The Long Tail is Longer than You Think: The Surprisingly Large Extent of Online Sales by Small Volume Sellers

Abstract

Sales by small volume sellers are systematically undercounted in public and private surveys of ecommerce. The twin results are that the contribution of small sellers to the ecommerce marketplace is considerably larger than generally assumed and the overall market is larger by this difference.

As the costs of selling things online have fallen with cheaper equipment and communications fees, and with the availability of retail platform services provided by eBay, Amazon.com, Google, and many other firms, Internet retailing has grown to include many small businesses and individual occasional sellers, particularly in the United States. But how much do these "small sellers" sell each year?

U.S. Government statistics give some insight into the type and sales volume of online sellers, but the Government's current methods of data collection and analysis are better suited to tracking larger, traditionally organized businesses, rather than "small sellers," whether operating as small businesses or as individuals. Traditionally, small sellers simply were ignored. In traditional retail markets, the number of businesses with low annual revenues may not be significant because the contribution of such small sellers to the overall size of the market is relatively small. However, in Internet retailing, there are millions of small sellers that, in the aggregate, make a large contribution to the overall market. Yet these small sellers are systematically overlooked in government and private data collection and analysis.

In this paper, we estimate the size of Internet retailing in 2004 to have been over 20% above U.S. Government estimates - and the difference is explained by a more accurate accounting of sales by small sellers. We do this through a variety of methods and the development of confidence intervals in our data. We hope that the techniques outlined in this paper will give greater insight into the magnitude of Internet retailing, particularly in the "long tail" of the ecommerce market occupied by small volume sellers.

Keywords: Internet Retailing, Long Tail, Electronic Commerce

JEL Classification: L81, O38