If you’ve ever run into the grocery store with a short list in hand and an even shorter amount of time to get in and get out, the last thing you want to be faced with are 20 brands of peanut butter. Believing that having an abundance of choices will make consumers happy, grocery stores just keep getting bigger and more complicated. It’s making many of us avoid them like the plague.
Here are opposite ends of the spectrum when it comes to choice in the grocery world. While Wal-Mart overwhelms us with 34 choices of toilet paper, the 350-store grocery chain, Trader Joe’s, gives us one. Where we’re unhappily surprised if we can’t find even the most obscure item at Wal-Mart, we know Trader Joe’s isn’t the place to go for everything needed for the backyard barbeque. But, we’ll sure make an extra stop for the grilled chicken sausages and a six-pack of Trader Jose’s beer that we won’t do without.
Trader Joe’s is a classic example of a wildly profitable enterprise due to its simplicity. Unlike huge chains like Whole Foods that serve the same upscale, urban market, Trader Joe’s employs a scaled-back strategy. It intentionally keeps stores small – on average 10,000 square feet of shopping space versus Whole Foods at 35,000 sq. ft., and it offers approximately 4,000 items – whereas most grocery store chains stock approximately 50,000.
In his book the “Paradox of Choice,” Barry Schwartz describes how too many choices can keep us from making any decision at all – a phenomenon he calls “decision paralysis.” Schwartz states that having a big selection may draw people’s interest, but it often reduces their ability to buy. Since Schwartz presented his theory, a number of large-scale studies have shown that this paralysis goes away when the range of choices is reduced.
Simplicity is certainly gaining in popularity. Where customers hate their Wal-Mart shopping experience and its vendors have to buy back their unsold inventory, the followers of Trader Joe’s implore the company to open more stores, and product suppliers beg to get in front of the company’s purchasing agents.
Trader Joe’s is showing how profitable simplicity can be. By intentionally limiting consumer choices, Trader Joe’s has become an $8 billion business with sales of an estimated $1,750 in merchandise per square foot (more than double what Whole Foods produces.)
No matter how you look at it, Trader Joe’s uses a brilliant limited-selection business model. The company is extremely successful using it, and its customers are thrilled with their four choices of peanut butter.
Is there a lesson here for your small business? If you’re trying to be all things to every potential customer who comes within 10 feet of your store, you might want to take a lesson from Trader Joe’s and simplify.