The opening voice-overs of the 1998 romantic comedy You’ve Got Mail include a short monologue about a newly ubiquitous chain:
“The whole purpose of places like Starbucks is for people with no decision-making ability whatsoever to make six decisions just to buy one cup of coffee. Short, tall, light, dark, caf, decaf, low-fat, non-fat, etc. So people who don’t know what the hell they’re doing or who on earth they are can, for only $2.95, get not just a cup of coffee but an absolutely defining sense of self: Tall. Decaf. Cappuccino.”
Eleven years later, The Los Angeles Times published “Hit with decision overload,” which explored the psychological impact of consumers being overwhelmed with choice in the market: “Starbucks offers consumers up to 87,000 drink combinations. Comcast, the nation’s largest cable provider, offers up to 1,000 channels. Sirius offers 140 different satellite radio stations for your listening pleasure.”
If people had too many choices 15 years ago, what does that mean for today’s consumer? Now, you can customize your Starbucks order in 170,000 ways. You can watch shows and movies on 200 streaming platforms, never mind cable. And if you don’t like radio, you can choose from 3.2 million podcasts.
That’s an incredible testament to the power of free markets. The explosion of choice has emerged from vibrant consumer demand, despite some politicians like Bernie Sanders who lament such wide-ranging options. But consumers can and do often feel overwhelmed by all the choices they have.
This isn’t just an emotion prevalent among consumers; it also burdens businesses. When people feel overwhelmed, they’re less likely to purchase – or they purchase too quickly, which increases the likelihood of a return.
But choices aren’t going anywhere, nor should they. As the retail landscape expands, there will be more and more of them. And consumers want choices. McKinsey research found that for consumers who have tried different brands, 73% want to incorporate more new brands into their routine (with Gen Z most prone to switching brands). And 88% of shoppers say that product variety is important.
For some brands, though, too many choices actually result in fewer sales. A 2000 study found that consumers were 10 times more likely to purchase jam when offered six kinds instead of 24. This study has been replicated frequently with different products, from chocolate to health and pension plans, and the results have affected how retailers sell products. For example, when Procter & Gamble reduced its number of Head & Shoulders varieties from 26 to 15, it led to a 10% increase in revenue.
Consumers want a broad range of choices so they can meet their individual, unique needs. However, their struggle with sorting through a wide selection of products also affects retailers.
What can companies do to help consumers sort through options and find choices that fit their needs, without unnecessarily restricting the market and taking away choice?
Digital Tools and Personalization Help
Customers like to explore new products—but within the circle of their own preferences. Thankfully, recent advances in technology allow overall product choices to continue to increase, while perceived choice decreases.
According to the National Retail Federation, 80% of shoppers say that tech innovations have improved their online experience, and 66% say it’s improved in-store shopping. A recent IDC study found that 40% of worldwide retailers are experimenting with generative AI, and 21% are already investing in implementing the technology.
Filters
Filters can reduce decision fatigue by allowing customers to narrow down a large set of options to a more manageable and relevant selection to their specific needs. Websites with filters perform better.
It’s important for retailers to provide multiple filter values, as well as the option to eliminate choices, not just add them. Some customers know what they don’t want, but they’re not sure exactly what they do want. Filters should also go beyond choices such as color or style and extend to thematic options, like best selling products, and logistical filters, like next-day shipping and in-stock products.
Product Recommendations
Long before online shopping, consumers frequented the same stores in person, and salespeople knew them and could help recommend products to their needs. In-person shoppers experience this still today. For online shopping today, AI has helped companies produce relevant product recommendations by using algorithms to match consumers with products. These are known as recommender systems.
This year, Samsung debuted its generative AI-powered assistants in-store that can speak to customers on tablets, kiosks or interactive displays to intelligently make recommendations and complete transactions for consumers.
Detailed Product Descriptions
According to the Association for Psychological Science, customers who have relevant, clear information about products are more likely to make a purchase. Product descriptions help reduce the overwhelm and indecision caused by choice overload. Retailers are now using AI product description generators to save time, create text that boosts sales and improve SEO results. These include tools like Jasper, Ahrefs, Hypotenuse AI, GetGenie, Shopify Magic and Frase.io.
Other Consumers’ Preferences
Online shoppers are now used to seeing features like “Customers also bought” or “Frequently bought together” sections. These features help reduce choice overwhelm by allowing them to find a product without scrolling.
Last year, Amazon introduced a new AI-powered feature that provides a short paragraph on product detail pages that summarizes customer reviews, helping customers determine at a glance whether a product is right for them. This feature also customizes reviews based on reviewers who have similar preferences as the shopper at hand. Other retailers have followed suit, including Target, Walmart and Kroger.
Choice is Still a Priority
While consumers may face choice overload when it comes to products, they want more choices when it comes to the number of ways they can shop. Research by the National Retail Federation found that most consumers “want the freedom to use whatever shopping method is most convenient for them at the time.” And more than half of customers engage across three to five channels per shopping journey, from in-store to social media to websites.
Offering shopping options results in higher sales. At Target, for example, “multichannel customers spend four times as much as in-store customers and 10 times more than digital-only customers.”
Ultimately, Personalization is Key for Consumers
According to McKinsey, customers are willing to spend more in return for a more personalized experience. Another report by Moengage found that 49% of consumers have purchased items due to personalized product recommendations that they didn’t initially intend to buy.
Our retail landscape will probably never go back to the time when we could choose from only five cereals at the grocery store—nor should it. As new tools become available to help customers find the products that best suit their needs, to retailers – and many customers – this vast competition and choice is awesome and worth celebrating.