What Is Average Order Value and Why Is it Important For Your eCommerce Store

If you’ve ever wondered what average order value is and why it’s important for your ecommerce store, then you’ve come to the right place.

One of the biggest challenges online retailers face is figuring out how to increase their average order value. The AOV calculates the average dollar amount of each order a consumer places with a business over a given period of time. This metric is a critical indicator of your business’s success, and if you’re not keeping an eye on it, then you are leaving money on the table.

By analyzing all this information and using it wisely, you can increase your e-commerce return on investment (ROI), and improve your overall ecommerce sales.

Let’s find out what average order value is, what factors influence your online store’s average order value, how you can use average order value to guide the design of your e-commerce store, and how to improve it.

Key Takeaways:

• The AOV is primarily influenced by the average cost of each product and the number of products in each order.
• A high AOV is a good sign that you’re boosting your revenue per sale.
• Your transaction revenue is less than ideal if your AOV is low or declining.
• Knowing what your AOV is can help you determine how to improve it in a way that benefits your customers.

What Is Average Order Value (AOV)?

Average Order Value (AOV) is one of the key performance indicators (KPIs) you should check regularly to see the average amount of money your customers spent per sale.

As an important metric to track, it shows the overall health & performance of your e-commerce store and provides insight into how customers interact with your products. You can monitor the AOV for any time period, yet most merchants typically keep a close eye on the moving monthly average.

While a high AOV helps you understand that your customers tend to buy more items per order, or they spend more on each item, a low AOV may show that your customers buy fewer items or they just spend less per item.

Once you calculate your average order value, you can:

• Evaluate the performance of your marketing efforts and strategies, as it offers the data you require to measure the value of individual customers.
• Understand your customer behavior, identifying trends and patterns your customers spend money on per transaction.
• Tailor your marketing efforts and product offerings to better meet the needs and preferences of your target audience.
• Adjust your pricing strategies to encourage customers to spend more per transaction.
• Benchmark your performance against industry standards or your historical data to see how well your e-commerce store is performing in terms of customer spend.
• Monitor your overall performance to see if there’s any room for improvement, such as better eCommerce product pages.

All in all, calculating the average amount of money spent by your customers in a single transaction, commonly known as the average order value (AOV), helps you optimize your revenue & make data-driven decisions to drive growth.

How To Calculate Average Order Value?

You can calculate the average order value (AOV) very easily. To do that, you should divide the total revenue by the number of orders placed.

Calculate the average order value (AOV)For example, if you want to calculate the average order value (AOV) of an e-Commerce store that generates $10,000 in revenue from 100 orders, you need to do the following operation:

$10,000 / 100 orders = $100/order (AOV)

That’s to say, the AOV would be $100 in this case.

Yet, it’s important to note that AOV only reflects the average amount spent per transaction and does not take into account the number of items purchased in each order. If you want to understand the average value of each item sold, you need to use a different metric called Average Selling Price (ASP).

What Is The Average Order Value (AOV) For ecommerce?

Firstly, you should know that the average order value (AOV) of ecommerce can vary significantly based on the sector, business, and categories of products.

However, e-commerce stores offering pricey products such as electronics or luxury items may have higher AOVs in comparison to those shipping low-priced items such as clothing or accessories.

For example, according to a set of ecommerce data (October 2022), electrical and commercial equipment products have the highest AOV, with consumers spending an average of $230.51 per checkout.

Here are some more insights from the report:

• The report reveals an average order value (AOV) of $129.23, which shows a 16.89% increase from the previous year.
• This is nearly twice the 7.81% annual growth from 2020 to 2021 and a stark contrast to the 10.05 percent slump from October 2019 to October 2020.
• The average order value for baby and child products is $191.04, meaning a 4.28% decrease from 2021.
• Cars and motorcycling products come in third place with an AOV of $176.05, which marks a 20.75% YoY increase.
• Food and drink products have an AOV of $144.20, while the average order value for sports and recreation products is $127.74.

It’s important to note that the average order value (AOV) is just one metric and should be taken into account alongside other metrics such as conversion rate and customer lifetime value. Analyzing all the metrics can help you get a better understanding of your ecommerce performance.

How To Find Your Average ecommerce Order Value In Google Analytics?

Once you find your average ecommerce order value in Google Analytics, you can get a better understanding of how much money your customers are spending per transaction and identify trends and patterns in their spending habits.

In order to view the Average Order Revenue (referred to as Purchase Revenue in GA4) in Google Analytics 4, you need to generate a custom Exploration report.

Follow the steps below to find your AOV in Google Analytics 4 (GA4):

1. Log in to your GA4 account and navigate to Explorations.

2. Click on the plus icon to create a new Exploration.

3. Name your report as ‘Average Order Value’, and then click the plus icon next to Dimensions.

4. Search for ‘Device category’, ‘Session source/medium’, ‘City’, and ‘Session campaign’ to add them to your report by checking the box and then clicking Import in the end.

5. Click the plus icon next to Metrics.

6. Search for ‘Average purchase revenue’ and import it to your report.

7. Choose a dimension to drag & drop it over to the Rows section. You can start with ‘Session source/medium’.

8. Move ‘Average purchase revenue’ from the Metrics over to the Values by dragging & dropping.

9. Now, you can view the average order value (average purchase revenue in GA4) for each session campaign.

You can go ahead and play around with the other dimensions you added by removing session campaign and adding those instead in order to get further details from your data.

How To Increase Average Order Value? 5 Tips For Improving Average Order Value (AOV)

Usually, when customers shop online, they tend to buy only what they are looking for. However, with some strategies that you can use to increase average order value, you might be able to present customers with more useful products, which will result in more sales from each order.

Here are 5 tips for improving your average order value:

1. Cross-sell products

Cross-selling is the practice of offering a customer a product or service that is different from the one they are currently looking at. For instance, if a customer is viewing a shirt, you can suggest some complementary item such as a pair of earrings or display them as recommended products.

2. Offer free shipping

Offering free shipping when customers reach a particular threshold of spending on your ecommerce store can encourage them to purchase more products. For example, you can offer free shipping on all orders over $100.

3. Give volume discounts

You can provide volume discounts based on the value of the order. For instance, you can let customers receive a $15 reduction once they spend $100 or more, or they can be offered a $5 discount for orders of $60 or more.

4. Provide first time offers

If your brand has been established for less than six months, the majority of your customers are likely to be first-time visitors. You can improve average order value by offering special deals to new customers. For example, they can get a one-time discount when they purchase multiple items from a popular product line or a bundle of items exclusively for first-time shoppers.

5. Up-sell products

An up-sell is a technique used to promote higher-priced items or additional products to enhance average order value or generate more income. As an example, if you are selling phone cases, you can suggest other accessories or items to increase your sales.

Conclusion

In conclusion, the average order value (AOV) is an important metric that you should keep your eyes on for your ecommerce store. Calculating & understanding it can provide insight into the purchase behavior of your customers, allowing you to see what items customers are buying and how much they are spending.

By tracking this metric and understanding how it influences customer behavior, you can optimize your pricing and promotions, and drive more sales. Therefore, the AOV can be a great means for you to increase your revenue, maximize customer satisfaction, and stay competitive in the digital marketplace.