Understanding Basket Value: A Retailer's Guide

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🎓 Definition

Defines the average Ticket (or Basket) Value spent by a shopper in a Store scope during a defined period in one shopping trip. The basket value can be calculated at the store level, but also at the category level, Sub-Category level, and even at a brand level in the Merchandise Hierarchy.

🧪 Example of Average Basket Value calculation

For example, a Supermarket generated total Sales of $200,000, while the total Baskets or Tickets from Customers is 1,000 tickets. So the Average spend per Basket in the Supermarket is (200,000 / 1,000) = $200 per Basket.

❓What Basket Value is used for

Basket Value allows retailers to better understand their customers and their stores' catchment areas. Often, the average basket value will be different from one store to another even in the same format (Convenience, Supermarket, or Hypermarket). Average Basket Value will depend on the Store Location, its customers' wealth (High, Medium, Low), its average daily number of Customers, and the type of Assortment proposed to the Customers.

Average Basket Value will also help retailers to adjust their Pricing Structure by Store. For example, in a convenience store Retailer will pay attention not to propose Items with a Selling Price too high compared to the Average Basket Value of the Store.

🎁 Take Away

Increasing the Average Basket Value is one of the strategies to grow Sales, as is growing traffic.
Increasing the average basket value can be achieved by either inviting Shoppers to buy more expensive products in the same category (trade-up) or buying more products in other categories. Some other strategies are:

• Cross Merchandising (Knowing which Items are often bought together) helps retailers or brands propose relevant associated items to be offered together.

• Up-selling or Trade-Up can be achieved by offering customers motivation to spend more. For example, offering a free gift if Customers purchase an additional Ite, or providing a discount coupon if Customers reach a certain purchase amount. Product displays and placement (in physical or digital stores) can also have an important impact on customer spending. For example, the set up of attractive End of Gondolas near the Cashier Line or displaying popular Items at the Cashier Line.

• Item Bundling, is about grouping products that will be sold cheaper than if there were purchased individually. This strategy has several benefits: it increases the perceived value of purchase, decreases marketing costs, and directly impacts the Average Basket Value. It can also help to sell slow-moving Items.

• Increase products' availability. This strategy is of course fundamental.