Do Mobile Applications Bring Longer Tail? An Empirical Study of Sales Concentration in Online Channels

Abstract

With the emergence of online channels, more niche products are sold compared to traditional channels, and it has resulted in more product variety. This “Long Tail” effect has distributed the sales among more products, reducing the importance of the mainstream top-selling items. Using a rich dataset from an online marketplace with four product categories, we study the distribution of product sales in online channels and compare the effect of the long tail in PC versus App. We show that the distribution of product sales in App is less concentrated. We investigate the mechanism of the long tail effect and find that different shopping patterns in PC and App result in the long tail effect in App. We find that customers spend more time searching the products in App. We identify two aspects of product search that help us to understand the underlying mechanism: Search Depth, the number of product-specific searches (within), and Search Breadth, the number of unique products searched (across). We find that the share of niche product sales in App increases due to higher Search Depth. On the other hand, Search Breadth negatively affects niche item purchase likelihood in App. The findings suggest no evidence of a complementary effect between App and PC on niche product sales. We provide evidence for the generalizability of the findings by reproducing the results using the public data of Google Merchandise Store. The findings provide key insights for retailers: mobile applications generate value for them by increasing the customer surplus.

Keywords: Long Tail, Mobile, Electronic Commerce, Sales Concentration, Internet, Apps, Mobile Commerce, Mobile Analytics, Mobile Apps