Psycho-economist Sheena Lyengar tells us that the average grocery store today offers 45,000 types of products. The average Walmart offers 100,000. The ninth biggest retailer in the world, however, is Aldi, which offers only 1,400 products. Aldi’s successful business model circumvents “choice overload.”
Less is more when it comes to choosing because more choices result in choice overload. In employee financial investment plans, more offerings means less participation.
She recommends that we take a bit of time to think about the consequences of our choices in a vivid way to stay on target. Another technique is to order the complexity of our choices so that we start with simpler easier choices to ease into complex projects. These strategies are worth considering, since the average person makes 70 choices every day. Most people could use help “managing their choices.”
There is quite a bit of overlap in this topic with the work of Barry Schwartz, who presented on the “paradox of choice.”
In Aldi’s case, I suspect that the decision to offer a less diverse selection was driven more by simple economics instead of psychological studies.
Aldi’s started out as a German convenience store chain which split into to divisions, one maintaining the convenience chain and the other moving into groceries. The grocery store division borrowed much of the business model from convenience store operations, stocking only the most needed foods, offering prepackaged and frozen meats instead of maintaining an in store butcher shop, selling bread from local bakeries instead of having an in store bakery, and providing low cost generic canned goods.
The stores are small by most grocery store standards and initially seem very similar to the Savalot discount grocery stores, but the Aldi’s model creates a store that can be operated by a two person crew during the low demand hours. Mainly, they keep costs down by not offering the slow selling items found in other grocery stores.