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Paradox of Choice: Why Less is More

By Ritchie Sayner

Advanced Retail Strategies

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 wellbeing.” 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 is 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 to 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 three… ABC, NBC, CBS].

The same thing can happen in your store. Unless the assortment plan is carefully monitored, it is possible your customer could become overwhelmed with choices and end up buying less than expected. Have you ever showed a customer several styles of jeans, sandals, or you name it only to hear them say, “do you

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have anything else?” or, “is that all you have?” and they 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! Stores that are continuously overbought oftentimes 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 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! Think for a second about the challenge 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 fillins in a timely fashion. I have a technique that is useful when this situation arises. It is called a model stock. markdown the merchandise that exists outside of your model and use that money to reorder the items you need. 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.

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. Let’s assume you have an Open-toBuy of $10,000 @ cost. For illustration purposes, this will give you an average retail inventory of roughly $20,000 given a 50% Initial Markup (IMU). This is an example only as IMU’s for socks are generally higher. You plan to turn socks three times annually so your anticipated sales will be $60,000. 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 your purchases must fit into the $20,000 maximum retail inventory. Once you are satisfied everything is in balance and the model covers all 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

Ritchie Sayner

Sayner has spent the past four decades helping independent retailers improve profitability. In addition to speaking to retail groups nationwide, Sayner is a regular contributor to retail industry publications. Prior to embarking on his retail consulting career, he was the general merchandise manager for an independent department store in the Midwest. Ritchie is a graduate of the University of Wisconsin-LaCrosse. He is also the author of the book, “Retail Revelations-Strategies for Improving Sales, Margins, and Turnover.” He can be reached though his website at www.advancedretailstrategies.com.

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