What Is AUR and Why Is It Important?
- AUR stands for Average Unit Retail, and it's one of the most important KPIs a retailer can track.
- AUR is practically a universal language in retail, providing insight into trends and competitors at-a-glance.
- AUR helps guide pricing and strategic growth, including effective inventory management.
- AUR is calculated as net sales divided by units sold, resulting in a dollar figure.
- AUR is even more powerful when combined with other data, like competitor sales.
By tracking the average revenue per unit over a given period, AUR has become one of the most important metrics for e-commerce, department stores, and retailers of all sizes.
Especially when compared with price intelligence, competitor sales, and other data, AUR helps retailers unlock crucial insights and even automate pricing strategies and inventory management, helping to drive more sales. Learn how Integrate.io can help you tap into metrics like AUR and how it can grow your business.
Table of Contents
- Definition of AUR
- Why Is AUR Important in Retail?
- Understanding the AUR Relationship
- How to Track AUR and Utilize It
Definition of AUR
Average unit retail (AUR) is perhaps the most critical metric used in modern retail, be it for a small brick-and-mortar store or omnichannel drop-shipping operation. It's nearly as important as your profit margin, and it can help you optimize your supply chain, eliminate dead stock, and even help detect employee theft. So, what is it?
To define it in the simplest way possible, AUR measures the average price an item sells for over a given period. It might not sound very useful on paper, but it can offer excellent guidance for e-commerce businesses. First, though, you'll need to get your data in order. Integrate.io can help you get more out of your data.
You can calculate AUR by dividing total revenue by the number of items sold. For instance, the AUR for a given day can be determined by dividing net sales (e.g., $5,000) by the number of units (e.g., 200), which would result in an AUR calculation for a one-day sales period (e.g., $25).
What's most important when calculating AUR is that you make sure the revenue or net sales number you're using is after any markdowns. Otherwise, the calculation will be inaccurate and not fairly represent the prices that items are actually selling for.
Tracking your AUR over time can reveal important information about the market, and it can help you examine how price changes impact sales. However, there's more to it than that. As one of the most critical metrics in retail, AUR has many critical use cases that can drive growth.
Are you tracking AUR and other KPIs yet? If not, Integrate.io can help you break down silos, make your data more accessible, and uncover new metrics and insights to grow your business.
Why Is AUR Important in Retail?
Retailers have found many ways to utilize AUR to reveal insights about their market, operations, and pricing. For instance, you can calculate the AUR to understand how sales change throughout the year as seasons or market conditions change. You can also use AUR to inform decisions when making changes to the category of products you sell or specific items in your inventory.
Physical stores can calculate AUR at the point-of-sale system (POS). Multichannel online sellers can likely find the data already in their sales system to calculate AUR with ease. In any case, AUR can often be automated and even tracked in real time based on retail sales (for a retail chain) or purchase orders (for suppliers).
Businesses that track the AUR of resellers can even identify when they drop prices or introduce a popular discount. For instance, one reseller might be selling substantially more products, and AUR can reveal if the average price is trending down (because of a discount or price drop) to help facilitate the additional sales.
With these use cases in mind, it's clear that retailers can also use AUR to help guide price adjustments. With small price changes, businesses can help uncover the "sweet spot" for their retail products. AUR is even more powerful when paired with data on competitors and other information.
For instance, if you can compare your AUR with the price data of your competition, you might be able to identify where you can raise your prices or where you should lower them (or offer a discount) to remain competitive and gain more sales. Ultimately, elements like pricing and selection trickle down to customer experience and satisfaction.
Understanding the AUR Relationship
Calculating AUR is simple enough, but how do you make sense of the number that results from your calculation? For instance, if you make $5,000 in a day after discounts from selling 200 units, your AUR is $25. What do you do with that information going forward?
By seeing the trends of your AUR over a given time, like one quarter, you can note if the AUR drops or remains flat. This would indicate that your customers are not purchasing that item as often, or there has been no increase in buying behavior. If AUR drops, your sales have dropped, which means your price may be too high.
Of course, even tracking AUR for a few months may not provide you with enough data to take action, which is why you should continuously track AUR and look at your historical data. When doing so, you may be able to identify new trends—like a seasonal dip or surge in sales. Even "non-seasonal" businesses tend to see this throughout the year, but you may only notice it if you track KPIs like AUR.
With tools to help you bring your data into one place, clean it up, and utilize it, Integrate.io can help you get more in touch with your data. One way that you can effectively use AUR is by looking back at trends and correlating changes in AUR with promotions, discounts, seasonal changes, and events.
For instance, many businesses see their AUR climb around local events when there is more foot traffic outside their storefront. This increase is understandable and traceable, but what if there isn't an increase? In addition to revealing trends you may not have noticed, AUR can help you look back and determine if sales didn't increase when you expected them to.
So, if there was a lot of foot traffic on a particular festival weekend, but your AUR hardly moved, elements like lower-priced competition or poor selection may have driven customers away. These types of observations can help you make changes to your pricing and even inform marketing and inventory decisions.
For example, if you monitor SKUs in your store along with the amount of stock and implement cross-merchandising techniques, you can use AUR to pick up on how product placement, selection, or price impacts AUR. Cross-merchandising, in particular, is an excellent tactic for increasing average order value (which is another metric worth tracking).
Whether you're pushing new products or just trying to sell more, stores often place caramel dip with apples or chips and dip next to each other since they are frequently bought together. This is an excellent example of thinking about your target market and using cross-merchandising to match different types of products that may complement one another based on their needs or preferences.
How to Track AUR and Utilize It
If you are not already tracking AUR for your retail store, it's vital that you find a system that will allow you to do so. Ultimately, AUR and other KPIs can be completely automated if you find the right platform to integrate with your sales channels. Using a platform like Integrate.io, you can calculate important metrics like these while organizing all of your data into one place.
Integrate.io is the fasted platform of its kind, offering both ETL and CDC tools that help e-commerce businesses and retailers make the most of advanced cloud applications. If you don't yet have a handle on AUR and other valuable insights that you could glean from your sales data, it's time to explore all of the ways that Integrate.io can help drive strategic growth.
Ready to learn more about how Integrate.io can help your retail business thrive? Schedule a demo today and talk with our team about how our platform works and how you can use it to reach your sales goals.