Average Unit Retail (AUR): Definition and How To Calculate It

By Indeed Editorial Team

March 22, 2022

Retail businesses use many metrics to assess and improve their operational and sales performance. One of these metrics is average unit retail (AUR), which shows the average price a product sells for during a specified period. Understanding how to calculate and use this metric can help companies in the retail industry develop strategies and make decisions that optimize their performance.

In this article, we discuss AUR, including its importance for retail businesses, how to calculate this metric and several ways you can use it.

What is AUR?

Average unit retail (AUR) is the average selling price for an item within a specific period. Retail businesses and suppliers often use this metric to compare their sales across different categories. When determining it, they need to know the number of units sold and the net sales. 

AUR can help retailers understand how much money their customers are willing to spend and how many products they're willing to purchase. Businesses often use this metric in combination with other retail and pricing key performance indicators (KPIs) to gather a more comprehensive view of the business and develop strategic goals.

Looking at this metric during particular periods can help retailers assess the pricing of their goods and determine if they can raise them or need to lower them. For example, if a business notices its AUR increases over a particular period but its total revenue doesn't, it might signal that its prices may be too high because customers are purchasing fewer items.

Related: A Complete Guide to Key Performance Indicators (KPIs)

How to calculate AUR

You can use these four simple steps to calculate AUR:

1. Determine the period to evaluate

Businesses assess their average unit retail by looking at a specific period. This period can vary depending on a business' interests or needs. For example, a retailer may decide to look at sales during the third quarter (Q3), meaning July through September. Within this period, for example, the business wants to determine the AUR of its T-shirt line.

2. Identify net sales

Next, the retailer determines the net sales from the specific period. Net sales represent revenue after deducting sales returns, discounts and allowances for missing or damaged items. Companies typically report this information on their income statements under the label "sales." Using the example of a business looking at sales during the third quarter, it may determine that it had net sales of $3,500 for T-shirts.

Related: Net Sales: Definition and How To Calculate Them

3. Identify units sold

The second essential component of this calculation is units sold. Companies often report unit sales on their income statements, calculating them based on different accounting periods. Typical periods used by businesses include monthly, quarterly or yearly. You may also find this information in the retail management systems you use. In our example, the business determines that it sold 140 T-shirts from July to September.

4. Divide net sales by units sold

Once you identify the net sales and units sold for your desired period, you can perform the AUR formula. This simple calculation requires dividing net sales by units sold:

Net sales / Units sold = AUR 

The retailer in the example would do the following calculation:

$3,500 / 140 = $25

Each T-shirt sold averaged $25 per sale during the third quarter based on the AUR formula. The company can combine this metric with other pricing and sales data to make decisions or assessments about the business.

Ways to use AUR

Here are four examples of how businesses use AUR:

To identify trends

Businesses can use AUR to identify and monitor trends for particular products. They can compare one quarter or month to another to assess their differences. Using this data, they may determine that certain products perform particularly well in one quarter vs. another. For example, a boutique may notice it sells fewer sweaters during the summer than in the fall or winter months. This data can help the boutique create better pricing and inventory strategies to optimize its sales during different periods.

Similarly, companies can examine this metric to determine what products sell well in their stores and what needs improvement. For example, the boutique may notice consistently positive sales for its clothing items and falling or stagnant sales for its makeup offerings. These results may lead the business to reassess its decision to sell makeup or implement strategies to promote those products more to see if they help boost sales. 

When examining the number of units sold, companies can also identify how unforeseen events may have impacted their sales, such as shortages, industry changes or natural disasters.

To determine customer behavior

Somewhat similar to trends, retailers can also use this metric to understand their customers' shopping habits. Understanding customer behaviors or shopping habits helps businesses learn why and how they make purchasing decisions. AUR may demonstrate when customers tend to purchase particular products, such as an increase in sunscreen sales during the summer months at a convenience store. It can also show how many units customers are willing to buy and at what prices.

Retailers can use these insights to create optimal business models and strategies to boost revenues and retention rates. For example, a store may notice that its candy sales increased during a period of three months, but its revenue from that item didn't. This situation shows customers don't feel comfortable with the pricing and are buying them in fewer quantities or not at all. As a result, the store may decide to lower those prices or run promotions to encourage customers to buy more quantities of the candy at a time and boost revenues.

Read more: 11 Different Types of Customer Buying Behaviors

To establish pricing strategies

Using AUR to understand shopping trends and behaviors can enable retail businesses to develop more effective pricing strategies. A pricing strategy refers to the method used by businesses to set the prices of the products they sell. Companies typically choose strategies that attract or retain customers and encourage them to make purchases. Businesses also want to ensure that the prices they establish are profitable, offsetting the costs of producing or purchasing them to make them available for sale.

When determining pricing strategies, the business can also assess its profit margin. The profit margin represents the amount that sales revenue from a product exceeds the cost of that product. If the profit margin is too small and the business isn't making much money from each sale, it may need to increase prices to ensure profitability.

Read more: What Is a Pricing Strategy?

To manage inventory

When businesses sell several categories of products, they may use AUR to assess their inventory management strategies. Inventory represents the number of products a business has available for purchase. Maintaining the proper inventory levels is essential for a retailer’s success. Having too little inventory available may lead the business to lose potential sales because it can't meet customer demand. Meanwhile, too much inventory can lead to paying storage fees for unsold products or being unable to sell them.

Monitoring AUR over different periods can help businesses assess which products are selling best. During periods where there’s high demand for a particular product, a business may adjust its strategy by increasing the amount of that product in its inventory to meet customer demand. During periods of low sales, inventories may be kept lower to ensure that the business doesn't have more on hand than it can sell.

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