Aftermarket & Reverse Logistics Market Size Revisited
Aftermarket and reverse logistics market size a quantitative approach to an accurate forecsat.
As many of you know, I have written a great deal about the size and forecast of the Aftermarket & Reverse Logistics Service Market. The reason why I am so passionate about this subject is because I strongly believe that the days of relying on intuition to determine the size of a market are long gone.
I have found that companies who take a strategic, statistical, and econometric approach to determining the size and forecast of a market are more likely to experience sustainable, continuous, and profitable revenue growth. This is because a quantitative approach to market analysis enables a company to be more precise and accurate about market demand and revenue potential. As a result, the management team can do a better job at allocating resources and prioritizing investments resulting in the company being better prepared to handle challenges and respond to opportunities.
It does not suffice a company's management team to say "let's not worry about the precise size of the market, we know the market is really big, so let's just focus on getting new business". This is tantamount to taking a trip from NY to LA in your car by just driving west and without a map. You wouldn't expect to such behavior from any educated or even sane person, so why would a company behave in such an irrational manner?
I believe that it is because market analysis is more complex than meets the eye. Determining the size of the Aftermarket & Reverse Logistics Service market is part science and part art. It requires that a company really understand the true dimensions and dynamics of the market. And there's the rub. Unlike a product market, which is much easier to define the Reverse Logistics market is large, complex, and fragmented. This makes the task of sizing & forecasting a market very difficult. However, it is not, I repeat not impossible.
Unlike product markets which require knowledge of limited set of factors like competition, product features, price points, number of potential users, and market demand; the Aftermarket & Reverse Logistics Market must be analyzed against a broad array of factors and dimensions that are inter-related and dependent on each other. Examples of these factors/dimensions include:
- Size and age of equipment installed base
- Annual Sales and Return Rates
- Disposion of Product returns
- Expenditures for in-warranty versus out- of- warranty service
- Percent of market served by 3rd Party versus internal repair organizations
- Percent of 3rd Party market served by authorized providers versus multi vendor (i.e., non-authorized) providers
- Service Expenditures by type of service performed (e.g., repair, technical support, advanced exchange, e-Waste, service parts logistics, etc.)
- Service Expenditures by type of equipment supported
- Gross Domestic Product
- Annual Growth Rate of GDP and market participants
By considering these factors, a company can accurately arrive at the size and forecast of the available, relevant, and addressable market. This requires an extensive knowledge of the market and access to multiple databases that track this information as well as a working knowledge of the relationship of each of the factors listed above with respect to how they impact/influence market demand and revenue potential.
This level of complexity should not be overlooked. Some companies only focus on single attribute when sizing the market like percentage of GDP or Warranty spend by OEMs. However, this sort of thinking is much too myopic and results in a under estimate of the true size of the market. The rule of thumb is the more distinctions that one can make about the market and the more facts that one has to support these distinctions, the more likely they will to arrive at a much more accurate and valid view of the market.