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Market sizing - estimate the number of regular customers of a supermarket

Felicia asked on Aug 14, 2018 - 1 answer

I got the below approach from a casebook: Work out how many people are in the store at a given moment, then estimate average shopping time and use that estimate how many shopping visits are made during a week, then estimate total regular customers.

Specifically though, how would it work? Say we have 100 people in the store at the moment, and average shopping time is 1 hour, does that mean we have 100 people * 8h / day * 7 days in a week = 5600 regular customers?

Ritesh updated his answer on Aug 14, 2018

Regular customers would be those customers who shop in a fixed cycle - basis i.e daily/weekly/monthly.

A supermarket offers a wide variety of food and household products, hence a very diverse group of people come to shop.

We can estimate the footfall of an average sized supermarket. Typically supermarket keeps a count of people entering and exting.

Further, the conversion rate i.e actual number of people buying / No. of people that entered the supermarket, is typically between 20% - 40% ( i.e the balance 80% to 60% people are leaving without buying - lost opportunity) This rate can be considered higher like 70% or 80% by considering the competition or location or Industry standard if available.

So, Conversion rate X No. of people in the super market = Actual customers

Out of this actual customers, customers who would buy on regular cycles ( mentioned above) can be taken as 90%.

Therefore, Regular customers = 90% X Actual Customers

Why 90%? because given the diverse choice in a supermarket, a customer was able to spend his quality time to go through aisles and then actually decide on what to purchase, shows the likeability of that customer to return in future to make either a same purchase or supplementary or a complimentary purchase.