Market Sizing Approach in 7-Eleven Case

Cases Market analysis market entry Market sizing
Neue Antwort am 31. Dez. 2021
7 Antworten
3,9 T. Views
Anonym A fragte am 14. Apr. 2020

Hi there,

I'd like to hear your thoughts on how to answer to market sizing in limited geographies, such as in this 7-Eleven Case I was given.
I performed so and so, therefore I decided to restructure my answer, and I want to hear your point of view.

Question (simplified): what's the market sizing (number of customers) of a new 7-Eleven in an urban neighborhood of 100K residents? Assume no tourists, no non-resident workers. 7-Eleven does not typically have capacity issues.

My answer (revised)
I can think of four ways:

  1. I can estimate the market share: starting from the potential market, I can estimate a market share based on the number/positioning of similar shops
  2. If we don't have such information, I can base my estimate starting from product/service, by: a) Estimating the potential market and the penetration rate for our cafeteria services (product area 1) b) Estimating the potential market and the penetration rate for our small shop services (product area 2) c) Considering the intersection between a and b
  3. If those estimates seem too blurred, I can base my estimate starting from customers, by assuming a penetration rate for different customer segments (divided by e.g. age, income, proximity, etc.) I can also mix approaches 3 and 4, by basing my product-centered analysis on different customer segments
  4. If none of these approaches are doable, I can estimate the number of hourly/daily customers based on my experience in similar shops

Is this approach good? Would you add/remove/modify something?
I have tried to tailor it to the case.

Thank you

VJ

Übersicht der Antworten

Upvotes
  • Upvotes
  • Datum aufsteigend
  • Datum absteigend
Beste Antwort
Adam
Experte
bearbeitete eine Antwort am 16. Apr. 2020
Ex Bain/ A.T. Kearney: Principal with >10 years global consulting and recruiting experience and >150 interviews

Hi,

I think I would start with customer segments (broad buckets) and then make some assumptions about basket size and store traffic.

You could think about customer segments linked to the time of day (i.e. 'use-case'):

  • There are probably a few peak times in the day where we might have commuters shopping on their way to and from work. Perhaps in the morning buying coffee, snacks etc and in the evening buying bread milk etc, on their way home.
  • There is probably another segment purchasing around lunchtime, buying soft drinks, sandwiches etc.
  • There is probably a steady flow of 'convenience' customers through the day buying miscellaneous items

With this type of problem, it’s always best to keep it as simple as possible. Here I would allocate a % of population to each segment (i.e. penetration), multiply by frequency to get traffic and then assume a basket size for each purchase occasion.

Hope this is helpful!

Kind Regards,

Adam

Edited to remove typos!

(editiert)

War diese Antwort hilfreich?
Vlad
Experte
antwortete am 15. Apr. 2020
McKinsey / Accenture Alum / Got all BIG3 offers / Harvard Business School

Hi,

It will depend on wether 7-11 is at the gas station or standalone:

  • For standalone you need to assume the % of use cases (7-11 is a convenience store, so more for day to day small grocery shopping) and then the geographical area it covers and % market share
  • For the gas station - you need to calculate the total number of gas stations in the city and the traffic for one. Then you add the % of those who do the in-store purchases

Best

War diese Antwort hilfreich?
Clara
Experte
Content Creator
antwortete am 15. Apr. 2020
McKinsey | Awarded professor at Master in Management @ IE | MBA at MIT |+180 students coached | Integrated FIT Guide aut

Agree with Vlad, depends on whether it´s attached or not to a gas station (+ other factors such as location, competition -and when is this open-, etc.)

Cheers,

Clara

War diese Antwort hilfreich?
Ian
Experte
Content Creator
antwortete am 31. Dez. 2021
#1 BCG coach | MBB | Tier 2 | Digital, Tech, Platinion | 100% personal success rate (8/8) | 95% candidate success rate

Hi there,

Providing some market sizing thinking for anyone revisiting this Q&A:

Remember that there's rarely a "best" answer with market sizing. What's important is that you break down the problem the way it makes sense to you. Importantly, break it down so that the assumptions you make are the ones you're most comfortable in.

For example, do you know all the major brands? Great go with that. Do you understand all the segments of that country's population (either age or wealth or job breakdown)? Go with that. Do you know the total market size of the tourism (or hotel) industry? Then break it down that way.

Some tips:

  1. Just like in a case, make sure you understand the question - what are you really being asked to calculate
  2. Decide whether a top-down or bottom-up approach is best
  3. Figure out what you know you know, and what you know you don't know, but could estimate
    1. This helps you determine how to split out buckets
  4. Stay flexible - you can start with a "high-level" market sizing, but gauge your interviewers reaction....if it looks like they want you to do more...then go along level deeper in terms of your splits
War diese Antwort hilfreich?
Antonello
Experte
Content Creator
antwortete am 30. Apr. 2020
McKinsey | NASA | top 10 FT MBA professor for consulting interviews | 6+ years of coaching

Hi, in addition to the solutions proposed by the other coaches in the discussion, I would like to suggest similar cases in the platform to practice with:

  • https://www.preplounge.com/en/consulting-forum/how-much-would-you-charge-to-clean-all-the-windows-in-seattle-4965
  • https://www.preplounge.com/en/consulting-forum/market-sizing-milk-consumption-5087
  • https://www.preplounge.com/en/consulting-forum/how-would-you-calculate-the-value-of-a-cow-4982
  • https://www.preplounge.com/en/consulting-forum/estimate-number-of-traffic-lights-in-a-london-5692

Hope it helps,
Antonello

War diese Antwort hilfreich?
RUBEN bearbeitete eine Antwort am 16. Apr. 2020
Junior Strategy Consultant, London - Looking for New Opportunities

I favour Vlad´s answer. First, I will ask whether the 7-11 is standalone or is a gas station. Let´s assume it is not a gas station as Vlad covered that perfectly in two lines.

I would investigate three critical points:

  • Location
    • I would ask if it is a neighbourhood of detached/semi-detached houses or big buildings. For example, if you assume 100 people per building, that is an area of 1,000 buildings to cover 100k residents. Unless people drive everywhere it seems unlikely that the store will be able to cover more than 50% of the residents. We assume the store is not next to a mall or an important landmark
  • Demographics
    • Average size of a household in the neighbourhood. If it is a family-oriented neighbourhood, consider that the kids are likely to buy sodas and slurpees
    • Is it a bedroom community or a commercial area?
    • Income level: for example, you can argue that low income families are more likely to have night-shifts and be more drawn to what the store offers
  • Competition: You will have to consider the % market share. You could enquire about the number of convenience stores and small-basket supermarkets around your area

Just in case, I would ask if they want you to provide the # of unique customers or elaborate on a # of visits per period. If you must elaborate, just multiply the addressable market by a daily frequency factor taking into account the demographics and the location - and adjust it by competition.

Best

(editiert)

War diese Antwort hilfreich?
0
Thomas
Experte
Content Creator
antwortete am 16. Apr. 2020
150+ interviews | 6+ years experience | Bain, Kearney & Accenture | Exited startup| London Business School

Hi there,

A segmented demand approach would be best here. Purely looking at standalone stores, there will be a significant difference (e.g. small neighborhood store vs store in a mall). I would hypothesize that location is one of the most critical elements and it is also an easy way to segment.

War diese Antwort hilfreich?
0

Adam

Premium + Coaching-Experten
Ex Bain/ A.T. Kearney: Principal with >10 years global consulting and recruiting experience and >150 interviews
28
Meetings
47
Q&A Upvotes
0
Awards
5,0
9 Bewertungen
Wie wahrscheinlich ist es, dass du uns einem Freund oder Kommilitonen empfiehlst?
0
1
2
3
4
5
6
7
8
9
10
0 = Nicht wahrscheinlich
10 = Sehr wahrscheinlich