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06 Sep 2019, 05:08
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The following appeared as part of a recommendation from the business manager of a department store:
“Local clothing stores reported that their profits decreased, on average, for the three-month period between August 1 and October 31. Stores that sell products for the home reported that, on average, their profits increased during this same period. Clearly, consumers are choosing to buy products for their homes instead of clothing. To take advantage of this trend, we should reduce the size of our clothing departments and enlarge our home furnishings and household products departments.”
Discuss how well reasoned . . . etc.
The author, a business manager of a department store, argues that a reported decrease in profitability in clothes sales is linked to an increase in profitability in home products and that the organisation could capture greater profitability by reducing its clothing department and increasing its household department. This argument is flawed in several ways: it relies on vague clothing profitability data, it relies on average household products profitability data, and it assumes that consumers are switching between the two product categories.
First, we are told that ‘local’ clothing stores have reported ‘decreased’ profitability. It is not clear to what extent the term ‘local’ covers all clothing stores in the nearby area, in the city, in the state or even further afield. Should the reference be to stores in the near vicinity it is possible that a local, or very specific phenomenon, is to blame for the reported lower profitability. Moreover, the reference to ‘decreased’ profitability is unqualified: the drop could be substantial or only minor. And given the reference is to lower profit levels in a 3 month period it is arguable that the data is simply to short term in nature to rely on for decision making. Overall, the author appears to place significant reliance on data which lacks in detail in order to lend it more credibility.
Second, it is reported that products for the home sold by ‘stores’ has led to greater profitability. Here the author is seeking to rely on data related to ‘stores’ without setting out any geographic boundaries such as, for example, whether the stores are local, regional or even national. The author goes on to say that profits for these stores have increased on ‘average’ which could mean that some stores also experienced periods with a decrease in profitability. To seek to paint a picture that the home product stores are universally and consistently enjoying higher profits could be misleading. The absence of any quantification of the ‘increase’ in profitability weighs further against this data. As with the clothing store data, the home products data is also only for a three month period – surely an insufficient amount of time on which to base significant business decisions.
Third, the author suggests that the profitability data means that customers are simply switching between clothes and home products yet no evidence is cited to back up the idea that there is a casual link between the two. These may well be independent phenomena. In addition to this, the variability in reported profitability across the two single product stores may not be enjoyed by a department store due to possible different customer bases and shoppers’ preferences.
In summary, this argument is flawed for the reasons set out. More specific data around profitability of both categories discussed, as well as insights about consumer product switching behaviour, would be helpful in sharpening the author’s argument.
“Local clothing stores reported that their profits decreased, on average, for the three-month period between August 1 and October 31. Stores that sell products for the home reported that, on average, their profits increased during this same period. Clearly, consumers are choosing to buy products for their homes instead of clothing. To take advantage of this trend, we should reduce the size of our clothing departments and enlarge our home furnishings and household products departments.”
Discuss how well reasoned . . . etc.
The author, a business manager of a department store, argues that a reported decrease in profitability in clothes sales is linked to an increase in profitability in home products and that the organisation could capture greater profitability by reducing its clothing department and increasing its household department. This argument is flawed in several ways: it relies on vague clothing profitability data, it relies on average household products profitability data, and it assumes that consumers are switching between the two product categories.
First, we are told that ‘local’ clothing stores have reported ‘decreased’ profitability. It is not clear to what extent the term ‘local’ covers all clothing stores in the nearby area, in the city, in the state or even further afield. Should the reference be to stores in the near vicinity it is possible that a local, or very specific phenomenon, is to blame for the reported lower profitability. Moreover, the reference to ‘decreased’ profitability is unqualified: the drop could be substantial or only minor. And given the reference is to lower profit levels in a 3 month period it is arguable that the data is simply to short term in nature to rely on for decision making. Overall, the author appears to place significant reliance on data which lacks in detail in order to lend it more credibility.
Second, it is reported that products for the home sold by ‘stores’ has led to greater profitability. Here the author is seeking to rely on data related to ‘stores’ without setting out any geographic boundaries such as, for example, whether the stores are local, regional or even national. The author goes on to say that profits for these stores have increased on ‘average’ which could mean that some stores also experienced periods with a decrease in profitability. To seek to paint a picture that the home product stores are universally and consistently enjoying higher profits could be misleading. The absence of any quantification of the ‘increase’ in profitability weighs further against this data. As with the clothing store data, the home products data is also only for a three month period – surely an insufficient amount of time on which to base significant business decisions.
Third, the author suggests that the profitability data means that customers are simply switching between clothes and home products yet no evidence is cited to back up the idea that there is a casual link between the two. These may well be independent phenomena. In addition to this, the variability in reported profitability across the two single product stores may not be enjoyed by a department store due to possible different customer bases and shoppers’ preferences.
In summary, this argument is flawed for the reasons set out. More specific data around profitability of both categories discussed, as well as insights about consumer product switching behaviour, would be helpful in sharpening the author’s argument.
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