The average selling price of a single item, calculated by dividing the total sales by the number of units sold.
What is Average Unit Retail (AUR)?
Average Unit Retail (AUR) is the average selling price of a single unit of a product. It helps retailers assess pricing strategies, evaluate product performance, analyse profit margins, guide assortment planning, monitor sales performance, and benchmark against industry averages. It provides insights into pricing dynamics, customer preferences, and profitability.
How AUR works
- Calculation: AUR is determined by dividing the total sales revenue generated from a specific product or product category by the total number of units sold during a given period.
- Pricing Analysis: AUR helps retailers analyse pricing strategies by understanding the average price at which products are sold. It allows them to assess the effectiveness of pricing strategies and make adjustments as needed.
- Product Performance: AUR provides insights into the performance of different products or product categories. Higher AUR may indicate premium products or successful pricing strategies, while lower AUR may suggest pricing challenges or lower customer demand.
- Profitability Assessment: AUR is a key factor in assessing product profitability. By comparing the AUR to the cost of goods sold (COGS), retailers can determine the margin per unit and evaluate the profitability of their product offerings.
- Assortment Planning: AUR helps retailers in assortment planning by considering the profitability and demand for different products. It allows them to allocate resources effectively and make informed decisions on product assortment and pricing.
- Sales Performance Monitoring: AUR is used to monitor sales performance over time. Retailers can track changes in AUR to identify trends, seasonality, or shifts in customer preferences, and adjust their strategies accordingly.
Overall, AUR is a valuable metric that provides insights into pricing, product performance, profitability, assortment planning, and sales analysis for retailers.
Pros of AUR
- Pricing Optimisation: AUR helps retailers optimise pricing strategies by understanding the average price at which products are sold. By analysing AUR, retailers can identify opportunities to adjust prices and maximise revenue while remaining competitive in the market.
- Product Performance Assessment: AUR provides insights into the performance of different products or product categories. Higher AUR may indicate successful premium products, while lower AUR may indicate the need for product improvements or pricing adjustments. Retailers can use AUR to assess the popularity and profitability of their product offerings.
- Margin Analysis: AUR is a critical metric for assessing product profitability. By comparing AUR to the cost of goods sold (COGS), retailers can determine the margin per unit and evaluate the profitability of their products. This information helps in making informed decisions about pricing, inventory management, and overall business profitability.
Cons of AUR
- Limited View of Sales Performance: AUR focuses solely on the average price at which products are sold and may not provide a comprehensive understanding of overall sales performance. It does not consider factors such as sales volume, customer demand, or market trends, which may limit its usefulness as a standalone metric for assessing sales performance.
- Lack of Context: AUR alone may not provide sufficient context to evaluate the underlying factors affecting pricing and product performance. It does not consider factors such as promotions, discounts, or changes in customer behaviour, which can significantly impact sales and profitability. Additional metrics and analysis are often required to gain a holistic understanding of the business.
- Ignoring Product Mix: AUR does not take into account the mix of products sold within a category or the impact of product assortment on sales performance. Different products may have varying AURs, and focusing solely on the average may overlook the potential impact of specific products or product categories on overall sales and profitability.
FAQ
Below you will find answers to common questions
How can we improve our Average Unit Retail (AUR) for a specific product category?
To improve AUR for a specific product category, you can consider strategies such as implementing price optimisation techniques, offering targeted promotions, enhancing product features or quality, and focusing on upselling or cross-selling opportunities. Additionally, conducting market research and competitor analysis can help identify opportunities to position your products at competitive price points while maintaining profitability.
What factors can cause fluctuations in Average Unit Retail (AUR) across different time periods?
Fluctuations in AUR can be influenced by several factors. Some common factors include changes in customer preferences, market trends, economic conditions, competitor pricing strategies, and the introduction of new products or product variants. Seasonal variations, promotional activities, and shifts in product mix within a category can also contribute to AUR fluctuations. Monitoring and analysing these factors can help identify patterns and make informed decisions to manage AUR effectively.