Final answer:
The Long Tail refers to the strategy of selling small quantities of a large number of different items, which is exemplified by Amazon's vast inventory held in low-rent, highly computerized warehouses, demonstrating their exploitation of economies of scale.
Step-by-step explanation:
The term 'Long Tail' refers to the strategy of selling small quantities of a large number of different items. This model is opposed to focusing on just a few popular items. The concept is illustrated by Amazon's approach to retail.
Unlike traditional bookstores, which were limited by retail space and consequently could only stock bestsellers and popular items, Amazon utilizes large warehouses in low-rent locations to store a vast inventory.
These warehouses are highly computerized and use robots and relatively low-skilled workers to keep costs down, illustrating the benefits of economies of scale. By selling online, Amazon can offer a wider variety of books, including niche titles that only sell a few copies, adding up to a substantial portion of revenue.
This business model allows Amazon to cater to diverse consumer tastes and to undercut competitors' prices, even when shipping costs are factored in.