Why less is more
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I am not a big fan of shopping at D-Mart. Don’t get me wrong—it’s not that I dislike it. I like to buy my fresh fruits and vegetables at the farmers’ market on Sunday at a park close to where I live in Juhu. They also sell staples, organic honey, preserves and cookies. I enjoy the interaction with the farmers, the experience and discovery.
To me retail is not just about value for money, functionality and utility, it’s also about theatre, experience and discovery.
Unlike me, millions of consumers in western India love shopping at D-Mart. The fact that the no-frills discount retail chain’s parent Avenue Supermarts Ltd listed on 21 March with a 115% premium to its sale price is testimony to that.
To be sure, it’s not without reason that investors drove up the stock so steeply. The regional chain is India’s most profitable retailer. Over 90% of D-Mart’s customers are regular shoppers who buy from the retailer 2-3 times a month on average. This is despite having no loyalty programme.
What seems to be working for D-Mart is offering limited merchandise at prices lower than its rivals. If Future Retail’s large format stores like Big Bazaar stock 30,0000-50,000 units on average, a D-Mart store stocks just 40-50% of that merchandise.
Most of this seems to defy logic. After all, over the years, we have been getting used to increased choices. Today, there are around 141 models of passenger vehicles from 15 car manufacturers on Indian roads. This is without taking into consideration luxury car models such as BMW, Audi and Mercedes.
In the early 1990s, there were just four passenger car manufacturers with about a dozen car models, which included Hindustan’s Ambassador and Contessa, Premier Padmini, Standard Herald and 2000, the Maruti 800, Omni and Gypsy, and a range of Mahindra utility vehicles.
A search for soap on online retailer Amazon.com Inc.’s India website shows up 324,992 results whereas a search for shampoo produces 17,028 results. A huge change from 30-40 years ago when bath soaps were dominated by the red Lifebuoy, pink Lux, Liril and Cinthol soaps and hair wash options were largely Shikakai soap, Halo and Sunsilk shampoo.
However, too much is not always a good thing. Especially given our stressful and busy urban lives, offering more options to consumers may just lead to confusion, making shopping an ordeal instead of a pleasure.
Psychologists Sheena Iyengar and Mark Lepper said that consumers who are offered fewer choices are more likely to purchase, based on an experiment that they conducted with jam at an upscale food market in a landmark study in 2000.
The psychologists put up a display of 24 varieties of gourmet jam on one table one evening and on another day, shoppers saw a similar table, except that only six varieties of the jam were on display.
The large display attracted more interest than the small one. But when the time came to purchase, people who saw the large display were one-tenth as likely to buy as people who saw the small display.
In his provocative book, The Paradox of Choice, Barry Schwartz warns that giving consumers more product choices actually lowers their purchase satisfaction. Schwartz reasons that having too many options makes us fear missing out, which causes anxiety, analysis paralysis and regret.
Globally, some of the biggest success stories in food retailing in recent years are not that of US retailer Wal-Mart Stores Inc. or UK retailer Tesco Plc. They are of the international expansion of German no-frills retail chains Aldi and Lidl, founded in 1946 and 1973, respectively.
Aldi and Lidl only offer between 2,000 and 3,000 lines.
In comparison an average Walmart store has 100,000 products and an average retailer 45,000 items.
It’s not only in retail. Look at some of the most successful brands—Tesla Inc., Apple Inc. and Google’s home page.
What stands out is the simplicity of design, a clean interface, and no clutter.
Among large retailers and manufacturers, the shift towards simplicity and offering less choice has already started happening. In 2015, Tesco announced cutting its range on its retail shelves by a third. Walmart reduced its average number of store displays by 15%. Even Procter and Gamble reduced its range of Head and Shoulders shampoos by nearly half—and ended up seeing a 10% bump in sales.
Interestingly, for India, the journey from having no choices to having a plethora of choices, and now to preferring our choices curated for us has happened in a very short time frame of 25-26 years.
It was only in 1991 that India opened its doors to multinationals and we saw our markets being flooded by foreign manufacturers like The Coca-Cola Co. and PepsiCo Inc.
The lessons, though, are crystal clear.
D-Mart, even though much smaller in size, on listing, had a market capitalization of Rs39,916.44 crore, more than the aggregate of all of its key listed national rivals including Future Retail Ltd, Shoppers Stop Ltd and Trent Ltd.
Shop Talk will take a weekly look at consumer trends, behaviour and insights.