Retail Math: Understanding the basics

Melina Flabiano
7 min readJan 15, 2020

The Retail Tree is an elegant framework to understand and interpret sales performance

Photo by Marcin Kempa on Unsplash

I’ve worked in retail for many years, first as a management consultant and then in strategy. I’ve sold (and helped my clients sell) everything from jewelry to pasta sauce to women’s clothes to cruises. I’ve sold things online, in malls, and in boutiques. Through it all, there has been one framework that has remained posted on the wall next to my desk. I call it: The Retail Tree.

The goal of the Retail Tree is to decompose sales into its most basic parts, allowing you to zero in on specific tactics that you can use to grow your business.

If you sell anything to a customer, you should understand these metrics and how they work. Let’s dive in.

**This article is a high-level look at the most significant Retail metrics and what they mean. I am writing follow-up articles where I analyze best practices for these drivers in more detail**

Introducing the Retail Tree

Technically it’s more of an upside down tree. I was introduced to this framework by a mentor and the name stuck.

Let’s dive in.

Let’s start at the top of the tree with Sales. I’m not claiming to be an economics whiz, but I passed the class and do remember one equation from the first day:


Taking this universal truth and translating it into “retail speak”:

Sales=Average Order Value (Price)*Transactions (Quantity of Sales)

There are two ways to increase your sales. You can:

a. Make more sales (increase number of Transactions) AND/OR

b. Get more money per sale (increase average order value, or AOV)

This isn’t very helpful. “Make more sales” sounds great but isn’t actionable. We need to dive deeper into the framework.

Part A: Increase Transactions

Melina Flabiano

Consumer and retail strategist. Weekly insights on the future of shopping: