Market Sizing in China

Market sizing in China: collect hard data about your potential volume of operation and sales in China

Whether you are an international company wanting to enter the Chinese market, you already established operations in China or you have already a large history and experience in the Chinese market, you always need to be aware of the current size of the market and the opportunities that arise from it. No matter if it is a market analysis, a marketing research or it is a market entry study – our research at Daxue Consulting includes market sizing methodologies.  In doing so, we can:

• Determine actual market size
• Identify opportunities
• Determine market segment to focus on
• Provide you with competitive advantage due to more accurate estimations

Assessing the market size is also part of identifying the market potential. Determining market potential will help you to make different strategic decisions about product development, partnering and distribution, organizational design, and critical employee skills.  It contributes to determine levels of investments in your business and profitable growth targets. For startups, knowing the size of the market also helps for tactical issues such as choosing an accountant or legal representation or selecting a bank. Externally, market sizing in China will be a determinant factor when searching for financing.

Daxue Consulting performs market sizing in China as part of strategy-oriented projects. “Market sizing is a technical and long process that involves three to four members of our research team and takes two months on average,” explains Clément Mougenot, Research Director at Daxue Consulting. “Business managers can find reports about the market they target on the internet, but reports may not be up-to-date, and sources may not be accurate or reliable. We aim to provide our clients with personalized and precise market sizing.”

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How Daxue’s team determines a market size in China

To work on market sizing in China, Daxue’s team uses a methodology that consists in cross-analyzing all three estimations of the market size:

1. Estimate supply on the market (top-down)

Our research team collects prices of the product or service concerned in the Chinese market, and study the financial reports of the competitors. Using data on revenues generated by the sale of the product or service, we can estimate the quantity sold in the market you target in China and have a first evaluation of the market size.

2. Assess demand for your product or service (macro)

Daxue’s team uses data and statistics (on demography for example) gathered through desk research to estimate the number of potential users of your product or service in China.

3. Study distribution on the market (bottom-up)

This approach includes distribution offline and online. Regarding online distribution, our researchers study analytics data of Chinese e-commerce platforms such as Tmall.com and JD.com, which occupy together 80% of the e-commerce market in China. Approaching offline distribution requires interviewing top managers and sales managers of major players on the market concerned. “We realize a significant number of these interviews to get first-hand information from professionals, such as their best-selling product(s), prices, and sales statistics,” explains Mougenot.

[Source: Daxue Consulting – Market sizing in China]

Daxue’s team uses various research methods to size your consumer demand:

– Desk research is widely performed to gather data about the market in China, competitors, and Chinese consumers

– Mystery shopping is another part of the bottom-up approach and is realized to study distribution on the market and get insights from sellers in China, mainly for projects for clients in B2B. Pretending to be a potential buyer/supplier and asking for data about the market, mystery shopping has the advantage of being much shorter than interviews, which is why we can do hundreds of calls to cover the whole market

– Store-checks allows us to be in contact with the market reality while keeping in mind that some companies don’t implement the same strategy (different pricing, different brands or products sold) in first-tier, second-tier, and third-tier cities in China

– In-depth interviews with market professionals, lasting 30 to 45 minutes

With information gathered using these research methods, we get three market size estimates from the different approaches previously mentioned. We combine these estimations to get the tightest range possible, which is the best market size provided to our client.

How Daxue Consulting uses market sizing in China to analyze your target market

Carrying out a range as an estimate of the market size is a first step in defining our client’s strategy. Our team then analyzes and segments the market by province, type of distribution channel, type of product and by end-demandto assess the attractiveness of the different segments according to selected KPIs and the client’s objectives. The last step is producing strategy recommendations. “To provide complete and tailored recommendations to our customers, we present them a detailed description and an estimated size of the segment we advise them to target, along with data about its potential,” concludes Mougenot. This potential is displayed in the prioritized segment’s present and future opportunities. However, we also illustrate the threats and red flags.

Market sizing in Shanghai, Beijing, Guangzhou, Shenzhen and more

For all the services listed above, daxue consulting has developed the resources and research network to provide them throughout China + Hong Kong and Taiwan. Although based in Shanghai, Beijing and Hong Kong, we are used to travel in China for our clients and know very well the specificities of each area of the country. We therefore work in the following cities:

• Tier-1 cities Beijing, Shanghai, Shenzhen, Guangzhou, Chengdu and Tianjin as well as
• Tier-1+ cities such as Nanjing, Chongqing, Kunming, Xi’an, Wuhan, Shenyang, Dongguan
• and many tier-2 cities and tier-3 cities.