Market Sizing Question: What is the potential market for a bookstore at the Heathrow Airport?

Well this is were you start making assumptions. 

There is no way to know this precisely, so all you need to know is find good arguments on how you put numbers into the gaps.

E.g. let's assume you segment travellers by short vs long haul /biz vs leisure, so spanning a 2x2 if you will.

First short haul: 

• You typically arrive at the airport relatively on time, so little time to find your gate, then roam around, do window shopping, etc. You might then bring in your own experience to speculate further: 
  • Biz travellers are the target group for some of these book stores, btu they are also efficient, annoyed by their schedule, on the phone etc...so assume a low rate of buying books - let's say 1 in 100
  • Leisure travellers in short haul might be arriving a bit earlier, they are not flying as often, so everything still exciting, asusme something a bit higher, maybe 3 in 100
• Now long-haul
  • Biz travellers probably go through the same argument as above, but they need to arrive a bit earlier - they are avid readers, have some time to kill. Maybe also 3 in 100
  • Leisure travellers for long haul are excited about their vaccation. They arrive 3 hours too early, are in a spending mood (vaccation time!!!) and are looking at a 6-10 hour flight so they are probably more likely buying a book. Here you can probably also bank on your experience as a leisure passenger. Is it a 5 in 100 or a 10 in 100? Who knows, but if you structure your arguements like this, you should get to a reasonable outcome.

Hope this helps! There are certainly a ton of other ways how to do it, and in these cases there is no right or wrong as long as you make reasonable assumptions based on the data you have (which is typically just your own experience or little bits of data you remember).

You need to just make reasonable assumptions here! You don't have to be 100% right! You just need to have a reason for it. Furthermore, you have to be "right" in which one is larger than the other. I.e. higher-income people would obviously have a higher % chance of buying a book.

It's less about having the exactly right answer and more about being relatively right and with good logical reasoning around the assumptions!

Also important: Your segmentations need to be those that are reasonably indicative in changed behavior. So, I wouldn't segment by men and women, because there shouldn't be an obvious difference in their book-buying habits at airports.

Hi Anonmyous,

One very typical mistake candidates are doing that they just think into one direction. What I mean by that that either they build their market sizing case bottom-up or top-down implicitly, without really thinking about those 2 fundamental options.

Ideally you generate an approach for both options and can triangulate both outcomes (should be somewhere in the same ballpark) or at least share the options with your interviewer and define together which way to proceed.

Jumping into one of those implicitly is definitely not top-down and not structured = not good in your interviews.

Hope that helps - if so, please be so kind to give it a thumbs-up with the green upvote button below!

Robert

In order to estimate the number of people that buy a book the following has to occur (assuming you can afford to buy one)

• You have to have a desire to buy a book
  • This is either prior to seeing a bookstore (so the decision has already been made prior to entering a bookshop)
  • Or you are influenced while in the bookshop
• For those who are decided 
  • Likely to be long distance leisure travelers looking to bide time (e.g., 25% are long distance and 10% want to read, and of those 20% are planning to buy a book prior to reading)
• For those undecided
  • Someone buying a gift etc (any type of traveler) - 5% need a gift and 10% of those would buy a book for example
  • Buying to read at a later date (either type of traveler) - very small percentage again 
• Above would be one way to solve it and then get to potential market size

Remember a book store at an airport probably makes more money selling other items like food, snacks, drinks, accessories (chargers, cables, traveling needs) than actual books so make sure you also account for those!

Best,

Udayan

Hello!

This is indeed a quite simple case. 

You need to calculate: 

1. Number of passengers that go through Heathrow Airport
2. % of those who would enter the shop and buy something
3. Average ticket per each of those buyers

Points 2 & 3 are educated guesses, but for point 1 you need a more structured approach: 

• Number of planes/hour 
  • 2 runways
  • Usually 1 operation/2 mins in each runway
• 18 h open per day
• Average plane size of 250 at 70% capacity

Hope it helps!

Cheers,

Clara

Hi there,

There are certainly different approaches to crack this case, depending on the data you have, and here is one way to sove it:

1. Estimate the number of travellers at this airport: take the number of runways, the number of flights per hour per runway, then the number of the daily hours of operations and then number of passengers per flight
2. Ask about the location of this store, is it before the customs (everybody passes through it) or right before the boarding (only the people travelling through the nearby gates would pass through it)
3. Is this the only bookstore at the airport or does it have competitors (to estimate the market share after you size the market)
4. Make assumptions on a % of people who visit such stores (depending if they are business or leisure travellers)
5. Make assumptions on the conversion rates (how many people end up making a purchase - based on the average unit price)

Obviously there are many parameters you can take into account when answering this market sizing question, but this is a good approach you can follow to crack it.

I hope this helps!

Mehdi