Hi community, how would you solve the size of parcel delivery in your city in terms of annual revenues?
My approach:
1. Ask whether it is a B2B or B2C or C2C parcel delivery space?
2. Ask whether it includes e-Commerce as well?
Population of city -→ Split by income level -→ Assume higher income population would have more deliveries (in terms of order value) -→ Calculate all order size in $ -→ Take a blanket 2% fee on the order size -→ This is the value of the parcel delivery market
Hi there,
This approach is generally correct. Another approach (or an additional layer) would be to split by urban versus suburban.
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:
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
Hi there,
Yes, your approach is overall fairly sensible. Some additional thoughts..
Hope this helps.
Regards, Andi
Your approach seems reasonable. However, it’s important to note that the size of the parcel delivery market can vary depending on a number of factors, such as the size of the city, the population density, and the level of competition in the market. According to Apex Insight, the global parcels market exceeded US$500bn in value in 2020, up from just under US$450bn in 2018. Asia Pacific is the largest regional parcels market by value, accounting for around 42% of the global market. North America and Europe together represent a little over 50% of the market.
It’s also worth noting that there are many different types of parcel delivery services, including B2B, B2C, and C2C. Additionally, e-commerce has had a significant impact on the parcel delivery market in recent years. According to Adroit Market Research, the size of the worldwide parcel delivery market is projected to reach US$2 billion in 2032 at a compound annual growth rate of 10.9%.
Hi there,
This approach makes sense.
Master tip - play around with market sizing questions on chatGPT. Ask for it to give you feedback on how else to approach the question.
Also, make sure that when you reach the end of the answer with market sizing questions, you also interpret it. Specifically, talk about some of the assumptions that you've taken and the next steps that you'd go through to increase the certainty in them.
Best,
Cristian
