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"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 concluded that the company Olympus must focus on stay as physical store rather than change to an online store. The reason behind is that the author consider that the physical stores are better for the companies development than online stores and presents three reasons: the top online companies had negative profits, the usual funding of the online stores its foreign funding and its often risky, and finally the main reason of preference online over physical its because the high discount, that impacts the cost of investor. The reasoning is flawed in several ways. It will be discuss the assumption behind the reason of negative profits and the high discounts.
First, the argument claims about the negative results of most of the top online companies. There is no more information about the reasons behind such results, it can be a general performance in all the stores, physical and online, because macroeconomics factors. Also, it can be a problem in a specific sector, for example the Top 100 online retailers can be focus on tecnhology and such sector was the most impact last quarter. Also, even if the assumption is correct, the negative profit can be because of the core of the retail and not in the way it sell. The author assume that if a company works as physical store will be save of such performance.
Second, the author mention that the main reasons consumers prefer the online retailers is because the high discount offered and that generate a cost in the investors'money. The discounts offer by a company usually tend to give a price fewer that the sell price but higher or equal to the cost price. In that case, even if the discount is really high, the company must consider a sell at a zero profit rather than decrease the price and lost for the sale. The argument online consider one part of the reasoning. Even if the assumption is correct, the application of discounts can be a good strategy for some companies because, although the price is lower, the quantity of products sell can recover the profit (PxQ).
The argument of the physical stores are better than the online stores can have more flaws that the ones discussing. To ensure the reasoning, must be include information about the performance of the physical stores, for example the profits of last quarter and the number of products sell. As it stands, however, the argument is flawed for the reasons indicated.