Estimate the total industry wide sales of lipstick in the U.S.

(edited)

Estimate the total industry wide sales of lipstick in the U.S.

(edited)

[Pop US] * [% Female] * [% use makeup] * [% use lipstick] * [# of lipsticks they own] * [1/avg lifetime before finished or stop using] * [$ per lipstick]

E.g.

300m people * 50% female * about 60% would use make up * 70% use lipstick * average of 3 lipsticks they own * 1/1 per year as last long * $10 = ~ 1.9B USD per year in sales for consumers.

We can then extrapolate and add in another ~10-20% to account for business use such as make up artists, perhaps males, etc. Giving us between 2-2.5B USD per year.

If too low, perhaps the price I set per piece is wrong, but something you can check with interviewer.

This is how I solved it.

__Clarifying questions:__

- Does industry wide sale of lipstick mean # units sold or $ value of the units sold?
- Are we interested in just the market size or the number of units sold annually?

( NO OF UNITS SOLD ANNUALLY IS PROBLEMATIC - will cover that later )

**Data:**

US population: 320 million

Average Life expectancy : 80 million

**Approach:**

I believe as per the question we are suppose to find the market size in terms of number of units sold. ( not annually; however I will mention the method to solve it annually )

- We split the entire female population into age groups.
- We assume an average number of lipsticks owned by the women in those age groups.
- Multiply that with the population present in the group and get the # lipsticks owned by the females in that group.
- We total the above to get the total market size.

**Math:**

No of woman in USA belonging to every age group = 320 million / ( 80 * 2) = 2 million woman in every age group.

Assuming that only women of the age 16 and above use make up we have a 130 million woman who use make up.

**Age****Average No of lipsticks / woman**** Group Population No of Lipsticks**

16 to 25 10 2 million * 10 2 million*10*10

26 to 35 8 2 million * 10 2 million*10*6

36 to 60 6 2 million * 25 2 million*25*6

61 to 80 4 2 million * 20 2 millino*20*4

Total of the last Column = 820 million lipsticks.

**Now if we were trying to find the annual number of lipsticks sold in the US then things get tricky.**

If a person just uses one lipstick then the answer is simple :

Total market size / time it takes to finish the lipstick

However in reality women have multiple lipstick options and they dont constantly use one lipstick. Therefore, the time it takes to finish one lipstick increases significantly. Assuming that women apply the different color of lipsticks they own one after the other on different days , that every single women purchased her entire collection on the same day ( that is all lipsticks owned by a single women have the same starting point) , that all lipsticks are of the same size and that it takes roughly 3 months to finish one lipstick. We can estimate how long it would take one women to finish her entire collection.

Once we know that for each group we can then calculate the weighted average of the time taken. This way we will have just one timeline for the entire female population. Then we use

No of lipsticks sold per year =

Total market share / weighted average time taken to finish the lipstick.

NOTE: I am not sure of my final Solution. These are just my estimates.

If you find a mistake in my solution or would liek to further discuss the solutuion please do let me know.

Structure:

1. How many people use lipsticks?

a) Women + Men

# of women = 320 M * 50% = 160 M

# of men = 320 M * 50% = 160 M

b) Women + Men who use lipsticks

160 M * 80% + 160 M * 10% = 144 M (here I assume 80% of US women and 10% of men use lipsticks)

2. How many lipsticks do these people buy?

I divide lipstick consumers into three tiers

a) 40% buy 3 lipsticks per year

b) 40% buy 2 lipsticks per year

c) 20% buy 1 lipstic per year

***alternatively, it is porbably also fine to just assume the average number of lipsticks bought per person per year (as a side note, people do not necessarily wait till one lipstick to use up to buy new ones so no need to consider this factor)

3. How much does one lipstick cost?

assume average cost per lipstick is $20 dollars

Therefore, the sale of lipsticks in the US per year equals

(144*40%*20*3) + (144*40%*20*2) + (144*20%*20*1) = ~ **$ 6.38 B**

Write down your own attempt as well and where you are stuck.

Market Sizing Cases are used to test your quantitative and reasoning skills. The interviewer evaluates your structure, numbers-handling and business sense.

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