Ever get overwhelmed by endless options when you’re shopping online? You’re not alone. 

Maybe you’re hunting for the best budget-friendly headphones on Amazon, your dream jacket on Vinted or the perfect pizza deal on Deliveroo. But the more you scroll, the less you know what to choose. 

The next time you’re lost in this sea of options, remember that the problem may help explain the findings of Senay Sokullu’s new study in the Journal of Economic Behavior and Organization. 

In her study, Senay (Senior Lecturer in Economics) analysed book sales from one of France’s biggest e-commerce sites. Demand from buyers goes up with the number of listings, she shows. But only to a point.  

This evidence could prove useful to competition regulators who need to understand the power dynamics within e-commerce giants like Amazon and eBay. 

Two-sided markets in online retail 

Senay became interested in e-commerce platforms after studying newspapers and magazines. What newspapers and online marketplaces, like Etsy and eBay, have in common is that they’re both two-sided markets.  

For newspapers, the two sides are readers and advertisers. For marketplaces, they’re buyers and sellers. The two sides give businesses a mix of tensions and mutual rewards to negotiate. 

She wanted to see if buyers really do like more sellers – as predicted by theoretical studies. “Many studies assume that buyers are more likely to join a platform if it has more sellers, and vice versa, because the benefit gained by each side depends on how well the other side is doing,” sums up Senay. “But, as a shopper, are you really going to check all 100 results for a product?”. 

Senay took advantage of recent developments in research methods to paint a clear picture of the relationship between the number of book sellers and the demand from buyers on PriceMinister. This huge French platform, which rebranded as Rakuten in 2018, is similar to Amazon Marketplace. 

Diminishing returns  

Based on a snapshot of sales data from September 2007 for 1,503 different books sold by 1,070 sellers, Senay discovered a sweet spot for variety:  

• When a book had between 12 and 17 sellers, buyers got excited. They were more likely to purchase the book than if it had just a handful of sellers. But after this point, their enthusiasm fizzled.   
• Demand plateaued when a book had 20+ sellers. People still bought the book, but any additional vendors did not make a sale more likely. 

The title of the book was the same in each case, but shoppers could select by price, condition (new or used), and its seller (professional or non-professional, and their customer rating).  

The seller numbers are unique to this specific case. Senay points out that they’ll be different in other contexts, for example, if the books were priced differently.   

Importantly, however, the results show that: “buyers like variety, but not too much variety.” This is contrary to the theories that assume more options will always boost buyers’ interest. 

She didn’t explore the reasons behind the behaviour of PriceMinister’s customers, but suggests two possibilities for the diminishing returns:  

• Search fatigue: Sifting through endless options is mentally draining. 
• Attention overload: We can only focus on so much at once. 

The market power of online retailers 

It probably doesn’t make sense for platforms to restrict the number of sellers, Senay suggests. Vendors remain a source of income, whatever their number.  

And, of course, choice overload is not news to online retailers, who widely use tools to steer shoppers to a product quickly. Search filters are an obvious example. Others in Amazon’s box of tricks include Amazon’s Choice – the black badge that adorns the ‘best’ item in your results – and free, fast delivery on select products for Amazon Prime members. 

The study may have important policy implications, however: “Competition regulators – especially the EU through its Digital Markets Act – are very interested in how e-commerce companies like Amazon work,” explains Senay.  

“These firms are such a huge and rapidly growing part of our economy. But regulators can struggle to keep up with them.” 

And she offers one big lesson for regulators: "You mustn't automatically assume that the platform with more sellers has more market power," referring to firms' ability to manipulate prices or levels of supply and demand. "There's much more to it."