What is Average Basket Size and Why Does It Matter?

It would be great if items jumped off the shelf and into your customers’ carts. In the real world, however, customers are selective about where they choose to invest their hard-earned dollars.

Those consumer decisions affect your average basket size, which in turn gives you a glimpse into the health of your business. Let’s start with learning how to calculate your average basket size, so you can leverage it to increase sales. 

What is basket size?

Average basket size (ABS), also known as units per transaction (UPT), refers to the average number of items sold per single transaction. You divide the total number of units sold by the total number of transactions to find your average basket size. 

Basket size matters because, as we said, your ABS can be used to measure your business’ overall performance. 

Average basket size vs. average ticket size

There’s a difference between average basket size and average ticket size that makes them useful for distinct sales goals. For this reason, it’s important to know the difference and what each is best for. 

Average basket size: Refers to the number of products a customer buys per single transaction. This is calculated as the total number of units sold divided by total transactions.

Average basket size = total number of units sold/total number of transactions

Average ticket size: Refers to the average dollar amount a customer spends per visit. To calculate ATS, you divide your total sales revenue by your total number of customers. 

Average ticket size = total sales revenue/total number of customers

The difference lies in what each formula measures. While average ticket size refers to the average amount of dollars a customer spends per transaction, average basket size refers to the average number of products sold per transaction. 

Average basket size makes more sense to measure for retailers that sell small-ticket items that don’t require repeat purchases (think vacation trinkets as opposed to paper towels). Average ticket size can be a more relevant metric for stores that sell higher-ticket items (think big car parts instead of small hair products). 

Importance of basket size

The value of calculating your average basket size is twofold: it helps you assess your marketing and sales efforts, and it helps you understand your customers better.

Monitor average order value (AOV)

Monitoring your average order value, or the average amount spent each time an order is placed, helps you measure how well your marketing and sales efforts are paying off. However, accurately figuring AOV numbers can be tricky if you aren’t tracking ABS as a supporting metric. 

For example, if your AOV isn’t performing as projected, average basket size can help you understand why. 

Better understand shopper behavior

You can tell a lot about consumer behavior through the numbers, whether the consumers are walking into a brick-and-mortar store or buying online. Accurately tracking consumer behavior is crucial to your store’s growth. The data can help you: 

• Differentiate between types of consumers
• Predict consumer trends and outsell competition
• Make decisions on how to best retain customers
• Add the most relevant products to your shelf 
• Develop better, more targeted marketing strategies

For example, learning your ABS for each quarter can help you understand whether you’re providing your customers with the right products at the right time of the year. Did you rearrange your end caps near the front of your store last quarter? ABS can help you find out whether that change made a noticeable impact on your revenue for that quarter. 

---

---

How to calculate average basket size

Calculating your average basket size is a straightforward process. It begins with a simple formula that takes the total amount of units sold and divides it by the total number of transactions:

Average basket size = total number of units sold / total number of transactions

Let’s take a look at each part of the equation. 

Total units sold

To find your total number of units sold, you count the number of units you sold per transaction. Using a POS system with built-in inventory management makes the process of tracking total units sold easier. 

Number of transactions

The second part of the equation is the total number of transactions during the same time you sold your total number of units. This is where reporting and analytics retail software can make the process of tracking the number of transactions easy with automation features. 

Example of calculating average basket size

Say you wanted to figure out your average basket size during a specific sales period. Your company totaled 16,000 transactions and sold a total of 5,000 units. Plug those numbers into your ABS formula and you get an average basket size of 3.2. 

3.2 = (16,000/5,000)

How to increase average basket size

• Cross-selling and upselling
• Offer free shipping
• Product bundling
• Leverage store layout
• Reduce stockouts
• Personalize recommendations

Your average basket size might not be where you want it. This is where a few tried-and-true retail strategies can help you bump that number up. 

Cross-selling and upselling

Cross-sell and upsell your customers to increase your basket size. The key is to not come off as salesy so you don’t turn your customers off. To upsell and cross-sell effectively, consider what you can sell to your customer before or after a purchase. 

Here are a few upsell inducements you can offer pre- and post-purchase: 

• Offer a free gift to customers who purchase an additional product
• Provide a discount coupon if they reach a certain purchase amount
• Offer a complimentary service (if it makes sense for your store) if an additional item is added to their purchase
• Set end caps with your most popular products near checkout areas

Offer free shipping

Brands like POPFLEX, an international workout wear and equipment brand, leverage the power of offering free shipping to entice customers to add one more thing to their carts. Jen-AI Notman, POPFLEX’s Director of Marketing, explains how they increase ABS by offering free perks: 

“We offer free domestic shipping on orders over $100. Qualifying for free shipping is a gentle nudge that persuades customers to add more items to their cart.”

Product bundling

A product bundle is a group of items that cost less purchased together than if they were purchased individually. Leveraging this selling strategy does a few things:

• It increases the perceived value of a purchase
• You sell more while decreasing marketing, warehouse, and distribution costs
• It simultaneously increases your average order value or AOV
• You can leverage it to sell stagnant items that are not selling

Take Glossier’s dreamy color set bundle. Instead of buying each product separately, you can buy them as a set and save $10. This moves more products off Glossier’s shelves and it entices consumers to buy more because of the “save $10” perceived value the bundle offers. You can do the same in your store once you identify items that would sell well together. 

Leverage store layout

Store layout matters. Just ask Costco. It moves items around the store constantly to simulate a “treasure hunt” experience that gets customers to roam more, encounter more products, and ultimately end up buying more. 

Take a note from huge retailers and leverage your store layout by:

• Stocking your end caps with your best deals or best-selling items
• Adding a loss leader near the back of your store so customers encounter more products on their way there, thus increasing the chances of additional purchases
• Rearranging where your items are located in the store regularly

Reduce stockouts

Most of us are familiar with the disappointment of getting to a store only to find the item you were hoping to buy is out of stock. Chances are, the next time you want that same item you’ll think twice about purchasing it there. 

Reducing stockouts increases the chances of customers finding more items to add to their order, which in turn increases your ABS. So how can you ensure you end up with stockouts less often?

• Tighten up your inventory management with automation to reduce human error
• Apply anti-shrinkage strategies.
• Implement a demand forecasting strategy for each quarter
• Create a safety stock backup of your bestselling items

Personalize recommendations

It’s nice when you find a product that fits your criteria. It’s even nicer when you get product recommendations that are exactly what you’re looking for; 91% of customers say they’re more likely to shop with brands that recommend offers that are relevant to them.

Such is the power of a personalized shopping experience. These days, stores are using the power of augmented reality to retain consumer attention. With AR, a personalized experience can do things like stage an item into an image of your home to help you visualize how it would look. 

In 2019, Amazon launched a personal shopper experience for its prime members. Once they complete a style quiz, customers get a set of personalized items sent to their doorstep picked out by professional stylists. The personalized experience comes with irresistible perks:

• You get a try-before-you-buy 7-day window to return unwanted items
• You can chat with a live stylist to ask questions about your needs
• Stylists match your size, your budget, and personal preferences
• You can choose to receive new looks monthly

In the same way, your store can try different strategies to personalize the customer experience. You don’t have to be a giant brand to pull off a personalized experience that works. 

Consider offering:

• Promotions and special deals that align with your customers’ needs due to seasonal changes, world events, or personal demographics 
• Customer loyalty programs that offer personalized in-store gifts after a certain number of purchases
• A mobile app where consumers can open personal accounts that cater to their specified preferences
• A better try-on experience with a team member that can help ease the process of picking out sizes
• A mix-and-match bundle allowing customers to choose a combination of products for a discounted rate
• Personalized coupons based on previous purchase history with a POS system that tracks buying history 

Measure your store’s average basket size

There are several advantages to knowing your average basket size and leveraging those numbers. You can drive store growth, stay relevant in a competitive market, know what products sell best, and increase your revenue quarter after quarter.

But that can’t happen if you don’t keep a finger on daily customer transactions. With a sound strategy and the help of POS software, you can optimize your store for more sales.

Source