Average Transaction Value or ATV is essentially the average value of a shopper’s basket.
In stores where the product is more expensive and you’re selling high ticket items like cars, boats or even some luxury boutiques, you can expect your ATV to be high but with a low IPT or item count.
In lower price point stores you might have customers purchasing more things, but the overall ATV will nonetheless be much lower. Neither retailer is wrong in these scenarios. Every store is different and every retailer's optimal ATV is going to vary, sometimes quite dramatically.
The universal truth is that whatever your ATV is, as a regional manager or someone on the leadership team you will be wanting to increase your ATV, because a higher ATV (whatever the starting bid) is going to positively affect your bottom line.
To break it down: Your ATV is calculated by taking the total sum value of purchases in your store for a selected period of time, then dividing this number by the number of sales or transaction counts in that period.
In one month, you generated $10,000 from 25 transactions
You divide 10,000 by 25 to get your ATV
Your ATV = $400
The biggest players that will affect your ATV (whether positively or negatively…. is up to you):
Price Point: If you have misjudged your demographic and priced your product at a price point that is out of reach, you will have a low ATV as not many customers will actually buy. In contrast, if your price point is too low not only can you harm the perceived value of your products but your ATV will be low due to the lower price point. Maintaining your selling velocity while still retaining the highest price you can sell that product at to maximize margin is a delicate balance.
Promotions: If you are running a strong promotion within your store you can certainly stir up more transactions. However once again, the actual ATV will need to be watched closely to avoid your promotional prices, eating into your margins.
10/10 Customer Service & Strategic Selling: The number one key drive behind your ATV comes down to your front line teams and how they sell. If your staff is made up of timid sellers with weak product knowledge, that will be reflected in your ATV. However, if your team feels ready to close sales then upsell and cross sell with ease, you’ll be away laughing!
So how do you drive your ATV up? It comes back to cultivating a frontline retail team who understand conversion is key. For your team to close more sales on the shop floor they need to feel confident in the art of selling strategically.
Does your team have a retail toolbox of strategies they can lean on in the different aspects of a sale?
For example, a warm and friendly “Good Morning” is going to open the door for not only a more confident close, but if you’ve built strong rapport with your customer it’s also easier to upsell and cross sell near the end of the sales process. This is important because it's the upsell that really has the capacity to influence your ATV.
