The clamor of threat for the physical stores posed by the online retai
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05 Jan 2021, 07:51
Hello Everyone
I hope everyone's doing great! I am having my GMAT exam in two weeks and it will be highly appreciated if someone can evaluate my awa essay.
I'll drop the question and essay here.
The clamor of threat for the physical stores posed by the online retailers has been
consistently increasing. Intelligentsia has indulged in hasty laudation of the online
model and bashing of the physical model in today’s internet-driven world. These
proponents may not be aware that 70% of the country’s top 100 online retail
companies had negative profits in the last quarter and 80% of the companies have
foreign funding which is often risky, unreliable. Further, the main reason why
consumers prefer the online retailers is the high discount offered, often coming at
the cost of the investors’ money. How long can this continue? Olympus, a traditional
retailer, must certainly believe that the physical stores are there to stay and must
focus on opening more stores rather than worry about tapping the online retailing
ways
The argument states that the traditional retail shop, namely “Olympus” must stick on to the conventional methods and open more physical stores rather than finding ways to set up online retail shops. The proponent has pointed out that among the country’s top 100 online retail companies 70% of them have negative profits in the last quarter and 80% have foreign funding, as a few of the reasons for his conclusion. Furthermore, he states that most of the customers prefer online retailers because they offer high discount which is coming at the expense of the investor’s money. The argument is flawed as it is based on various assumptions as well as red herrings. The author oversees various facts and does not provide any illustration to support him claim and hence the given argument is flawed, weak and unconvincing.
Firstly, the argument assumes that the negative profits in the previous quarter of 70% of top 100 online stores is a sign of deteriorating business. This is not true and in fact many business strategies include taking losses in the beginning of the business so as to expand its the user base. For instance, Zomato, a well-known brand among all food lovers, has till yet not reached break-even and is at a loss of almost 300 Cr. Their business strategy is to expand the user base by providing discounts now and then gradually increase the prize of its commodities, which will in future provide huge volume business at high prize and thereby providing huge profits. It can also be seen that the author mentions only about 70% of top online stores’ profit and not about the physical stores’ profits. This also brings a possibility of economic erosion during the last quarter for the country as a whole irrespective of the retail sector. The argument can be strengthened if the proponent can provide more details about the profits of other physical stores during the same period and also bring in more illustrations to support his claim.
Secondly, the argument claims that the online stores are having foreign funding and that they are using a part of it to fuel the high discounts rates. This is a red herring as no evidence is provided to support this. Most of the online shops are capable of providing heavy discounts as they don’t have to pay the high rent for their store, unlike the paradigmatic stores do. This amount can be leveraged to provide heavy discounts without using the foreign investments. The author has also tagged the foreign investments to be riskier and unreliable without providing grounds for this claim. Without sufficient information it cannot be concluded that the foreign investments are riskier than the other alternatives. The argument can be made better if the proponent can provide more data support his claim as well as provide some correlation between the foreign investments and the heavy discount rates.
Finally, the argument concludes that the offline stores or the physical stores are better than the online stores with complete disregard to the Intelligentsia’s article or report. This conclusion appears to be rather wishful than founded on logical data. Nevertheless, he also endorses a traditional retailer called “Olympus” to focus more on opening more stores rather than worrying about tapping the online retailing ways. This conclusion is based on leap of faith and is not reliable as it oversees the various possibilities and opportunities that the combination of the both can provide. For instance, many coaching centers such as IMS provide both classroom coaching as well as the online coaching which enables them to reach to a wider network of people and hence increase their sales and revenue. The conclusion can be more strengthened if the author can provide examples of the companies that have succeeded in the way the author expects “Olympus” to succeed with physical stores alone.
In summary, the argument raised by the author is weak, unconvincing built on red herrings and partial information and hence non-reliable. To assess the merits of a given scenario one must analyze all the parameters that lead to such a situation.