What Is Average Unit Retail?
Average Unit Retail (AUR) is the average selling price of an item. It is calculated by dividing the total sales in dollars by the number of items sold and is often used to compare sales across different departments or categories.
As a supplier, having a good understanding of the AUR for your item is especially important when determining your pricing strategy for Walmart and other retail partners.
To calculate AUR, you simply take the total revenue (or net sales) divided by the number of units sold.
Example: $500 in net sales / 50 units sold = $10 AUR (each unit sold averaged $10 per sale).
Why Is AUR Important?
It’s very important for suppliers to know an item’s AUR. It not only gives them insight into how to adjust their business, but also customer insight for planning marketing, events, and inventory throughout the year.
Some of the tools AUR gives the supplier are:
Customer Shopping Habits
Average Unit Retail is an important tool to use with other pricing metrics to better understand the shopping habits of your customer. AUR gives you insight into how many units of your item a customer is willing to buy as well as the price point they find acceptable. If the cost of your item is too high, it will be reflected in your AUR data.
At the same time, the AUR can tell you if your price point is too low. When taking into account your AUR, the cost of your item, and the profit margin, you may consider raising the AUR if the margin is too small.
When you have multiple SKUs, keeping a close watch on AUR can assist in maintaining proper inventory levels.
Why would AUR on one item compare to the AURs for other items in your inventory? This is an excellent gauge for letting you know it is time to make adjustments to your inventory.
Knowing what items (and how many) are selling and what items do not move as fast will help you make decisions for better sales. You’ll be able to see where improvements need to be made and how to build on what is already working.
As some retailers are every-day-low-priced whereas others play “high/low” with retail price, understanding your retailer’s strategy is vital. It helps you better understand if they’re happy with where their AUR is compared to their competition.
AUR is an important metric to understand, although the retailer is in sole control of retail price.
Monitor your AUR over time to spot trends when your product is in demand. Finding the low purchase periods will help determine if you need to run a sale or feature marketing. Finding periods of strong sales will help ensure your inventory levels can support the higher demand.
Tracing AUR trends over a 12-month period is key, but also note special events that impact the buying patterns (i.e. tragic weather, shortages, industry changes, etc.).
Some businesses make a common error in calculating their AUR. Miscalculating AUR can really throw off your data, especially if you are not sure what the numbers are supposed to represent. By miscalculating the AUR, your data will incorrectly show your sales are actually greater than they are in the store.
When trying to determine their Average Unit Retail, some suppliers mistakenly factor in their on-hand inventory. This calculation can be incorrect because of markdowns. For example, a shirt in your existing inventory may be priced at $30. However, the actual price of the shirt on the salesfloor may be discounted because of a sale. This will impact the AUR.
Ensure your AUR calculation is using the Net Sales after markdowns divided by your total units sold.
As a Walmart supplier, understanding Average Unit Retail will be a huge benefit to your business and relationship with your buyer. Your AUR can help guide discussions on how a price is impacting sales volume and how it can influence your customers’ behavior.
Remember this tool when approaching your buyer about raising or lowering a price, adjusting inventory, or suggesting sales and feature placement.
To learn more about AUR and the impact on your business, contact 8th & Walton for a free consultation.