How to drive actionable insights with basket analysis

Team Headset
December 14, 2020
 min read
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A retailer's total revenue is simply the sum of all the transactions or 'baskets' that occur within a given time period. For that reason, it is incredibly important for cannabis retailers to know exactly what is happening within those baskets. Of course, a busy retailer might have thousands of baskets to evaluate in any given week, so using the basket analysis tools available in Retailer Premium allows us to distill this data into clear trends and, most importantly, actionable insights.

These analyses can help businesses identify potential strategies for basket expansion and monitor performance. If you're ready to better understand the baskets that fuel your business, sign up for a demo of Retailer Premium.

Executive Summary

The individual transactions, or 'baskets', are the base building blocks of any retail business' total revenue. There are only two ways to increase revenue: increase basket count or increase basket size. This report will focus on strategies to increase basket size and therefore drive additional incremental revenue to a hypothetical cannabis retailer. We will use Retailer Premium to identify potential cross-selling and upselling campaigns and then discuss how to monitor their success.


All data for this report comes from the Headset Retailer Demo account, which provides sales data for a hypothetical "Emerald Valley" retail chain with five stores across Washington and Colorado. While this data is not real, it is realistic and a valuable example of how these analyses can be used in practice.

How baskets contribute to revenue

How baskets contribute to revenue

The total sales of any cannabis retailer for any given time period can be calculated with a simple equation:


These are the only two components that drive total revenue, and therefore they are the only two ways to increase total revenue:

1. Increase the number of transactions.

2. Increase the size of transactions

For this report we will be focusing on the latter. By using the basket analysis module in Retailer Premium, we will discover what basket trends exist in our retail chain and come up with strategies to increase the sizes of baskets to grow our total revenue.

As shown above, the average size of baskets in our retail store can be further broken down into another simple formula:


There are two main strategies retailers can employ to increase basket size: upselling and cross-selling. By employing these strategies we are confident that any cannabis retailer can increase their average basket size, and therefore total revenue, by 10%. Let’s get started!

Cross-selling and upselling

Cross-selling and upselling

Cross-selling is the act of suggesting an additional product from a different category. This strategy will help increase the average number of items in each basket. The classic example of successful cross-selling is the question: would you like fries with that? Even with a low conversion rate and a low price, this simple question has added enormous amounts of incremental revenue to McDonalds’ bottom line. For cannabis retailers, there are several types of products that could fulfill this role in across-selling strategy. Pre-Rolls and paraphernalia are some examples.

Upselling is the tactic of suggesting a larger or more premium item than the customer’s original choice and can therefore help increase the average item price within baskets. To stick with a food example, the upselling question would be: would you like that supersized? While you won’t hear that question anymore (the supersized menu was discontinued in 2004), it was effective because it offered customers a simple choice to spend a little bit more and add a little more incremental revenue to the business. In a cannabis store there are many opportunities to upsell. For example: "Did you know that strain comes in a 3.5g package as well?”

Current basket statistics


The ‘Current Basket Statistics’ graph on the Basket Analysis Overview dashboard in the Retailer Premium Basket Analysis module is a great place to begin any dive into basket statistics for your business. Here we can quickly view the recent and long term changes to our shop’s transaction volume and size trends. This data is from Emerald Valley’s Bothell location. We can immediately see that, in comparison to last year, baskets are significantly larger. However in recent weeks, transaction volume is lower than this time last year. Let’s look at a more broad time frame next.

Basket performance over time (avg basket size & basket count)


This graph, also on the Basket Analysis Overview dashboard, allows us to view these critical basket metrics over time at a greater level of granularity. Here we see the average basket size and basket count for Emerald Valley Bothell within each complete month of 2020. Some clear trends stand out:

- Average basket size greatly increased from February through May. It rose by more than 19% from $28.45 in February to $33.90 in May. Since then, it has hovered steadily around $33.

- Total basket count dropped off in Spring, but steadily recovered through late Summer and Autumn.

Both of these trends can be explained by the COVID-19 pandemic. Customers have been encouraged to make fewer trips outside the home since the pandemic began and therefore tend to stock up more per trip. Let’s evaluate the rise in basket size in more detail.

Basket performance over time


On another graph from the Basket Analysis Overview dashboard, we can now see exactly what was driving that increase in basket size earlier in the year. Between February and May there was a modest increase in items per basket which rose by 5.5% from 2.1 to 2.3. There was also a more significant increase in average item price over the same time frame. In February the average price for a single item in our shop was $13.20, three months later it was 14% higher at $15.00. Why would my customers be suddenly purchasing more expensive items? Were my customers splurging on luxury brands during lockdown?

Perhaps, but given the total basket trends we’ve already discovered, a more logical explanation would be a shift towards larger package sizes. If my customers were making fewer but larger trips to my store, wouldn’t it make sense that they’d be more likely to buy a larger product that will last them longer? Let’s take a look at our top selling category to see what was going on.

Flower average item price over time


In this graph we see the average item price for Flower over time in Emerald Valley Bothell as well as the average price for Flower across all of Washington state. Here we can see that both in my shop and across the entire market, average item prices of Flower rose significantly during the first half of 2020. Across Washington, the average price for a Flower product rose by 17% from $19.04 in the first week of the year, to $22.31 by mid-May. There was even greater growth within my shop where average prices rose by 29% over the same time period! Given what we saw in the more broad basket trends, it seems safe to assume that this increase in price, and therefore increase in basket size, was driven by our customers choosing larger package sizes of Flower more often than previously.

This should be a big indicator of an extremely simple upsell strategy: make sure that every customer who brings a Flower product to the register knows that there is a larger size available. Even with a very low conversion rate, this simple question could contribute big growth to our average basket size and therefore total revenue. If only one in ten potential 3.5g customers converts up to a 7g package instead, that alone could increase a store’s average basket size by a few percentage points.

Average basket size & basket penetration by category


This graph shows the average size of baskets that contain each product category, as well as the basket penetration rate for that category. Basket penetration is the percentage of total baskets that contain the given category. This is critical data to build effective cross-selling strategies.

Above, in my shop’s data for the previous 12 months, the very high average basket size of the Tincture & Sublingual category immediately stands out. With a basket penetration rate of 0.7%, this category presents great opportunity for growth. Over the last year, less than 1 in 100 baskets contained a Tincture, but those customers spent way more than average. If I can nudge that basket penetration rate so that closer to 1 in 50 baskets contains a Tincture, I will see a noticeable impact on the average basket sizes in my shop.

Perhaps I could try giving Tinctures more prominent shelf space, or hosting my top Tincture brand for a vendor day to increase that basket penetration rate and drive some additional incremental revenue into my business.

Cross category attachment rates: Flower vs Non-Cannabis products


One of the easiest ways to build cross-selling strategies is to figure out which types of products are already more likely to be purchased together so that you can target these logical combinations. Attachment Rate analyses, available in the Basket Analysis module of Retailer Premium, are perfect for identifying these successful product pairings. The graph above displays the cross category attachment rate for the Flower and Non-Cannabis categories at Emerald Valley Bothell over the previous year.

From the previous graph we know that Flower has the highest basket penetration rate of all categories, so it’s an obvious target for incremental revenue strategies. Here we can see that only 6.8% of Flower baskets also contain a Non-Cannabis product. If we could drive that number up to 10% over the coming months by asking Flower customers if they need papers, lighters, or grinders, we will see a noticeable increase in Flower basket size. It also appears that the Vapor Pen category would be a great target for cross-selling Non-Cannabis items such as batteries, since 22.8% of Non-Cannabis baskets also contain a Vapor Pen product.

Would you like a Pre-Roll today?

Lastly, let’s work through a more concrete example of the power of cross-selling to drive incremental revenue using the basket data from Emerald Valley Bothell over the previous week. To pay homage to the world famous ”Would you like fries with that?” sales tactic, let’s test a ”Would you like a Pre-Roll today?” strategy.

According to the Benchmarking - Pricing dashboard, over the previous 30 days, the pre-tax average item price for Pre-Rolls in my shop was $4.84. If I can secure supply of value-oriented Pre-Rolls to offer at a slightly lower price, I will be able to hit an out-the-door price of $6 even:

$4.04 + 37% WA EXCISE TAX + 10% BOTHELL WA SALES TAX = $6.00

With this low cost product available, my strategy will be to display these Pre-Rolls prominently in the Pre-Roll section of my store, as well as right at the cash registers. I will have my staff members ask every customer at check out: ”Did you see our new six dollar Pre-Rolls?”

Of course, most customers will decline the add-on, but some will say “Sure!” and instantly increase their basket by $4.04. Let’s assume we can achieve a conversion rate of 10% and one in ten customers decides to add a Pre-Roll to their purchase. As you can see in the table below, if I had achieved that modest conversion rate last week, I would have increased my shop’s average basket size and total revenue by 1.3%.

While this would be a small increase, it takes only a simple strategy to achieve. With a handful of similar strategies, inspired by the insights available in Retailer Premium, a 10% increase in basket size is very much within my reach.


Individual baskets are the building blocks of any retail business. If you don’t know what’s happening at a basket level, you don’t know what’s happening in your shop. By using the robust basket analysis tools available in Retailer Premium, you will be able efficiently learn what your store’s baskets look like and discover upselling and cross-selling strategies to grow your revenues and, most importantly, measure that growth.

At Headset, we whole-heartedly believe that by employing simple, basket analysis-driven, upselling and cross-selling campaigns, any cannabis retailer will be able to grow their average basket size, and therefore total revenues by at least 10%.

To learn more about Basket Analysis and how you can use Retailer Premium to create and monitor an effective basket expansion strategy, sign up for a demo today.

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Team Headset
December 14, 2020
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