I'm not much of a marketing guy, but I read an article from Wired called “The Long Tail” (thanks Tariq for the link), and it blew me away. Basically the article examines the popular conception that 80% of sales dollars are generated by 20% of products. I've worked in retail, and this is a tried-and-true rule. But the article goes on to explain that some retailers (e.g. Amazon, NetFlix) are catering to the other 80% of products (the “long tail“-end of the market), that aren't in so high demand, and finding a lot more than just 20% dollar sales.
Some quotes to give you an impression of the article:
“...Wal-Mart must sell at least 100,000 copies of a CD to cover its retail overhead and make a sufficient profit; less than 1 percent of CDs do that kind of volume...“
“...The average Barnes & Noble carries 130,000 titles. Yet more than half of Amazon's book sales come from outside its top 130,000 titles...“
“...Hit-driven economics is a creation of an age without enough room to carry everything for everybody. Not enough shelf space for all the CDs, DVDs, and games produced. Not enough screens to show all the available movies. Not enough channels to broadcast all the TV programs, not enough radio waves to play all the music created, and not enough hours in the day to squeeze everything out through either of those sets of slots...“
Worth a read.
The Wired article also discusses what the price of online music should be (towards the bottom of the article). Very interesting.
One of the reasons I really enjoyed the article is because previously I've bagged local (to Melbourne/Victoria/Australia) video and book stores as they do not cater for online shopping - they've got no inventory online, and they have close to the same prices as I would pay in a “real“, physical shop. I have to back down from that opinion somewhat as there are Australian bookstores with inventory online (like Dymocks). I'm still sulking because there's nothing even remotely comparable to Amazon down under.
Using Amazon, I can track down any product, and buy it cheaper than I could over here, even accounting for shipping and the exchange rate.
On a side note, I do actually expect to pay a premium price when I shop in a shopping centre and buy items at full price - there's rent, sales staff, running costs, limited space, etc. Supply and demand also dictates that prices are generally going to be cheaper in the US (population, 300 million plus) than in Australia (population, 21 million or so), especially for items that are made for the US market, or in the US itself. I am starting to look forward to a time when I can get films, music and e-books delivered electronically as a download (no packaging, no manual, no space taken up), which should cost a lot less.