By increasing the average amount customers spend per transaction, stores can generate more income without necessarily needing to attract additional customers or increase foot traffic – which is particularly important in the physical retail industry, where margins can be tight, and declining footfall numbers have resulted in fewer customers visiting stores, explains Steve Pickering, the ‘unorthodox’ CEO of fast-growing South East independent bed retail chain Sussex Beds …
As we entered 2020, our group’s average order value (AOV) was £719. Today (Q1 2024), it has risen to £1217, an increase of +70%. Within this time period, inflation has played its part in this increase. However, it was an internal strategy that has had a greater impact in driving up this key metric.
Pre-pandemic, our sales team was rewarded by various commissions targeted toward specific premium product lines or add-on products such as mattress protectors. This incentivised the upsell to these higher-value brands and the attachment of mattress protectors – a common practice in furniture retail. My issue was that this focus on commissioning toward specific lines added a sales bias, which may not have aligned 100% of the time with the customer’s needs.
Enter lockdown! Time and freedom to rethink, and together with my brother Matt Pickering, we developed a new reward system focused on order value rather than specific product lines. This tiered system would increase commission levels as order values were passed. For example: £749 and lower = 0.5% of gross profit; £750-£999 = 1% of gross profit; £1000-£1499 = 2% of gross profit; £1500-£4999 = 4% of gross profit; and £5000 and up = 6% of gross profit.
As we returned from lockdown, the new system was introduced, and the impact was immediate. By the end of the quarter, the AOV was hitting £838, an increase of £119, and it continued to increase QoQ, YoY, ever since.
Another interesting fact is the number of orders hitting £5k and upward, which, if honest, was a bit of a fun super-target. For the 12 months pre-pandemic, we recorded 14 orders over £5k. In the year after the launch of the new format, this had increased to 46 orders, and last year, this had reached 142. Glass ceilings have definitely been well and truly broken.
In conclusion, the initiative has been a success for the business, with a substantial rise in revenue per customer. The team have increased their earnings. Most importantly, our customers have benefitted from unbiased, quality advice and received products aligned with their needs.
What successful strategies have you used to target AOV?
Discover more of Steve’s thoughts in his blog.
