Estimate the size of second hand furniture market in the USA

estimation market sizing guesstimation market
New answer on Nov 08, 2022
4 Answers
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Anonymous A asked on Sep 28, 2022

hi, I am a bit stuck in solving for these second hand items. Talking specifically ab furniture— I would probably classify into contract and residential and say the average lifetime the furniture is replaced in each of there ( assuming residence will keep it longer than hotels, offices etc.)  plus growth 

calculate the avg spend by each of them giving examples of some large ticket items like dining, sofa,bed etc. 
 

finally, this will give the base for used furniture and hence I can again divide the used furniture by the lifetime and price reduction both reducing the base a little.. 

This is looking at the problem from Supply Side 

review is welcome! 

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Pedro
Expert
replied on Sep 28, 2022
Bain | EY-Parthenon | Roland Berger | FIT | Market Sizing | Former Head Recruiter

While I suggest reading through my answer on the used car market (https://www.preplounge.com/en/consulting-forum/size-of-the-second-hand-car-market-in-the-us-14555) there is a key difference here. While virtually every car will be sold at some point as an used car, this doesn't apply to furniture. Also, a car has a limit to its useful life, furniture doesn't. On top of that, many people give away used furniture (to family, friends).

In short, you cannot cannot simply assume that a table will last 30 years and will be sold every 10. That is just irrealistic. 

I suggest you approach it from a slightly different angle. You need to consider more carefully WHO is purchasing the used furniture and why / when. 

In my experience, you have two segments. 1) Young people, regardless of income level (with a few exceptions), as they leave their parents homes, go to college, professionals that move city for their first job, and similar siutation. This is a one time situation. 2) Low/low-middle class people. These will trade used furniture multiple times. [be careful not to double count this situations].

On the business side, you have offices, restaurants, hotels, retail, services, etc. Only those that are HIGH ROTATION (i.e., businesses usually don't last long, so they close and need to sell their furniture to someone who's entering the business) are likely to be relevant. 

Meaning that restaurants is your #1 customer. Everyone else is not very relevant (retail only needs some shelves, small offices is mostly basic tables and chairs that don't last that long, hotels may refurbish but usually try to maintain as long as possible…).

So I would just assume that restaurants are 80% of the market and use it as a proxy.

Finally, yes, you'll need to consider how much furniture they have, what's the value of new, and what's the discount they'll have. I would do simple assumptions here, i.e., something around that the furniture is only sold once and at e.g. 30% of their new value.

This is not a full answer, but hope this helps.

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Ian
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updated an answer on Sep 28, 2022
MBB | 100% personal interview success rate (8/8) and 95% candidate success rate | Personalized interview prep

Hi there,

This is about right! A few thoughts:

  • If by contract you mean “commercial” (businesses), this should probably be cut as businesses would buy used product
  • Make sure to break down the population and segment it (income makes most sense here…on a household level)
  • The # furniture, price of furniture, and replacement ate of furniture per year is going to change across segments ("oddly" quantity going down as income goes up, but spend per furniture going up)
  • You're looking at demand NOT supply here

 

How to approach market sizing

It's very simple: Do the approach the is the easiest for you given the question.

Are they asking you to estimate something where you don't even know where to begin from the top (maybe you have 0 clue as to the market size of the industry, the GDP of that country, etc. etc.)? Then do bottom-up!

Alternatively, does it seem impossible to do a realistic from-the-ground-up estimation of something (perhaps it requires just far too many steps and assumptions)? Then do top-down!

Fundamentally, you need to take the approach that just makes the most sense in that circumstance. Quickly think about the key assumptions / numbers required and whether you 1) Know them or 2) Can reasonably estimate them. If you can, go ahead!

An Example

He's a Q&A for a great market sizing question here asking to estimate # of electric charging stations in a city in 10 years:

https://www.preplounge.com/en/consulting-forum/how-would-you-solve-this-market-sizing-question-from-roland-berger-7631

This one could be answered top-down (as I did) by estimating population of the city, # of drivers/ cars, etc. etc.

OR, it could be answered bottom-up by estimating # of stations you see per block (or # of gas/petrol tanks), % increase this might be over time (or # of EV stations that would be needed per gas tank given EV stations take 10 times as long), and # of blocks you'd estimate the city to have.

Take a look here for additional practice! https://www.preplounge.com/en/management-consulting-cases/brain-teaser/intermediate/taxis-in-manhattan-market-sizing-229

(edited)

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Jago
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replied on Nov 08, 2022
Account Manager seeking Strategy Consulting role.

Hi, I've taken a crack at this question. Can you please provide some advice on my logic and let me know if my estimates/process is acceptable?

Looking at this estimation from a demand-side perspective.

Segmenting second-hand (SH) furniture market in the USA by a) commercial and b) residential customers.

RESIDENTIAL

  • 330M people live in the USA.
  • Taking into account people who live by themselves and larger families/student-sharing households I estimate 3 people per household — 110M households in the USA (let's say 100M for ease in calculations going forward).
  • Estimating the average number of furniture items in a household of 3 as 30 items (3 beds, 6 bedside tables, 3 tables, 3 wardrobes, 2 sofas, 10 chairs, 1 miscellaneous).
  • Segmenting the population of the USA by income:
    • 50% low-income households.
    • 30% medium-income households.
    • 20% high-income households.
  • I am assuming households across all incomes all have 30 furniture items per household, on average (and the same proportion sold SH), but the replacement rate and value are different.
    • Low income: 6 items are replaced per year (20%)
    • Medium income: 4 items replaced per year (~15%)
    • High income: 2 items replace ed per year (~5%)
  • Assuming 50% of the items replaced per year are done SH:
    • Low income: 3 items sold SH per year, as 50% of households (50% of 100M) this is 150M items sold SH
    • Medium income: 2 items sold SH per year, 60M sold SH per year
    • High income: 1 item sold SH per year, 20M sold SH per year

COMMERCIAL

  • As a quick estimation to get the volume of furniture items sold SH for the commercial segment:
    • Assume residential is 70% of the market, the commercial is 30% of the market, as such (150+60+20=230M, 30% is ~90M), round up to 100M SH furniture item volume for the commercial market.

TOTAL

  • The final calculation, multiplying volume by estimated prices:
    • Low income (mean SH furniture price $50): 150M*$50 = $7,500M
    • Medium income (mean SH furniture price $100 from personal experience): 60M*$100 = $6,000M
    • High income (mean SH furniture price $200): 20M*$200 = $4,000M
    • Commercial (mean SH furniture price $50 due to wholesale discounts): 100M*$50 = $5,000M

Total market size = $22.5 Bn

Thinking critically about what I've done I think I've possibly made some rather unfounded assumptions (e.g. replacement rate, proportion sold/bought via SH, the proportion of the market which is commercial vs residential). I also feel my estimation of commercial market size could be better.

Looking forward to any feedback!

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Clara
Expert
Content Creator
replied on Sep 30, 2022
McKinsey | Awarded professor at Master in Management @ IE | MBA at MIT |+180 students coached | Integrated FIT Guide aut

Hello!

I would always recommend you to give it a shot and then post it here, this would help you the most. 

Given that market sizing cases were the topic of many questions in this Forum, I developped a market sizing case, that you can find for free in PrepL´s library

https://www.preplounge.com/en/management-consulting-cases/candidate-led-usual-style/intermediate/market-sizing-new-startup-launch-baby-strollers-in-the-us-244

Furthermore, you can find a detailed market sizing (a complex one integrated into a case) in my latest case: 

Swiss manufacturer market assessment, profitability and scenarios: https://www.preplounge.com/en/management-consulting-cases/candidate-led-usual-style/advanced/swiss-coffins-the-death-business-245

Let me know if you have any doubts with it, it contains a detailed explanation and methodology about how to solve this specific example, but you can extrapolate to many other market sizings!

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Pedro gave the best answer

Pedro

Bain | EY-Parthenon | Roland Berger | FIT | Market Sizing | Former Head Recruiter
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