When Internet and catalog retailers are excluded, retail productivity

Question

When Internet and catalog retailers are excluded, retail productivity in the United States, measured in
terms of revenue per dollar spent on employee salaries, increased more than 20 percent during the 1990s.
When the productivity changes of individual stores are tracked from the beginning of the decade to the end,
however, very few stores show greater than a 10 percent gain, [i]none had more than a 15 percent gain,

On the basis of the information given, which of the following can most properly be concluded about retailing in the United States in the 1990s?

A. The individual stores whose productivity increased the most tended to be those that had the highest sales revenue.

B. Most of the gain in retail productivity resulted from some combination of the closing of inefficient stores and the opening of new, efficient ones.

C. The gains in retail productivity were concentrated in the beginning of the decade, with much larger annual gains in the first few years than in the last few.

D. Increases in retail productivity were lower for Internet and catalog retailers than they were for other retailers.

E. After adjusting for inflation, the aggregate amount spent annually by retailers on salaries was lower at the end of the 1990s than it had been at the beginning.

masoy · Accepted Answer

We are given two premises that seem contradicting and we are asked to derive a conclusion

Premise 1: When Internet and catalog retailers are excluded, retail productivity in the United States, measured in 
terms of revenue per dollar spent on employee salaries, increased more than 20 percent during the 1990s.

Premise 2: When the productivity changes of individual stores are tracked from the beginning of the decade to the end, 
however, very few stores show greater than a 10 percent gain, none had more than a 15 percent gain, and 
many show only very small gains.

Pre-thinking: overall there was a 20% increase in productivity. However, when tracking individual stores, none showed more than a 15% increase and very few showed an increase of more than 10%. There can be 3 reasons that can help resolve the paradox:

1. Some stores with low productivity were closed, thereby raising the "average" productivity per store
2. Some stores with higher productivity were introduced, thereby raising the "average" productivity per store
3. Most of the stores that showed an increase in productivity were those that had the highest productivity, therefore their "contribution" to the overall productivity would add to 20%

Now let's examine the answer choices:

A. This answer choice tries to explain the paradox using reason 3 above. However, the choice replaces "high productivity" with "high revenue." Remember that productivity is revenue/salary of employees. Therefore, it's not necessary that stores with the highest revenue are those who have the highest productivity. ELIMINATE.

B. This answer choice combines reasons 1&2 above. It matches them and the answer would explain the paradox and can be a conclusion. THIS IS THE RIGHT ANSWER

C. We are told about the overall gain, therefore we cannot conclude whether the gain was concentrated I. The beginning of the decade. The question does not provide any support for this. ELIMINATE

D. The Internet and catalog retailers were only mentioned in the beginning of the passage, and they are excluded from the author's analysis. Therefore, we can't make any conclusion about them. ELIMINATE

E. This answer is too strong to be true. At best, it attempts to use reason 1 by saying that the some store with low productivity were closed. However, we cannot go from "some stores were closed" to "the overall salary was less" unless if we make some assumptions. Therefore, this answer is wrong. ELIMINATE

Answer: B

gmatbull · Answer

1990's: internet and catalog retailers excluded, Retail productivity(RP) increased 20%
Productivity changes for stores: few > 10%; none was >15%; many show small gains.

What can we assume on the basis of the information provided before delving into the ans?
I don't even understand what the passage is saying.....

Could someone pls explain?

sidhu09 · Answer

Given:
Retail productivity (revenue per dollar spent on employee salaries) increased > 20% in 1990s
ie if a company has 1000 employees and each employee has 1000 dollars as salary then
Retail productivity = (Revenue/(1000 employees)*(1000 dollars))*100

Breakdown of increase in RP is shown at the end of the decade.

Since the RP has shown a downward trend, what can be inferred from the information above.

A. The individual stores whose productivity increased the most tended to be those that had the highest sales revenue. -  Not necessarily, Since RP depends on the employees and their salaries, increase in RP can be attributed to decrease in employees as well keeping the revenue constant - Incorrect 
B. Most of the gain in retail productivity resulted from some combination of the closing of inefficient stores and the opening of new, efficient ones. -  Information pertaining to closure of stores is out of scope - Incorrect 
C. The gains in retail productivity were concentrated in the beginning of the decade, with much larger annual gains in the first few years than in the last few. -  This information is already provided in the passage and nothing new or groud breaking information is implied here - Incorrect 
D. Increases in retail productivity were lower for Internet and catalog retailers than they were for other retailers. -  Since internet and catalog retailers are excluded from the study, this information is irrelevant - Incorrect 
E. After adjusting for inflation, the aggregate amount spent annually by retailers on salaries was lower at the end of the 1990s than it had been at the beginning. -  Spending lower amount on salaries implies lower employee strength or decrease in salaries of the existing employees. In each case this attributes to lower revenue in the later half decade in 1990s. Hence this is the right answer - Correct

A very good question. I would really like to know any other line of reasoning as well.

Thank you.

gmatbull · Answer

@Sidhu09
"...productivity changes of individual stores are tracked FROM the beginning of the decade TO the end"

gmatbull · Answer

A knowledge of the OA  B will probably be helpful in making a proper analysis.
Anyone please?

@Sidhu09
Even though u did not get the answer, i like the fact that you demonstrated an understanding
of the concept.

E: i think is wrong 'cos....for "productivity changes ...FROM the beginning of the decade TO the end":
few were >10%; none was >15%; and many show small gains...the passage did not say whether the
results were a trend from start to finish of the decade in the respective order stated.
Also, nowhere was "inflation" discussed; it only adjusted for "internet and catalogs"

abctongji · Answer

I think the stimulus provides a paradox here. the retail industry shows 20% increase on RP during the 1990s. But indivisual retail companies tracks show: few gain 15%, few gain 10%, many gain a small increase. Then how the industry's 20% increase possible?

A and B are the contenders to solve this paradox.

A The individual stores whose productivity increased the most tended to be those that had the highest sales revenue. --Say 100 comanies, 10 of them increase by 40% and they have the highest sales revenue(50% of the revenue). Though a few gain more than 15%. 20% total increase of the industry is attainalbe. So I go for A.

B Most of the gain in retail productivity resulted from some combination of the closing of inefficient stores and the opening of new, efficient ones.--This also might lead the industry gain more than 20% increase. I am confused. NEED Official Explanations.

TGC · Answer

A. The individual stores whose productivity increased the most tended to be those that had the highest sales 
revenue.  Irrelevant  
B. Most of the gain in retail productivity resulted from some combination of the closing of inefficient stores and 
the opening of new, efficient ones.  Indeed,Correct answer because in the decade 1800-1900 it decreased.However,in the year 1990 it increased.So,we need a reason to justify this . 
C. The gains in retail productivity were concentrated in the beginning of the decade, with much larger annual gains 
in the first few years than in the last few.  Irrelevant 
D. Increases in retail productivity were lower for Internet and catalog retailers than they were for other retailers.
 Irrelevant,they are already excluded from survey 
E. After adjusting for inflation, the aggregate amount spent annually by retailers on salaries was lower at the end of 
the 1990s than it had been at the beginning. The passage talks about decade and not only year 1990

BukrsGmat · Answer

@masoy --> A great explanation .. But I still have few queries..

When Internet and catalog retailers are excluded, retail productivity in the United States, measured in 
terms of revenue per dollar spent on employee salaries, increased more than 20 percent during the 1990s. 
When the productivity changes of individual stores are tracked from the beginning of the decade to the end, 
however, very few stores show greater than a 10 percent gain,   none had more than a 15 percent gain ,  and 
many show only very small gains.

As per the argument none had more than a 15 percent gain then how can be the retail productivity increase more than 20%.

As per option B
 B. Most of the gain in retail productivity resulted from some combination of the closing of inefficient stores and 
the opening of new, efficient ones.

But creating new efficient stores with gain less than 15 %(because premise considers all the stores in the decade ) any way is not going to increase the productivity gain by 20%.

Please explain.. .

masoy · Answer

The premise says that the stores were tracked from the  beginning  of the decade to the end of it. Therefore, it does not consider stores that were added or removed in between. Moreover, if a store opened in the middle of the 1990s, then you can't really talk about its productivity gain because the store did not exist in 1990.

docdrizzeally · Answer

OK Lights went out when I was first trying to complete the discussion so someone should think about saving drafts , ofcourse this is just a board but still.

Here is a standard new GMAT toughie where the problem has indeed required all gears clicking so you can move across multiple frames and especially that thankfully for you, most of the incorrect choices are easily excluded as I have added inline above:

masoy · Answer

The reason why I eliminated E is that it is not necessary the case that the overall salary has decreased, it may be that the revenue increased while the overall salary was the same. Whereas there is no way for the argument to make sense without introducing new stores that have a higher efficiency; hence choice B. Although I admit that the closing of inefficient stores is unnecessary, choice E requires more assumptions to be valid.

In the end, I think this question is not "air-tight" and therefore I don't believe it is an official question

sananoor · Answer

GMATNinja   broall   chetan2u  and  daagh 
I am convinced with OA but still want you guys to explain this in detail. I find the question good though!

DavidTutorexamPAL · Answer

mahendru1992  none of the data given includes internet and retail ==> thus, we can't conclude anything about them. they could be higher, lower, the same... The question is only relating to a disparity between two bits of data about non-internet&catalog stores.

VerbalBot · Answer

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When Internet and catalog retailers are excluded, retail productivity

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When Internet and catalog retailers are excluded, retail productivity

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