How to calculate market share

A market has $100 million in annual sales. Company A sold $42 million. Its share is 42 ÷ 100 = 42%.

Revenue share vs unit share

Market share can be measured in money or in units, and the two can differ a lot. If Company A sold 1.2 million of the 4 million units sold in the market, its unit share is 1.2 ÷ 4 = 30%, while its revenue share is 42%. Company A sells fewer, more expensive items than average.

Premium brands usually have a higher revenue share than unit share; budget brands the reverse. Say which one you’re quoting.

Defining the market

The answer depends on what you count as “the market.” A coffee chain might have 40% of specialty coffee shops in a city but 8% of all coffee sold there, including supermarkets. Be explicit about the product category, geography and time period.

Changes in share

Shares are percentages, so changes in share are usually given in percentage points. Company A going from 38% to 42% gained 4 points. Relative to its old share, that’s a 10.5% increase.

A company can grow its sales and still lose share, if the market grows faster. Sales up 10% in a market that grew 15% means share fell.

Relative market share

Relative market share compares a company with its largest competitor:

Company A versus B: 42 ÷ 31 = 1.35. A value above 1 means you’re the market leader. For Company B, the largest competitor is A: 31 ÷ 42 = 0.74.

Concentration

A quick way to describe how concentrated a market is: add the shares of the top few firms. Here the top three hold 42 + 31 + 18 = 91%. Analysts also use the Herfindahl-Hirschman Index, which adds the squares of each firm’s share, so larger firms weigh more.

A table of shares

When you have sales for every company, list each as a percentage of the total. Because of rounding, the shares might add to 99.9% or 100.1%. See percentage of total in a table for how to handle that, and percentage points vs percent for describing changes.

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