Market Sizing: Strollers

Question

During an interview, I received the questions to estimate the market of strollers in the US.

I structured as follows:

1. Number of babies born every year as 300M inhabitants / 80 years lifespan x 1% growth = 3,8M

2. On average 2 children so 50% are first child and 50% are second, third... child

3. I assumed that 80% of first children receive a new stroller while only 10% of second, third children receive a new stroller (90% inherit the stroller from the previous child) resulting in 1,7M strollers a year

4. Average price of 200$ so total market of 340M$

Does this sound like a good approach to you as unfortunately I didn't receive an offer to come back and I wanted to know if it might have had to do with my solution to the case.

Thomas

Answer 1

Hi,

I agree with your initial approach and don't agree with Luca. Basically, you are making a reasonable assumption about the Birth Rate. If you apply growth - just make sure that the population is growing (although the number is small anyway)

Best

Answer 2

Hi Thomas,

the most important thing to do during a market sizing is to make reasonable hypotesis, easy steps and detail the steps as much as you can (make them deep) while maintaining an overall execution time within 10/20 mins max.

Said this, looking at your approach I find that your first assumption may be a bit hursh... you are basically saying that all the population in 1 yr bucket will have a child every year... so like saying people within 34 and 35 will have a child... All of them will have a child and nobody else will have. Unless I misunderstood your calculation

Maybe the number is also correct (idk), but for sure the hypotesis is not clear to me... I would have procced dividing the population into buckets (10 years span per bucket) and then defining some drivers as: Children yes/no (for example below 15 and over 70 I sould say no), then Likelyhood ( from 20 to 30 maybe 20%, from 30 to 40 maybe 30%, from 40 to 50 maybe 20% ...) thenyou can add your filter (1st/ 2nd child)... and so on

But I would have been much more granular while making the hypotesis and explaining them to the interviewer. Remember the number is important, but is nothing without a clear, reasonbable and understandable explanation

Hope this can help

Answer 3

I like your approach! It is pragmatic, easy to follow, and allows for a clear discussion of the different underlying drivers.

Cheers, Sidi

Answer 4

Somethings to be considered, just sharing, thanks:

1. should be strollers for new babies, and for existing babies' replacement (can add this at the end with a %)

2. % use strollers, % not use

3. 1st baby can buy new & second hand, 2nd baby can also buy new & second hand

4. the babies are from low income, middle income and rich families, so the average price can be segmented further

Answer 5

Hi there,

Providing some market sizing thinking for anyone revisiting this Q&A:

Remember that there's rarely a "best" answer with market sizing. What's important is that you break down the problem the way it makes sense to you. Importantly, break it down so that the assumptions you make are the ones you're most comfortable in.

For example, do you know all the major brands? Great go with that. Do you understand all the segments of that country's population (either age or wealth or job breakdown)? Go with that. Do you know the total market size of the tourism (or hotel) industry? Then break it down that way.

Some tips:

Just like in a case, make sure you understand the question - what are you really being asked to calculate
Decide whether a top-down or bottom-up approach is best
Figure out what you know you know, and what you know you don't know, but could estimate
1. This helps you determine how to split out buckets
Stay flexible - you can start with a "high-level" market sizing, but gauge your interviewers reaction....if it looks like they want you to do more...then go along level deeper in terms of your splits

Answer 6

Hi, I would go in a bit different way and calculate: Split the people into different age groups (80 years life... (read entire answer)

Hi, I would go in a bit different way and calculate: Split the people into different age groups (80 years life expectancy, 4 mln people in US per age if you assume people... (read entire answer)

Answer 7

Hi, You can calculate it from the demand and supply sides: Demand side: Population of London % of the popula... (read entire answer)

Hi, You can calculate it from the demand and supply sides: Demand side: Population of London % of the population that orders food on demand (use the sample of your frie... (read entire answer)

Answer 8

Hi, 1) From the demand side: every time you come to this store you see x ppl. You can assume how much time on avera... (read entire answer)

Hi, 1) From the demand side: every time you come to this store you see x ppl. You can assume how much time on average they spend at the store and calculate daily traffic. Then... (read entire answer)