related crashes. This principle also helped business owners to realize that, in most cases, 80% of the sales comes from 20% of the shoppers. Moreover, by concentrating on their most loyal customers, businesses could increase their income significantly.
Though it would seem a logical conclusion that a small percent of the products account for the majority of the sales in e-commerce sites, this is questionable, at least.
The Long Tail