How to market size the number of fireworks in China?

Question

Hello everyone!

I'm looking to estimate the market size of fireworks in china. For that reason I propose the following approach, I would love to hear your opinion:

I would start to estimate the # Customers x Avg. Spend per customer.

To estimate # Customers: I would find the # business that buy fireworks x # households that buy fireworks.

To estimate the # of business that buy firewors I would find # people of working age on China that work on firms / Average # people per firm.
To estimate the number of people of working age in China I would start by Chinese population x % in working age that work in firms.
For that I would start segmenting 1b population into population on working age 52.5% (Population between 18-60 years) = 525 m. Then I would segment this by % Employed ( 90%) and % Unemployed (10%), then I would segment the %Employed into % Working by firms (80%) and % Self employed (10%), this would give me a 380m.
To estimate the Average # people per business I would do the following segmentation: - 20 employes for 90% of firms - 50 employes for 9% of firms - 200 employes for 1% of firms This gives me 18%
So I would have a total of 21.1 m of business. I assume the % that buys fireworks is 0.1% so 21 K,
And for homes I would segment by number of people / people per home (2) and I get 500m then I assume 0.1% buys fireworks so 5m homes.

To estimate the average spend per customer: I would multiply price (0.6) by Quantity which I segment by business (20 - which are 10% of their customers) and homes (12 - which are 90% of customers) and I guet 13.

I get a market of 36.7m

What do you guys think?

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Clara

Expert

Content Creator

replied on Mar 06, 2021

McKinsey | Awarded professor at Master in Management @ IE | MBA at MIT |+180 students coached | Integrated FIT Guide aut

Hello Floyd!

Love that you are so active here with your market estimations :)

For this particular example: I would actually advise the more "conventional" ones. This, without further gudance, is more complicated than what you would usually find in an MBB interview.

Hope it helps!

Cheers,

Clara

Raj

Expert

Content Creator

replied on Mar 14, 2021

There are many similar questions with useful answers on preplounge already, like below:

Fundamentally the structure and approach will be equivalent in all these cases and in the example you have stated above

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score 17 · Accepted Answer · 2021-03-04T14:36:49+00:00

Best Answer

Ian

Expert

Content Creator

replied on Mar 04, 2021

BCG | 100% personal interview success rate (8/8) and 95% candidate success rate | Personalized interview prep

Hey Floyd!

First, thanks for being so active on the Q&A!

Now, I can't help but note that this is like your 10th Market Sizing post.

Furthermore, your approach is always not quite right. You do all kinds of assumptions/step that really just beat around the bush, then you jump to a random estimation. For example, points 1-4 above do nothing for you! Point 5 is the entire point of the case...and you just put a finger in the air and guess. THIS is where you have to start the market sizing (i.e. break things down to figure out what this number could be).

"I assume the % that buys fireworks is 0.1% so 21 K" - THIS is the entire thing you're being asked to estimate! You can't just get a random big number here...it's exactly the same as saying "I think x % of China buys fireworks, therefore x % times China population = my number". This is too simple/made up!

You're really missing the point of market sizing...I highly high advise a coaching session to run home how you need to think about/approach market sizing.

OMG Ian thank you for your answer. As you can notice I'm having a hard time doing market sizing estimations :( Thank you for your answer. Can I send you a PM? — Floyd on Mar 06, 2021

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How to market size the number of fireworks in China?