Are you getting the most out of every customer who visits your store? In eCommerce, driving traffic to your site is only half the battle—optimizing how much each customer spends is where real growth happens. That’s where Average Order Value (AOV) comes into play. This key metric reflects how much revenue each order brings in and highlights opportunities to boost profitability with smart strategies. That's why, in this article, we will discuss what average order value is, how to calculate it, and how to increase it for better business performance.

What is the Average Order Value?

Average Order Value (AOV) refers to the average amount customers spend per order in your store. It’s a key metric for understanding purchasing behavior and identifying opportunities to increase revenue. To calculate average order value (AOV), you divide the total revenue by the number of orders over a specific period. For instance, if your store generated $10,000 from 200 orders, your AOV would be $50.

Understanding AOV helps businesses identify customer behavior trends and preferences. This insight allows for more targeted marketing performance and inventory management, improving customer satisfaction. For instance, when customers spend more per transaction, it can indicate that they find greater value in their purchases, enhancing brand loyalty and repeat business.

In a competitive market, optimizing AOV can provide a significant advantage, making it an essential metric for eCommerce success.

Average Order Value in eCommerce 📈

In the context of eCommerce, average order value (AOV) measures customer buying behavior. This enables brands to predict the productivity of their sales and marketing strategies. This way, by tracking AOV, the eCommerce businesses can easily see areas where they can increase the amount of business per customer.

For example, the AOV of fashion retailer organizations is used to assess the effectiveness of promotional campaigns in influencing the quantity of products customers buy.

Understanding AOV's significance leads us to explore how to calculate it effectively.

How to Calculate Average Order Value? 🔍

Average order value (AOV) is easy to calculate and essential for tracking customer spending. To find AOV, simply divide total revenue by the number of orders.

The Average Order Value  (AOV) Formula is:

Let’s say you run an online apparel store that generated $8,000 in sales for June, with 400 orders. Using the formula:

Average Order Value (AOV) = $8,000 ÷ 400 = $20 -> This means that each customer spent $20 on average during their visit.

It's important to note that while the average order value reflects your revenue, it doesn’t indicate your gross profits. You could have a high average order value (AOV) but still operate at a loss due to high costs.

Monitoring the average order value (AOV) provides valuable insights into your profit margins. If you notice a sudden increase or decrease in your average order value (AOV), it’s essential to investigate the reasons behind these changes. Factors like promotional campaigns or major seasonal events like BFCM often influence average order value (AOV) fluctuations.

If you notice a drop in average order value (AOV) during the summer season, it might be beneficial to launch a targeted marketing campaign around Black Friday and Cyber Monday (BFCM). This period often sees increased customer spending, so promoting slower-moving items during these sales can help boost your AOV. Running a special BFCM promotion that encourages customers to buy additional items at discounted rates can effectively elevate their overall spending.

Additionally, effective inventory management plays a crucial role in maximizing average order value (AOV). In this way, you can ensure your store has the right products available and ready for sale during peak shopping periods like Black Friday and Cyber Monday, and you can capitalize on the increased demand.

📌 Maximize your eCommerce store's potential during BFCM by managing your inventory effectively before, during, and after the event. Access Inventory Planning Playbook for BFCM.

How to Increase Average Order Value? 🚀

To increase the AOV, specific measures that will help increase the customer’s spending should be employed. Here are a few effective methods:

Bundling Complementary Products to Boost Average Order Value (AOV)

This strategy is commonly practiced by bundling products in a single package to boost the average order value (AOV).

For example, a beauty skincare store like Hello Joyous could create a skincare set that includes a cleanser, a toner, and a moisturizer. Doing this increases the average order value (AOV) and facilitates faster turnover, reducing stock congestion and ensuring that products move quickly.

📌 You can find the best bundle apps in Shopify here.

Upselling and Cross-Selling to Enhance Average Order Value (AOV)

Upselling involves suggesting a superior model or a higher-tier product than a customer currently considers. On the other hand, cross-selling means offering an additional related product that complements the original purchase.

For example, when you purchase a MacBook from Apple, the site recommends a model with a larger screen or more storage (e.g., a 512GB version instead of 256GB). This is a classic example of upselling, where the brand encourages customers to opt for a higher-end product.

Additionally, Apple suggests accessories such as a keyboard, trackpad, or mouse during checkout, demonstrating a cross-selling strategy. These techniques boost average order value (AOV) and create a more customized shopping experience for customers.

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Increase Average Order Value (AOV) by Setting Free Shipping Thresholds 🚚

Free shipping is one of the most common promotions to order larger targets. By setting the free shipping offer slightly higher than the current average order value (AOV), businesses encourage consumers to place more items in the cart.

Here is a real-life example from Sephora’s website:

When a shopper adds a $15 sunscreen to their cart but hasn't yet reached the $50 free shipping threshold, a prompt reminds them they’re "only $35 away from Free Shipping." This tactic effectively encourages customers to add more items to their cart, increasing the total purchase amount and, in turn, boosting the store’s average order value (AOV).

Boost Average Order Value (AOV) with Volume Discounts

Bulk packaging also encourages larger quantities of the business building by offering the prices customers would pay for a lower quantity in cases when they order a specific volume. Promoting bulk buys by offering certain quantity discounts helps customers buy more of a certain product. It makes the overall value of the order higher while consuming slow-moving items on the company’s inventory list.

Using Limited-Time Promotions to Increase Average Order Value (AOV) ⏳

It is also important to note that offering the customers a sense of limited availability breaks can force them to buy a larger quantity than usual. Promotions such as limited-time offers and limited-time prices can help pressure the shoppers into buying more as the offer will be valid only for a short time.

All these methods are used by eCommerce merchants as a natural part of their sales process. This increases average order value (AOV) and keeps customers satisfied with their shopping experience. However, a solid inventory management solution is essential for these strategies to work efficiently. This ensures that products are available when needed, preventing missed sales opportunities. That’s where Fabrikatör comes in! It streamlines inventory processes, helping stores optimize their stock and maximize average order value.

Increase Average Order Value (AOV) by Optimizing Inventory with Fabrikatör! 📈

The effective management of inventory contributes greatly to the enhancement of AOV. Accurate inventory management means having the right inventory in the right places for the right time to sell to customers. Fabrikatör provides sophisticated inventory management for eCommerce businesses, making it easy to manage the inventory to meet market demand efficiently and increase business performance.

With Fabrikatör, you can:

• Get actionable insights to make on-point inventory decisions to increase AOV,
• Quickly create purchase orders for efficient use of bundling and promotions,
• Receive alerts telling you when you’re out of stock so you can restock in time to satisfy demand,
• Effectively forecasts sales to plan how to run promotions to increase AOV,
• Simplify your shipping strategy with freight planning and reduce costs while maintaining customer satisfaction.

With the help of Fabrikatör, eCommerce businesses not only avoid out-of-stock issues but can also use such techniques as bundling or volume discounts more effectively, increasing the average order value and, therefore, the overall profitability. If you want to learn how, see Fabrikatör in action in only 30 minutes!

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