The following appeared in a memorandum from the vice president of Gigantis, a development company that builds and leases retail store facilities:
“Nationwide over the past five years, sales have increased significantly at outlet stores that deal exclusively in reduced-price merchandise. Therefore, we should publicize the new mall that we are building at Pleasantville as a central location for outlet shopping and rent store space only to outlet companies. By taking advantage of the success of outlet stores, this plan should help ensure full occupancy of the mall and enable us to recover quickly the costs of building the mall.”
Discuss how well reasoned you find this argument. In your discussion be sure to analyze the line of reasoning and the use of evidence in the argument. For example, you may need to consider what questionable assumptions underlie the thinking and what alternative explanations or counterexamples might weaken the conclusion. You can also discuss what sort of evidence would strengthen or refute the argument, what changes in the argument would make it more logically sound, and what, if anything, would help you better evaluate its conclusion.
The vice president of Gigantis is convinced that his company’s new mall should be built with outlet retailers only. He reasons that since outlet stores have performed well over the past five years, this new mall should be one of the few with outlet retailers. His reasoning is questionable, however, because he is basing his conclusion on short-term results rather than long-term trends. If the stores have high sales during this period, they will almost certainly continue to do well. Furthermore, not all outlet stores are the same. The success of one store in one location is not necessarily indicative of the success of another store somewhere else. For instance, a 17-year-old outlet mall in Big Bear, California, is thriving. However, the Big Bear outlet mall is not located in a high-traffic area. Therefore, the stores must rely on tourist traffic to sustain their business
The vice president of Gigantis also assumes that the outlet stores will recover their costs quickly. He has provided no information to support this assumption, and if he does, it is not provided. The mall could fail to earn enough revenue to cover its operating costs. The shopping center’s location could also cause it to lose money. If the parking lot at the shopping center is full, people will be reluctant to drive to it because they fear that they will not be able to park. People may also drive to the shopping center and park their cars in the lot, but the stores will be empty because the customers will not want to walk long distances to shop. If the stores are not full, there is no way to recoup the cost of building the mall
The vice president of Gigantis also assumes that only outlet retailers will find this new mall appealing. Every retailer, including the outlet retailers, wants to attract customers. Attracting customers to the new mall will be difficult, however, because the new mall will be built in a rural area. The mall will be far from any town or city. Consequently, people will not know about it or its location. Even if people know about the new mall, they may choose to go to other nearby shopping centers rather than drive the large distance
If the vice president of Gigantis is convinced that the outlet stores will perform well at the new mall, he should test his theory by first determining the success of outlet stores in other, similar malls. He should then calculate the operating costs of the mall, including its occupancy rate, before deciding whether to build it or not. If the operating costs are recovered at an acceptable rate, then his company can build the new mall
If the executive vice president of Gigantis decides to go ahead with the project, he should make certain that he knows all the issues that are associated with it. He must anticipate potential problems and plan for them. For example, he will need to design the mall so that it will have adequate parking. The stores might need more windows than standard outlets have. He will also need to plan how the stores will be connected to the mall
The vice president of Gigantis has based his recommendation on false assumptions. He assumes that all the outlet stores will perform well at the new mall. The success of one store does not prove that all stores will do well. In addition, the vice president of Gigantis assumes that the new mall will be located in a high-traffic area. He fails to consider that the mall’s location might make people reluctant to drive long distances to shop. He also assumes that people who shop in outlet stores are wealthier than people who shop in regular stores. The vice president of Gigantis has not considered the possibility that people who shop in outlet stores might be young. He assumes that because young people are on a budget, they will shop only in outlet stores. If the stores are located in a mall, however, young people can park at the mall and walk a short distance to the stores, which will enable them to save gas money
The vice president of Gigantis has a theory that the new mall will be successful. This theory is based on short-term results. The vice president of Gigantis should test his theory by performing market research before deciding whether to build the mall or to look for another location.