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What is Choice Overload and How Retailers Can Avoid It

What is Choice Overload and How Retailers Can Avoid It

Today’s consumers are constantly overwhelmed with choice. Whether it’s the style of clothing or make, model and color of a car, there’s often more options than people can comprehend. And that’s why an increasing number of retailers are learning that having more products doesn’t always equate to winning more customers.

Shoppers are already overwhelmed with too many choices, so widening your retail product range can sometimes do more harm than good. This phenomenon is more formally referred to as “choice overload.” Coined by author Alvin Toffler in the 1970s, in his own words choice overload occurs when “the advantages of diversity and individualization are canceled by the complexity of buyer’s decision-making process”.

But exactly what does choice overload mean in retail? Basically, having a diverse selection of items confuses consumers so much, that they become incapable of making a decision. So instead of buying, they simply leave the store.

Thankfully, there are strategies to guard against this happening. Here’s how to combat choice overload in retail, and prevent people from deciding not to buy.

Why choice overload is a problem

Choice overload is a bigger problem for brick and mortar stores than it is for online retailers like Amazon. Studies have shown that more choices in a brick and mortar environment can potentially result in decreased sales. Customers get too overwhelmed or get hung up on weighing the opportunity costs of various items. Whereas online, consumers have access to information like reviews and popularity, many times they’re left guessing in a physical store.

One study, for example, tracked the amount of jam sold to consumers under two scenarios. In the first, people were presented with 24 different jam flavors they could sample. In another, they were presented with only six. The result was that more people were attracted to the retail display with 24 flavors, and they were more likely to sample one of those flavors. However, the table with fewer flavors actually converted a higher percentage of sales of customers who stopped by or sampled their jam. So although choice might sound great to consumers, the data suggests that less choice makes it easier for them to actually buy.

Changes that are increasing choice overload

So why is it that retailers are presenting people with more choices than ever? One reason being there are now more businesses within each specific category. Fifty years ago people only had a couple different brands and varieties of spaghetti sauce to choose from, Prego and Ragu, and both brands were manufactured by major conglomerates. Now, there are not only multiple flavors within the Prego and Ragu lines, but dozens of smaller companies have entered the space in the last ten years or so, increasing choice exponentially.

This is happening in every industry, from retail products to banking and lending. And choice is increasing even more in today’s digital environment. Online shopping has increased the number of products and services available to people, and everything has become searchable and comparable.

Eliminating choice overload

The main step to take in order to prevent retail choice overload is to curate your offerings based on the customer. Think about what your typical consumer needs, as well as their buying patterns, and use that information to streamline your offerings. Moreover, give customers information that will help them make an informed choice. If you clarify what each product is, and the problem it’s designed to solve, you can help customers overcome choice overload.

Reducing complexity and narrowing product choice can boost revenues for retailers anywhere from 5-40 percent. Recently Head & Shoulders made an effort to trim their product line and saw a revenue increase of 10 percent. British mega-retailer Tesco is also realizing that choice overload is something they need to address, last year cutting its overall product range by about 30 percent.

How eliminating choice overload works

One of the best ways to ease choice overload is through digital marketing and lead nurturing. Because the gap between a person being overwhelmed and simply tuning out is razor thin, you want to continually educate consumers. You can set up an email marketing automation system, for example, to send out content or promotions based on their online shopping habits. If they put something in their shopping cart but didn’t complete the purchase, maybe it’s because there were too many other choices and they simply abandoned the process altogether. Having an automated response to check in, provide more information, or ask if they need help, can be valuable in increasing conversion rates.

Finally, focus on creating an overall brand that people can identify with, and differentiate from competitors. Having a strong brand identity and values that clearly state why your products are different will make it easier for people understand new and different options. An organic foods brand, for example, might come introduce 2-3 new flavors of a certain item. And while consumers still need to be educated on these products, they’ll know from the beginning that the products are organic, ethical, and sustainable. That’s one less hurdle you have to clear in the mind of the buyer, all because they identify with your brand values.

The landscape of retail choice overload has changed drastically in recent years, and will only continue to do so. By realizing the psychology behind choice overload, and changing your product strategy accordingly, you’ll be able to make your customers happier (and less overwhelmed).