Simply put, average order value is a key metric in ecommerce that shows the average amount spent by customers per order.
AOV in Ecommerce is vital for understanding buying habits, the effectiveness of sales strategies, customer preferences, and can guide business strategies and improve customer understanding for online retailers.
Here are the key takeaways:
Average Order Value (AOV) is Crucial: AOV tells you how much customers usually spend each time they buy something. AOV tells you how much customers usually spend each time they buy something.
It’s one of the most important KPIs that you should track for understanding what your customers like and how well your sales strategies are working.
Calculating AOV: Just divide your total sales by the number of orders in a certain time.
Using AOV to Get Better: Look at how average order value changes over time to improve your marketing, pricing, and what products you offer.
Average Order Value Benchmarks: It’s good to know the AOV in your industry and area. This helps you see how you’re doing compared to others and where you can get better. You can see the detailed data below.
Ways to Increase AOV: Try these ideas to increase the average order value:
- Suggest products based on what each customer likes.
- Offer smarter, higher-value items or related products.
- Have flexible prices for different customers.
- Send emails with offers and products picked just for them.
Pricing Strategies: Use tiered pricing, product bundles, and volume discounts to encourage higher spending.
Website Optimization: Focus on user-friendly design, quality product displays, clear descriptions, customer feedback, and mobile compatibility to improve the shopping experience and AOV.
🎉 Bonus Content: You can take a look at the best Shopify Google Tag Manager (GTM) apps to better track your important KPIs.
How to Calculate Ecommerce Average Order Value
The first thing you need to do is collect the necessary data:
- Total Revenue: This is all the money made from sales in a certain period. You can find this in the analytics section of your ecommerce platform.
- Number of Orders: Count how many orders you received in the same period. Remember, each purchase counts as one order, no matter how many items it includes.
Choose a Time Frame: Decide on a specific period for your calculation, like a month, three months, or a year. Using the same time frame each time you calculate is important for accurate tracking and comparison.
Average Order Value Formula: AOV = Total Revenue ÷ Number of Orders. Simply divide your total revenue by the number of orders in your chosen time frame.
Analyze Your Findings: Look at your average order value and compare it to previous calculations. Is it going up, down, or staying the same? This can tell you a lot about your sales trends.
Consider Other Influences: When you look at your AOV, think about any special circumstances that might have affected customer spending, like holiday sales, marketing campaigns, or new products you’ve added.
By following these steps, online businesses can accurately calculate and understand their Average Order Value, an essential indicator of sales efficiency and customer spending behavior.
If you want to see your average order value in Google Analytics 4, you can read our article
Using Customer Data to Increase Ecommerce Order Value
Personalized Product Suggestion
- What to Do: Look at what customers have bought, searched for, and browsed in the past.
- What You Get: Recommend products that customers are likely to be interested in.
Smart Upselling and Cross-Selling
- What to Do: Check what customers have bought before to see chances for suggesting more expensive items or related products.
- What You Get: For example, recommend better coffee beans or things like grinders to people who often buy coffee.
Flexible Pricing
- What to Do: Change prices based on each customer’s buying habits.
- What You Get: Give special deals to customers who come back often or buy a lot, and offer discounts to new or big spenders.
Personalized Email Marketing
- What to Do: Send emails with product suggestions and offers that fit each customer.
- What You Get: Group your email list by what customers like and do to make sure each message is right for them.
Rewards and Loyalty Programs
- What to Do: Set up rewards programs for customers who keep coming back, with perks that fit what they like.
- What You Get: Give points or lower prices on items that customers often buy.
Listening to Customer Feedback
- What to Do: Always ask for and pay attention to what customers say.
- What You Get: Use what you learn from feedback to make products, your website, and how you sell things better.
In Short: Using these straightforward, customer-focused methods, online stores can make shopping more enjoyable and sell more, creating a better experience for everyone.,
Pricing Strategies to Improve Your Ecommerce AOV
Tiered Pricing
Offer your products in basic, standard, and premium options. This strategy allows customers to opt for higher-priced versions with more features, boosting your AOV. For instance, you could sell a software package in basic, advanced, and pro versions.
Product Bundles
Combine related products into a bundle, offering it at a lower price than if purchased separately. This approach not only increases AOV but also encourages customers to make larger purchases. An example could be bundling a camera with a case and a memory card.
Buy More, Save More
Implement discounts that grow with the number of items purchased. This can persuade customers to buy more items in one go to enjoy greater savings. For example, offer a 15% discount on buying two items and 20% on three.
Free Shipping for Minimum Purchases
Introduce free shipping for orders exceeding a certain amount. This often motivates customers to add more items to their cart to meet the free shipping threshold. Ensure this amount is prominently displayed on your website.
Limited-Time Offers
Create a sense of urgency with time-limited sales or discounts. This can lead to faster and larger purchases. Use countdown timers or special banners to highlight these offers.
Ecommerce Website Design for Higher Average Order Value
User-Friendly Navigation
- Design your site with clear navigation so customers can easily find products. This helps them spend more time and potentially make larger purchases.
- Organize products clearly, have an effective search function, and offer filters for sorting.
Quality Product Displays
- Use high-quality images and videos for your products. Detailed visuals can make products more appealing and encourage higher spending.
- Features like close-up views or 360-degree angles can help customers examine products better.
Clear Product Descriptions
- Write straightforward and engaging descriptions for your products. Emphasize their benefits and unique aspects to persuade customers of their value.
- Use language that resonates with your target audience to encourage purchases.
Showcasing Customer Feedback
- Prominently display customer reviews and testimonials. Positive feedback builds trust and can influence customers to choose higher-priced items.
- Consider adding a rating system or user-generated photos for authenticity.
Effective Call-to-Action Buttons
- Use clear and engaging call-to-action buttons to guide customers through their purchase journey. Effective CTAs can facilitate quicker decision-making and adding more items to the cart.
- Experiment with the design and placement of CTAs for better results.
Mobile Compatibility
- Ensure your website is optimized for mobile devices. A seamless mobile experience is crucial for engaging customers and encouraging purchases.
- Focus on fast load times and easy navigation on smartphones and tablets.
Overall Goal
The goal is to create an inviting, easy-to-navigate, and trustworthy shopping environment. This approach aims to enhance the customer experience, leading to higher average order values.
Shopify Product Categories with Highest Average Order Value (AOV)
If you know the Shopify product categories with the highest average order value, you can better understand the norms and benchmarks of your industry/niche - and set your expectations accordingly.
It’s not just an advantage, but a cornerstone of strategic planning.
Here is a set of the latest data & reporting on the industries/product categories with the highest AOV across Shopify businesses:
*The graphic above shows data from a study conducted by Dynamic Yield in September 2023
Once you are familiar with the average order value benchmarks for your niche/industry, it helps you with multiple aspects of your business operation.
It influences how you position your brand, determine pricing strategies, and design marketing campaigns.
For example, if your niche is among those with higher AOVs, this insight could lead you to focus on quality and premium positioning. On the other hand, if your niche tends towards a lower AOV, strategies might pivot towards volume sales or enhanced customer retention efforts.
Ultimately, this knowledge empowers you to make informed decisions.
Whether it’s customizing marketing campaigns, fine-tuning pricing strategies, or even selecting new products to introduce to your store, being aware of the AOV standards in your industry is crucial.
It’s not just about competing; it’s about setting a realistic, achievable, and profitable path for your Shopify business in the backdrop of the broader ecommerce landscape.
You can discover how these Shopify businesses secure these AOV metrics with our dedicated Shopify stores section.
For example, you can click here to discover the best Shopify clothing stores in Europe, or the top Shopify furniture stores.
Understanding Ecommerce AOV Benchmarks
Current Average Order Value in Ecommerce: Right now, the average amount people spend on an online order is about $127.43 (or £100.63). That’s a 3.48% jump from last year, though it’s a slower growth compared to the 11.16% increase we saw the year before.
Why AOV Has Gone Up: Over the past year, AOV has risen by about 31%. Reasons for this big increase include higher prices (inflation) and changes in shopping habits, like more people using options to buy now and pay later, leading them to spend more each time they shop.
AOV Varies by Industry: The average order value isn’t the same in all industries. For instance, in September 2023, the home and furniture sector’s AOV was the highest at about $256.
This tells us that some types of stores, like those selling home goods, usually see bigger orders.
Regional Differences in AOV: Average order value also changes depending on where you are. In the Europe, Middle East, and Africa (EMEA) area, the average is around $207. In the Americas, it’s $108, and in the Asia-Pacific region, it’s $104.
This shows that things like the local market and how much people can afford affect AOV a lot.
Why Knowing AOV Matters for Online Stores: For businesses that sell online, it’s really important to understand these average order value numbers. They tell you how your store compares to others in your industry and region.
This info can help you figure out what to do better, like changing prices, offering different things, or tweaking your marketing to match what’s going on in your industry and area.
FAQ’s About Average Order Value in Ecommerce
Here are the frequently asked questions about average order value in ecommerce:
Q: What does AOV tell you about customer spending? A: AOV, or Average Order Value, shows you how much money customers spend each time they buy something from your online store. This helps you understand how they react to your products and prices.
Q: How does understanding AOV help with buying patterns? A: By looking at AOV, you can figure out if your customers usually buy lots of cheap items or just a few expensive ones. This is really important for managing your stock, planning your ads, and deciding on sales tactics.
Q: Can AOV indicate if sales strategies are working? A: Yes, changes in AOV can tell you if your sales methods are effective. For example, if AOV goes up, it might mean you’re doing a good job convincing customers to buy more expensive items or add more to their purchase.
Q: What can AOV reveal about your customers? A: Average order value can show you what kind of customers you have. A lower AOV could mean many customers prefer cheaper items, while a higher AOV might suggest they like more luxurious, expensive products.
Q: How does AOV guide product decisions? A: If your AOV is lower than you want, you might decide to bundle products together or offer deals to encourage customers to spend more. This helps you decide what products to sell.
Q: Does AOV help in identifying seasonal trends? A: Absolutely! AOV can change with the seasons or during special sales. This gives you insight into how these times affect what customers spend.
