Investigating a long tail in retail vehicle sales

The concept of the long tail in demand distributions has generated significant research interest because of its potential importance for producers, distributors and retailers. Studies to date have focused on information goods sold through internet channels. Here we study long tail effects in vehicle sales sold through conventional car dealerships. The willingness of customers to compromise on, and/or wait for their requested vehicle specifications are identified as critical factors in vehicle purchases. An extensive empirically based simulation study is conducted to investigate these demand-side factors. The results show how the characteristics of the customer population affect the observed pattern in vehicle sales. The interaction effects of supply-side factors are also highlighted, in particular the effect of the replenishment policy used in the fulfillment system. The study also analyzes the distortion of the underlying demand signal in the sales distribution and the lead time and degree of compromise experienced by different customer populations. Significant managerial implications are highlighted, including the dangers of using the sales distribution as a definitive indicator of demand, the need for the order fulfillment process to align with the characteristics of the market, and the negative effects of focusing replenishment on a small subset of the most popular variants.