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China and the long tail

Having spent the last two weeks in and around Hong Kong, it’s impossible not to be struck by the sheer size of the shadow in which it sits. You can’t go a week in the West without reading or hearing some incredible new stat about China. More graduates than we have young people, more honours students than we have students, more “x” than we have “y” and so on.

After a while you become almost deaf to the constant refrain but then you visit, and you see the size in action, and all of a sudden it becomes very real.

During the flight on my way out I re-read “the long tail” – it’s one of those books that, for a short while after reading it, somehow forces you to look at the world through its perspective and in doing so you begin to realise the significance of the stats we are so used to reading.

The long tail model splits markets into “heads” (blockbuster films, hit records, best sellers and the like), and tails (the rest). The significance is that time and again, the stats compare Chinese niches (or sections of the tail) with western “heads”. What’s more, in almost all cases, the Chinese niche is bigger than the western mainstream market.

This isn’t a post about how awesome the size of the Chinese market is. What interested me was the extent to which observations of the growth of China could help us understand the shape of new and emerging markets here in the UK. In a world where “hits” are becoming less and less powerful, what shape does a new (or newish) market take naturally?  The answer in relation to China is much as expected. A depressed head and elongated tail represent the enormous cultural diversity (so it’s more difficult to make a hit) and the increased economic viability of niches (because they are bigger).

I say “much” as expected because, whilst it does follow a pattern, I expected a more dramatic alteration. The problem with China as a long tail market clearly isn’t production or distribution, it’s abundantly clear (from even the briefest of looks at the Pearl River Delta area), that China has these elements nailed. The problem is in filtering. In order to shift demand down the tail you need to provide people with the means to locate these niches and, from what I saw, this isn’t absent but it’s no-where near sophisticated enough to deal with China’s abundance of supply-side resources.

Why is this on the Wolfstar blog? It struck me that the existing filtering system, primarily based on personal social networks, will, over the next few years be dramatically overhauled as the rise of social media begins to break down the barriers between China and the rest of the world. (Even the great firewall is showing signs of cracking). When that happens the established western economies will suddenly have to deal with a new market. One that is constructed from a million niches, and niches won’t necessarily be small any more. When you work from a big base, even a small percentage can represent a huge number.

Social media’s growth has gone hand in hand with the realisation by big business that niche’s matter and if (huge if) agencies in developed online markets can be ready for this, there is a massive opportunity.