How to estimate the retail market size in the US

Market sizing McKinsey first round
Recent activity on Oct 31, 2017
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Anonymous A asked on Oct 31, 2017

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Martin updated an answer on Oct 31, 2017
Interviewing at BCG soon.

For a simple calculation that should suffice in a stressful case interview, multiply population by disposable income/capita (or GDP/capita if you're desperate) and multiply that by a percentage of income that the average person seems likely to spend on retail every year (e.g. 33%?).

i.e. 300m * $40k * 0.33 = 4 trn
- which actually gets you pretty close to the ~4.5 trn spent on retail in the US last year. You'd get 5 trn from GDP per capita figures (~$50k/p.c.), so that would be an alright guess as well.

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Ivan replied on Oct 31, 2017

I would bottom up calculation in the following way

  1. Average income/Household
  2. Exclude avrg tax, insurance, loans etc. from income
  3. Exclude other expenses
  4. In the end, you have money that household would spend on retail PA
  5. Multiply it by the number of households in US

Of cause this calculation would not give you an exact figure however probably you would have an order of magnitude

What do you think? Does it make sense?

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Kevin Huang replied on Oct 31, 2017
Actively preparing for MBB interviews. Looking for regular partners.

1. define retail and unit of measurement, let's say overall spending on an annual basis.

2. MS= # people * disposable income/person/year * retail spending% + non-personal spending on retail + tourists

3. 3 segments of people: high income/ mid income/low income. Each has different disposable income and retail spending%.

4. assign percentages to non-personal retail spending and tourists.

Please let me know what you think.

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