There are several reason why Amazon, Alibaba, JD, eBay and other mega platforms sit at the top of the e-commerce pyramid: innovative services, competitive prices - and their vast selection of product offerings.One of the biggest advantages that Amazon, Alibaba, JD, eBay and other mega platforms have over other retail formats is unlimited shelf space. Consumers can usually find anything they want on these platforms increasing the chance of the platform making a sale.Some argue that while these platforms have infinite shelf space, products that don’t appear on the first page of a search have a greatly diminished chance of selling. Hence the growth in ‘promoted’ or ‘sponsored’ products on these sites.It is also a fact that in any category about 0.01% of the products account for most of the sales.On Amazon, 50 percent of its sellers generate about 90 percent of the platform’s sales . That means half of the sellers on the platform account for only 10 percent of its sales. Sellers must scramble to sell their products in a sea of competitors. The platform gets its percent of the transaction, regardless of which products the consumer purchases.So what’s the real value to the platform of having such an extensive catalog of products?Why More - Means More RevenueIt’s the long tail effect where millions of sellers sell only a few units each. For the platform, the aggregate of all those sales can be huge.For example, if Amazon has a million small sellers on its site and each sells only 1 product per year for $5, cumulatively that’s $5 million dollars in sales for the platform. For the individual seller one $5 dollar sale in a year is hardly worth the effort. For the platform, the aggregate of those sales is meaningful.The long tail is a business strategy that allows companies to realize significant profits by selling low volumes of hard-to-find items to many customers, instead of only selling large volumes of a reduced number of popular items, according to Investopedia.It's part of the reason that an increasing number of platforms around the world are taking on third-party sellers. The tail becomes bigger and longer in new markets (depicted in red). In other words, whereas traditional retailers have focused on the area to the left of the chart, online bookstores derive more sales from the area to the right. In his book “The Long Tail” author Chris Anderson explains, “A very, very big number (the products in the tail) multiplied by a relatively small number (the sales of each) is still equal to a very, very big number.”Mr. Anderson argues that these goods could actually increase in profitability because consumers are navigating away from mass market brands and products to more niche, indie products.The internet has given people more choices, but it’s also enabled them to research products. Today’s consumers is better educated. They are less likely to follow and more likely to make independent decisions.Prior to e-commerce, it was difficult to get any kind of scale for niche products. However now products have access to a global market where even narrowly defined niches can reach a large customer base.When the volume is big enough, niche products can out sell a few bestsellers. This is possible online where platforms can have catalogs with tens of thousands of products.This has been a game changer for niche brands and products, who now can achieve greater scale. Also for consumers, who can access a much wider range of products - particularly very specialized products.Blockbusters Lose Some of Their PowerRetailers no longer need to rely on a traditional “blockbuster strategy” that bet on a few carefully selected products to drive a disproportionate amount of sales. In Robert Frank and Philip Cook’s book The Winner-Takes-All Society (1995) the authors suggest that fewer products that have massive sales are more profitable for both manufacturer and retailer.Successful blockbuster products could deliver massive returns for retailers. The challenge was being able to identify which products would be top performers. Since performance was a combination of the product and the amount sellers invested in promoting that product, there was also considerable risk.While this model is still valid, it now sits side by side long tail strategy where an aggregate of few sales of many products can be equally successful.The long tail strategy is one that is made possible by e-commerce where the seller no longer faces geographic limitations on distribution or markets, and is not restricted by physical shelf space.Good for the Platform, Not So Good for BrandsWhile platforms profit from having vast catalogs of products, in individual brands tend to get lost in the chaos. Consumers are most likely to select from products that show up on the first page of their search.Thus while shelf space is infinite, it is also infinitely less valuable as your products move further and further away from page one. This is why sellers are now almost forced to pay to have their products show up on the first page of a search. Fees for sponsored, recommended or choice listings have become an immensely profitable source of revenue for all of the major platforms.