The following appeared in a memorandum written by the vice president of Nature’s Way, a chain of stores selling health food and other health-related products. “Previous experience has shown that our stores are most profitable in areas where residents are highly concerned with leading healthy lives. We should therefore build our next new store in Plainsville, which has many such residents. Plainsville merchants report that sales of running shoes and exercise clothing are at all-time highs.
The local health club, which nearly closed five years ago due to lack of business, has more members than ever, and the weight training and aerobics classes are always full. We can even anticipate a new generation of customers: Painesville’s schoolchildren are required to participate in a ‘fitness for life’ program, which emphasizes the benefits of regular exercise at an early age. ” This material written in a memorandum concludes that building a new store in Plainsville would be profitable.
The residents who are largely concerned with healthy lives are likely to purchase health food and health-related products, which was proved by local sales of running shoes and exercise clothing. Besides, the argument cites that a health club located in Plainsville is popular for its weight training and aerobics exercise, in addition, a program called ‘fitness for life’ is requiring pupils of taking regular exercise. The seemingly reasonable results lead to the indication that the profit is sizable if starting a new store in Plainsville, such conclusion depends on a series of unsubstantiated assumptions and thus, is unconvincing.
The huge percentage of residents who are aware of healthy lifestyle has engendered the false assumption that people tend to buy health-related commodities produced by Nature’s Way corporate. It is disconnected with reality. We all know that once getting used to a certain band of sports clothes and shoes which make customers feel most comfortable, they are unlikely changing their choice of preference, such “purchasing habit” is common especially in sport-related commodities. And as the popularity of the internet has been increasing, so has the on-line shopping grown.
What if people who live here favor e-shopping? There is no data showing the population of regular on-line shopping-holic, it could be huge. Besides, Plainsville could be an exercise clothing shopping center which attracts customers miles away or even far away drive here shopping, if so, the competition has the potential to be fierce, and Nature’s Way could be defeated by other competitors not to mention escalating profit. Even assuming that people would be commodities from Nature’s Way, the argument remains questionable.
The profit of Nature’s Way comes from both health food and other health-related products, unknowing the respectively exact proportion of each one. It is quite possible that most of the revenues gaining from health food rather than products. But the information we could get from this argument is that habitants in Plainsville routinely buy exercise clothing, not mention even a single word about health food. There is a risk in largely making money from running shoes and exercise clothing too early. ven if one accept the results that a majority of profit is from products instead of food, the argument is still weakened by the fact that schoolchildren are demanded to join a health program, which seems to indicates a large potential customers. There is no source of data on the ratio of pupil in the whole population of Plainsville, it is probable that people lived here are mostly comprised of retiree and working adults who are engaged in their business. Moreover, since the demand of health program is put forward by school, school could buy sports uniform for their students, and it is not rare.
Consequently, few schoolchildren are likely to buy other exercise-related clothing for they already have enough and reliable source. It is obvious to draw the conclusion that this argument, while logical at first sight, has several flaws as I presented above. If the company has done thorough market research, the conclusion would be improved. If would be further improved by contracting with local school which could be a stable source of potential customers to be profitable.