In e-commerce, there are many metrics that indicate the health of your online business. But metrics can’t be measured in a vacuum. You can’t measure one metric, improve it, and claim your store is ‘outstanding.’
That’s not how e-commerce metrics work.
As a business, you’ll need to measure several metrics, which may serve similar purposes, like increasing your revenues and, accordingly, your profits.
Still, you need to understand each metric, what it does, and how it helps your business grow.
One of the important success metrics in e-commerce, and mobile commerce, is the average basket size. You should examine this metric in a specific period, like a week, month, quarter, or year.
You may choose to look at your average basket size during a specific time of the year, like the Black Friday, Cyber Monday (BFCM) weekend of 2022 and compare it to 2021 or 2020.
In this article, we’ll be looking at what the average basket size is, how to calculate it, why it matters in e-commerce, and how to improve it.
We’ll also compare it to similar metrics and explain when you should be calculating your average basket size.
What is average basket size?
The average basket size is the number of items or products a customer buys in a single transaction.
To calculate your store’s average basket size, sometimes called ABS, you’ll need to divide the total number of items or units sold by your total transactions in a given period.
Average basket size = total number of items sold ÷ total number of transactions
Many e-commerce business owners confuse the average basket size with these two metrics:
- average ticket size
- average order value
Let’s explore each in brief.
What is average ticket size?
Average ticket size (ATS) is the average amount a customer spends each visit. To calculate your ATS, you’ll need to divide your total sales revenue by the total number of customers you have.
Average ticket size = total sales revenue ÷ total number of customers
What is average order value?
Average order value (AOV) looks at the average value of orders customers make in your store.
To calculate your AOV, you’ll need to divide your revenues by the end of a period with the total number of orders in that period.
Let’s clarify with an example. Let’s say you want to know the average order value of customers in March 2023. To do so, you’ll need to divide your revenues from March 2023 by your total orders during that month. The result is your average order value.
Businesses often review their AOV to understand their customers’ buying habits.
AOV helps businesses understand buying behavior and offers an estimate for their monthly, quarterly, or annual earnings.
Average basket size vs average order value: What’s the difference?
We’ve clarified both e-commerce metrics and concepts. But because of their names, many small business owners still confuse them.
The average basket size looks at items but doesn’t consider their monetary value. On the other hand, the average order value looks at value without considering the number of items in a basket or cart.
For example, you may find that your store’s ABS is 5 items per order, whereas the AOV per transaction is $100.
However, you may find that some customers make $100-purchases for an item or two, whereas for others, these $100 are spent on 5 or more items.
In a way, average basket size and average order value complement each other. That’s why we recommend reviewing both metrics side by side.
That said, for some, especially brands that sell a multitude of items, basket size might not be the most accurate metric to measure.
Do you think a brand like IKEA wants a higher basket size or a higher AOV? Some items are worth hundreds of dollars, while others may be just $10 or $20.
In this case, is average basket size a good metric? Not so much. At least, not alone.
Similarly, customers who pay for Amazon Prime get free priority delivery on thousands of products. This means their basket or cart size may be quite small because they don’t need to reach the minimum cart amount to get free shipping.
Why is average basket size important in e-commerce?
‘So, why is average basket size important for me an as e-commerce business?’ You ask.
Here’s why: Average basket size can help you in several ways.
1. Understand your customers better
In a way, each metric provides you with information about your customers. For example, AOV provides information about customers’ buying behavior—in numbers and money.
Meanwhile, average basket size looks at buyer behavior in terms of the products customers buy, how often, and the number of products.
ABS can help you distinguish between the types of customers and the types of loyal customers in your online store.
2. Predict customer trends
By examining the average basket size in your e-commerce store, you can get an idea about customer buying trends.
It gives you a view of their habits. It may also give you a glimpse of the types of products your customers like to buy together.
This can help you see which products you’ll need to restock often. You can also use average basket size data to provide upselling and cross-selling opportunities for your customers.
How to increase average basket size
Improving your store’s average basket size, whether online, offline, or via mobile, can often increase your average order value. This will likely result in higher revenues and profits for your business.
Here are a few ways to increase your store’s average basket size:
1. Free shipping
One of the top ways to increase various metrics and your revenues is to offer free shipping after customers pass a certain threshold.
This threshold may differ from one store to another.
For example, many online stores offer free shipping if customers complete an order exceeding $50. Other stores have a minimum threshold of $100 or even $500 depending on the products they sell and their AOV.
This minimum-for-free-shipping threshold can also increase based on certain locations. For example, offering free shipping from one state to another can be costly. So, you may choose to raise the minimum payment for free shipping between states or governorates.
It’s important to make sure that you’re not making it impossible for customers to benefit from your free shipping option.
2. Increasing inventory for in-demand products
To increase your average basket size, you’ll need to review your most in-demand products. What do customers keep adding to their carts and buying? Make sure these products don’t run out of stock often.
Otherwise, customers may be forced to look elsewhere or simply complete the purchase without their needs.
And if they find their favorite or most-in-need products regularly out-of-stock at your store, they’ll look for an alternative. And your basket sizes will dwindle.
Bonus tip:
You may include a ‘Notify me’ button next to sold-out or out-of-stock items to notify customers once you restock. This can increase the pace of sales and completed purchases. Especially as many customers may keep products in their carts and wait for you to restock.
Getting a notification that the product they want is back in stock can prompt them to complete their purchase.
3. Upselling & cross-selling
Using upselling and cross-selling techniques can boost your average basket size. These methods work with both ABS and AOV. However, it’s imperative you don’t appear salesy or pushy, or you’ll drive customers away.
Also, if you don’t have a tool that can group similar products together, you may want to hold off on using upselling and cross-selling.
A tool can help you group
- Similar products
- Products in the same category
- Frequently-bought products
Be sure to include the free shipping option, when customers reach the minimum amount required to get the perk.
4. Offering personalized recommendations
One of the top perks of online stores, and online shopping in general, is personalization.
According to McKinsey, 71% of consumers “expect companies to deliver personalized interactions,” whereas 67% “get frustrated when this doesn’t happen.”
McKinsey’s research also found that fast-growing companies generate 40% or more of their revenues from personalization compared to those who don’t use personalization.
But what is personalization exactly?
Personalization, or personalized marketing, means offering experiences that make customers feel unique. It’s about tailoring their experiences to them and their needs.
Here’s another great definition of personalization from MailChimp
“Personalized marketing is the practice of using analytics to make advertising messages and product experiences feel unique to each customer. Personalized marketing is much more than just inserting the customer name into the same marketing email that goes to all of your customers. It’s about reaching the right person with the right message at the right moment with the right suggestions.”
MailChimp
You can use personalization to offer, and sometimes remind, customers about products similar to what they like. Personalized recommendations mean each customer gets different recommendations from others.
A brother and sister will get different recommendations based on their buying behavior and history.
It’s worth mentioning that personalization isn’t just about recommending products to customers. It’s about creating a whole personalized customer experience that makes your store and brand memorable to customers.
Gameball helps you create personalized experiences that drive customer loyalty, satisfaction, and retention.
5. Use a customer rewards program
Customer loyalty and rewards programs help businesses on various levels. They’re mainly designed to turn customers into regular, more frequent, and more loyal customers.
But it’s not just about that. Customer loyalty is a long-term but fruitful endeavor.
Customer loyalty programs help you engage customers, offer them unique experiences, build long-term retention, offer rewards, among other benefits.
You can use a loyalty and rewards program to increase your average basket size and average order value.
Check out Gameball to find out how customer engagement, referrals, and rewards can drive and boost loyalty.
Wrapping it up
Average basket size is an important e-commerce and m-commerce metric. But it shouldn’t be measured alone. In fact, all metrics shouldn’t be measured individually but should be part of a broader picture.
It’s important to put context and decide which e-commerce metrics you want to measure and why. Once you know ‘why’ you’re measuring these metrics, you can then work on improving these metrics.
You should also look at your marketing efforts individually and as a whole.
For example, are your attempts at increasing your average basket size affecting the number of sales? Is it making customers shop less? Then, perhaps boosting your basket size isn’t the best solution right now.
If you have more questions about average basket size, AOV, or any other e-commerce metric, just leave them in the comments below.
Want to explore ways to create personalized experiences for your customers? Check out Gameball, an all-in-one customer engagement and retention platform, designed to keep your customers coming back.
