Hi guys,
does anyone have an idea how to approach this sizing case? Calculation with numbers?
I really appreciate any help!
Many thanks in advance!
How big is the market for online car selling in the premium segment within the first year after introduction of an online shop?
Overview of answers
Upvotes
Best answer
My estimate is around $11B in first year.
Market size = # luxury cars sold online this year (A) * avg price of luxury car ($60K)
A = # Household (HH) want luxury car (B) * % HH internet (90%) * % HH buys car online (10%)
B= # HH wanting to buy car this year (C) * % HH who will buy luxury (10%)
C = #HH with cars (D) * Avg # of cars per HH (2) / replaement time for car (10 years)
D= # HH in US (100M) * % with cars (100% assume for now)
Now starting from last row, D = 100M, C = 20M, B= 2M, A = 180K
So luxury cars sold online first year = $11 B
By the way, total US car luxury market seems to $100B. So we are looking at 10% in online sales.
I had laid this as a tree as suggested nicely in preplounge. Each alphabet above is a node with branches below if you are trying to rebuild the tree. Numbers in paranethesis are something you can play with.
Thanks
SR
Was this answer helpful?
Hey Patrick,
It would have been interesting to also read your approach first. Anyhow, here is how I'd think about this one (and assuming that you look within one country, otherwise you'd need to segment a bit more granular)
1) Look at the overall car replacement rate in your country (# housholds * avg car/household). We can then think about adjusting for decreasing/increasing growth in the overall market for cars. You might also consider that premium cars are more likely for corporate and limo service so the household approach is probably under estimating.
2) Estimate the fraction that is for premium car (obviously we would need guidance/assumption on price threshold for a premium car)
3) Estimate what market share an online car selling would get in the mid term. I'd have first a qualitative discussion on pro/cons of online sales for premium car, and then use other industries to triangulate an appropriate % of market share (such as luxury watches, private jet charters, or extreme such as Zalando with the idea that you'd difficulty get close to that for premium cars)
4) Estimate a time ramp-up to reach this mid-term market share from 3). Linear is the easy approximation but you might think about a hockey stick curve.
5) Combine all the elements to get your market on the first year.
Let me know what are you thoughts and how you'd have approached it.
Was this answer helpful?
I will basically do three steps to answer the question:
- Clarify the definition of online premium car sale market. Is it bounded by the online marketing effort, online financial transaction, or online customer service? Does this online shop operate like craigslist.com type info hub, or a shift.com type digitalized dealership who provide complementary test drive services?
- Estimate overall premium car sale in US. i) estimate overall volume of premium cars in US; ii) estimate lifetime of a premium car for new car sale calculation; iii) estimate average duration of premium car ownership for used car sale calculation; iv) sum up the new car and used car sale for total premium car sale calculation;
- Estimate the factor of online/offline premium car sale in the first year. i) estimate the factor for the corporate buyer (car rental company), ii) estimate the factor for the individual buyer; iii) estimate the ramp up speed for the factors respectively.
Was this answer helpful?
Related Cases
Company case by Oliver Wyman
Style:
Your client, large automotive OEM WyCar, has developed its first fully electric vehicle (EV) and introduced it as a pilot on the Austrian market last year. However, sales have been far below the expected numbers. The management has engaged you to support them in understanding the reasons and advise
...
Your client, large automotive OEM WyCar, has developed its first fully electric vehicle (EV) and introduced it as a pilot on the Austrian market last year. However, sales have been far below
...
(Open whole case)
117.7k
Times solved
Intermediate
Difficulty
Company case by Bain & Company
Style:
You have inherited the “Old Winery” from your grandfather, a winery that has been family-owned for five generations and can be dated back to the 16th century.Half of the eleven hectares are used to grow white grapes, the other half to grow red grapes. They are grown in a conventional way, i.e. they
...
You have inherited the “Old Winery” from your grandfather, a winery that has been family-owned for five generations and can be dated back to the 16th century.Half of the eleven hectares are
...
(Open whole case)
112.3k
Times solved
Intermediate
Difficulty
Company case by Roland Berger
Style:
Onlinestar, an online retailer of furniture and garden products (core business), has grown significantly in recent years as a result of an expansion of its product portfolio. The company mainly imports goods from Chinese manufacturers but also operates its own production of cat lavatories (special b
...
Onlinestar, an online retailer of furniture and garden products (core business), has grown significantly in recent years as a result of an expansion of its product portfolio. The company mai
...
(Open whole case)
87.9k
Times solved
Intermediate
Difficulty
Company case by RWE Consulting
Style:
RWE has reliably supplied people and companies with electricity for more than 120 years with activities around the world with a clear focus on growth. The company is pushing the energy transition to climate neutrality with focus on renewable energy sources like offshore or onshore wind as well as ph
...
RWE has reliably supplied people and companies with electricity for more than 120 years with activities around the world with a clear focus on growth. The company is pushing the energy trans
...
(Open whole case)
14.3k
Times solved
Intermediate
Difficulty
Company case by DB Management Consulting
Für Unternehmen ergeben sich durch die Digitalisierung neue Chancen und Risiken. Neue Märkte mit großem Potenzial können erschlossen werden – gleichzeitig erhöhen Wettbewerber den Konkurrenzdruck. KMUs, Start-ups und Konzerne bringen unterschiedliche Kompetenzen und finanzielle Möglichkeiten mi
...
Für Unternehmen ergeben sich durch die Digitalisierung neue Chancen und Risiken. Neue Märkte mit großem Potenzial können erschlossen werden – gleichzeitig erhöhen Wettbewerber den Konku
...
(Open whole case)
12.8k
Times solved
Intermediate
Difficulty