The Internet has really changed how we conduct our lives. One key area is how we shop for books and entertainment items such as movies and music.

In his new book, "The Long Tail, Why the Future of Business is Selling Less of More", Wired magazine's editor-in-chief Chris Anderson says that the Internet is in many cases also changing the relevance of "Pareto's law" - the 80/20 rule used by many businesses - and creating many new opportunities for perceptive retailers.

Applying Pareto's law to a fundamental retailing rule of thumb, Anderson says we assume that 20 per cent of the records in a typical Wal-Mart Store will account for 80 per cent of the store's sales and close to 100 per cent of its profits.

"The old retail era is a world of scarcity; now, with online distribution and retail, we are entering the world of abundance, with markets without end," he writes.

Anderson's research shows that online digital retailers such as Amazon (books), Netflix (movies) and Rhapsody (music CDs) have a much different product/sales distribution and are able to offer much more inventory than traditional book stores and music-retailers.

Digital music retailers such as Rhapsody can list 300,000 to 400,000 albums at virtually no cost on the Internet. At the same time, traditional mass retailers such as Wal-Mart carry only about 4,500 CD titles at one time.

These big traditional retailers, Anderson says, are interested only in high-volume, fast-moving products because they have much higher carrying costs. "In traditional retail a CD that sells only one unit a quarter consumes exactly the same half inch of shelf space as a CD that sells 1,000 units a quarter," he writes. However, when digital space costs virtually nothing, the infrequent sellers suddenly begin to have value. "That was the insight that led to Amazon and Netflix," he says.

All of these digital online retailers soon realised that where the traditional retailers ran out of steam, the economies of online got going. "The onesies and twosies were still selling in small numbers, but there were so, so many that in aggregate they added up to a big business; no regular store could carry 300,000 to 400,000 units," he said.

Anderson's research showed that whole new markets were being developed for non-hit niche items. "Rhapsody indicated that 98 per cent of their albums were sold at least once per quarter," he said.

He coined the statistical term "the long tail" to describe this phenomenon. "Curves like that are called long-tailed distributions, because the tail is very long relative to the head," head.

The old retail era, he added was a world of scarcity because retailers were forced by their cost structure to limit the number of products on sale to fast-moving items. As fast as Rhapsody adds tracks to its library, Anderson says, these tracks find an audience, even if it is just a handful of people every month, somewhere in the world.

"If Amazon statistics are any guide, the market for books that are not even sold in the average book store is already a third the size of the existing market, and it's growing quickly," he said.

Anderson predicts that the potential book market may actually be half as big again as it appears to be, "if we ever get over the economics of scarcity".

Successful retailers, he writes, cannot succeed by merely listing all books, CDs and movies on the Internet and waiting for buyers to access their websites. "They must also help potential buyers find quality in the long tail." They have learned how to use filters to move customers from the world they know (hits) to the world they don't know (niches) via routes that are comfortable and tailored to their tastes.

"Good filters have the effect of driving demand down the tail by revealing goods and services that appeal more than the lowest-common denominator fare that crowds the narrow channels of traditional mass-market distribution," he writes.

The ultimate secret of successful digital retailing and thriving in the "long tail", Anderson concludes, is to make everything available for sale and to find a way to help the customer find it.