Estimation question

Estimate the total dollar amount of online sales for fruits and vegetables per year in US.

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What this question tests

Structured market sizing: breaking a broad category into a defensible bottom up estimate.

How to approach it

  1. State the approach: bottom up from households and online grocery adoption.
  2. Assume roughly 130 million US households spending an average of 150 dollars a month on groceries, of which produce is about 15 percent.
  3. That gives roughly 23 dollars a month per household on produce, or about 280 dollars a year, times 130 million households equals roughly 36 billion dollars total produce spend annually.
  4. Apply an online grocery penetration assumption, for example 15 percent of grocery spend happens online today.
  5. Multiply: 36 billion times 15 percent equals roughly 5.4 billion dollars in online produce sales per year.
  6. Sanity check against known online grocery leaders like Amazon Fresh, Instacart, and Walmart to see if the number feels plausible.

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