Paradox of Choice: Why Less is More
Most retailers would agree that offering customers a wide variety of choices to pick from either in the store or on the website is a good thing. As with many things in life there can be too much of a good thing. That is where Barry Schwartz’s 2014 book entitled The Paradox of Choice comes in. Schwartz’s book explains how “too much of a good thing can prove detrimental to our psychological and emotional well-being.” In other words when the offering or assortment is too great and there is too much from which to choose the choices become overwhelming and result in customers actually being less satisfied.
Here’s a great example:
Think of how many television channels you subscribe to. For most subscription services this can range from 250-450 different viewing options. Even when you remove the foreign language and shopping networks the choice is overwhelming. Then add Netflix Hulu and all of the other options you have access to and you can shoot the entire evening simply trying to decide what to watch. Often this can lead to frustration and lack of satisfaction with the choice you ended up making. How many times have you gotten 5-10 minutes into a program that you thought looked interesting only to start the entire process over again?
[Sidenote: Some may remember when the number of television choices was exactly 3… ABC NBC CBS].
The Importance of a Well-Monitored Assortment Plan
The same thing can happen in your store. Unless the assortment plan is carefully monitored it’s possible your customer could become overwhelmed with choices and end up buying less.
Customer Experience
Have you ever shown a customer several styles of jeans sandals or you name it only to hear them say “Do you have anything else?” or “Is that all you have?” only to end up leaving without purchasing anything? I am sure we have all been in stores or visited websites that have left us confused overwhelmed and frustrated to the point that we leave without purchasing anything. Talk about counterproductive!
Overbuying Issues
Stores that are continuously overbought often have this problem. In an effort to offer more choices (read lack of buying plan or a “shotgun” approach to buying) too many vendors and styles are carried. This can lead to over-assortment and duplication with the end result being either too many markdowns or worse yet reduced inventory turnover and restricted cash flow. In other words due to the merchant’s inability to make a proper selection the store ends up with a whole lot of nothing!
Merchandising Challenges
Think for a second about the challenges that this presents from a merchandising perspective. The negative ramifications of this strategy are numerous. They range from deciding how to artfully present the different options to monitoring the reorders and fill-ins in a timely fashion.
Solution: Model Stock
I have a technique that is useful when this situation arises. It’s called a model stock.
Utilizing the Model Stock Approach to Inventory Management
This is how you might utilize the model stock approach to inventory management. Take any given category as this works for almost anything. Let’s use socks. Pretend you were given an opportunity to open another location. You now have a blank slate from which to build your assortment.
Financial Planning
Let’s assume you have an OTB of my keyword0000 at cost. For illustration purposes this will give you an average retail inventory of roughly $20000 given a 50% IMU (example only and IMU’s for socks are generally higher). You plan to turn socks three times annually so your anticipated sales will be $60000.
Assortment Planning
Now decide what vendors styles sizes colors and price points you need to cover and extend out your purchases on a spreadsheet. Just remember all of your purchases must fit into the $20000 maximum retail inventory.
Comparison and Adjustment
Once you are satisfied that everything is in balance and the model covers all of your merchandising objectives for this category compare it to what you currently have in the existing store. Most likely you will find styles sizes and vendors that need to be filled in. You might also find vendors you have discontinued styles that have been around too long broken sizes and bad colors. Immediately markdown the merchandise that exists outside of your model and use that money to reorder the items you need.
Conclusion
This simple and effective strategy will enable you to streamline your assortment plan and sell more with less.
Should you need further help on building a model stock feel free to reach out. I will be happy to help you.
Ritchie Sayner
Summary
The article discusses the “Paradox of Choice” highlighting how excessive options can overwhelm consumers leading to dissatisfaction and reduced sales. It suggests that retailers should carefully monitor their assortment plans to avoid overwhelming customers and proposes a “model stock” approach to streamline inventory management and improve customer satisfaction.
“Too much of a good thing can prove detrimental to our psychological and emotional well-being.”
Real-World Examples of the Paradox of Choice
The paradox of choice can be observed in various real-world scenarios where too many options lead to decision paralysis and dissatisfaction. Here are a few examples:
- Online Shopping: E-commerce platforms like Amazon offer an overwhelming number of product choices in categories like electronics clothing and home goods. This abundance can lead to consumers spending excessive time comparing products reading reviews and ultimately feeling less satisfied with their purchase decision due to the fear of missing out on a better option.
- Restaurant Menus: Some restaurants offer extensive menus with numerous dishes which can overwhelm diners and make it difficult to choose. This often results in diners second-guessing their choices or experiencing regret after ordering as they wonder if another dish might have been better.
- Streaming Services: With platforms like Netflix Amazon Prime and Disney+ viewers have access to thousands of movies and TV shows. The sheer volume of content can lead to decision fatigue where users spend more time scrolling through options than actually watching sometimes leaving them unsatisfied with their final choice.
