I already said, but I'll explain in more detail or w/e
Reducing variety means there's a smaller pool of people your gameplay appeals to because you are restricting the number of optimal players to character archetypes that are known to be successful, for the sake of balance. You also homogenize matchups reducing the game's replay value and longevity. If everybody's DD/WDs become good, you lose the opportunity to give those characters as much leeway in other departments for fear of causing balance problems. A really blatant example is characters with static space control. Characters like Snake, Diddy, Zelda, ROB and a few others to lesser extents can't exist, because you've already buffed everyone to be fast, strong, mobile and combo well. Diddy's like 3 lf those things and still controls static space really well, and I'd make the argument he's a top 5 or top 10 character. So then you create a balance problem like Diddy, by trying to have enough variety and still having all characters feel fast and responsive; or you severely restrict character variety; or the third option, you have characters that don't feel artificially as fluid because you didn't crank up the numbers on their running speed, aerial mobility, etc but you still have those characters to appeal to players who want a more unique experience, and you also appeal to other players by giving them opportunities to play more unique matchups occasionally without making them feel like they got ****ed by a superior character.
Holy run-on sentence batman