Wednesday, July 29, 2020

The Pandemic Has Removed Much Of The Problem Of Consumer Overchoice

The basic assumption of  economists is that humans are rational agents and, when offered a set of choices - say for a particular product -  will end up making the optimum one. But in an excellent book: The Paradox of Choice - Why More Is Less, the author (Barry Schwarz) showed this isn't the case and when humans are offered a surfeit of choice they punt! They either don't make any purchase, or they opt for the first one that comes to mind or in their field of vision.

A worse effect is paralysis of action or decision, as well as depression,  occurring because excessive choice presages a lack of control and autonomy. As noted by Schwartz (p. 104):

'Like the mechanical rabbit at the dog racing track that speeds along just ahead of the dogs no matter how fast they run, aspirations and expectations about control speed ahead of their realization, no matter how liberating the realization becomes."

In effect, more choices may not mean more control,  ccrtainly if they lead to paralysis in making the choice.  Consider just the case of Medicare and Medicare Advantage which choices often lead seniors spinning their wheels in confusion and costly inaction, indecision. 

This arises because each year prospective beneficiaries  must confront a miasma of more than 500 different plan choices for Medicare Advantage and Medicare proper.   In the latter seniors can choose from Parts B, D, and F but often make choices that end up being extremely costly. Worse, the whole Medicare system is contrived of constantly moving parts with changing prices, benefits year to year.  Especially Part D - the Prescription Drug Plan. The situation has become so intractable for many seniors, they are having to hire special services to wade through all the issues and make a decision.

A Wikipedia item references 'overchoice' :

"The phenomenon of overchoice occurs when many equivalent choices are available.Making a decision becomes overwhelming due to the many potential outcomes and risks that may result from making the wrong choice"

In a nutshell, the more decisions we make in any given day, and the more novel information we attempt to absorb, the more mental energy we use up. Worse,  the lower the quality of our resultant decision-making.  Or as Schwartz puts it (ibid.):

"To avoid the escalation of such burdens we must learn to be selective in exercising our choices. We must decide individually when choice really matters and focus ot energies there."

It appears now the pandemic has reduced a lot of the choices - namely in purchases such as groceries- that bordered on the ridiculous before, e.g. "275 varieties of cereal and 175 types of salad dressing" according to Schwartz' findings (p. 10)

But now, as a WSJ article points out ('Why The American Consumer Has Fewer Choices - Maybe For Good',  June 27, p. A10):


We may have crossed the Rubicon to the world of less choice.  And it will help our brains expend less wasted energy.   Example?

"Some IGA Inc. grocery stores now offer only four choices of toilet paper. A few months ago, before the coronavirus pandemic, IGA’s 1,100 U.S. stores typically carried about 40 varieties."

As IGA Chief Exec John Ross aptly put it:

"We may not need 40 different choices of toilet paper."

Indeed, why would anyone need more than 4?  (1-ply environment friendly, 2-ply, 3-ply, 4-ply) All the excess does is clutter the brain, overwhelm its decision making processes. That includes having to choose from 220 varieties of chicken soup or 275 kinds of cereal.   Why the surfeit of choice and why the trend to downshift now?  According to the piece:

"Consumer -oriented companies spent the past decades trying to please just about everyone.  The pandemic made that impossible and now some no longer plan to try. Sellers of potato chips, cars, meals and more have been narrowing offerings since the coronavius snarled supply chains and coaxed consumers back to familiar brands." 

 Which is welcome as it's a move back toward sanity, toward temperance, and essential conservation.  Ultimately, let's be clear that the spawning of vast numbers of "choices" in products was a deliberate effort to ramp up consumption - which is 70 percent of GDP.    As the WSJ piece points out: 

 "For years companies added choices and their execs told investors by putting a token salad on every fast food menu chain or stocking a detergent for 'extra sensitive skin'  they could cater to the whims of more people in a family."

Thus, instead of ONE detergent for a whole family, these companies conceived of one for each member, ever so slightly tweaked from the base product.  Instead of one purchase, maybe 3, 4 or 5 at once.  And as we learn (ibid.):

"These efforts helped goods makers claim more shelf space as more retail stores and supermarkets expanded into more big box stores. "

In this way, a strategy of offering less choice was deemed "contrarian" and even anti-capitalist.   But a strange thing happened as producers were poised to jack up choices even more:  the pandemic hit and with it panic buying -   which cleared supermarket shelves of staples, especially toilet paper, hand sanitizer and even soap.   Suddenly, choice sobriety and sense emerged as retail execs realized a change in course was in order.  Thus:

"Retailers and food companies over the past several months have convened calls in which it was decided food makers should cut back on options and concentrate production on the most in-demand goods."

And lo and behold the food producers have responded.  For example, Smucker pausing production of JIF low fat peanut butter and Nestle permanently dropping some lean cuisine varieties. Meanwhile, Mondelez has removed 25 varieties of its snacks to simplify the supply chain and reduce inventories.

The question now is whether this sober reduction in choice can last, analogous to whether the lowered CO2 emissions (also a result of the pandemic) would last.  A future post will touch on that.

No comments:

Post a Comment