There are certain metrics that define how well your ecommerce store is performing. One of the most important metrics is average order value, or AOV.
In this article, we’ll share the definition of average order value, followed by the industry standards, both overall and for specific product categories. We’ll finish up with some easily applicable tips to help you boost your store’s AOV.
If you’re ready to start making more in from your ecommerce business, read on.
What Does Average Order Value (AOV) Mean?
Average Order Value, or AOV, is the average amount spent with each purchase on your site.
To calculate average order value, simply divide your total revenue by the total number of orders in the same period.
For example, if in one month you had $80,000 in revenue with 2,000 orders, your average order value would be $40 (80,000 divided by 2,000).
AOV is one of the top KPI’s (key performance indicators) for any online store. It’s a sign of how valuable each customer is, which is an important thing to know to understand your marketing ROI.
What is the Average Order Value in ECommerce?
Wondering how your average order value stacks up?
According to the latest data from IRP Commerce, the average order value across the entire ecommerce market is £98.38, or $125.66.
A few other key metrics include:
- Average conversion rate: 1.89%
- Average item sale price: £49.42 ($63.12)
- Average revenue per visitor: £1.47 ($1.88)
Of course, there are a lot of variables to consider here, so don’t take it as an ultimate pass/fail if your store is above or below this figure.
ECommerce AOV By Category
Comparing your AOV to the industry average in your particular category is a better way to judge how well you’re doing. The figures below show the average AOV in several different product categories.
Arts and Crafts
- Average order value: $135.57
- Average item sale price: $31.08
Baby & Child
- Average order value: $247.63
- Average item sale price: $207.47
Cars and Motorcycling
- Average order value: $225.74
- Average item sale price: $75.10
Electrical & Commercial Equipment
- Average order value: $188.92
- Average item sale price: $13.73
Fashion Clothing & Accessories
- Average order value: $118.89
- Average item sale price: $78.91
Food & Drink
- Average order value: $125.52
- Average item sale price: $29.51
Health and Wellbeing
- Average order value: $54.17
- Average item sale price: $17.74
Home Accessories and Giftware
- Average order value: $98.56
- Average item sale price: $44.32
Kitchen & Home Appliances
- Average order value: $61.87
- Average item sale price: $21.05
- Average order value: $116.97
- Average item sale price: $59.59
Sports and Recreation
- Average order value: $118.39
- Average item sale price: $62.54
Toys, Games & Collectibles
- Average order value: $101.11
- Average item sale price: $56.51
Here are a few things we can learn from the average AOV and average sale price per item shown above.
- Baby & Child, Cars and Motorcycling are the two categories with the highest average AOV.
- Arts and Crafts and Electrical & Commercial Equipment are both also significantly higher than the overall average.
- Health and Wellbeing and Kitchen & Home Appliances are less than half the overall average.
- The average AOV for Home Accessories and Giftware and Toys, Games & Collectibles are not as drastic, but still significantly lower than average.
- Many product categories rely on multiple products in each purchase to make up their AOV, with Arts and Crafts, Electrical & Commercial Equipment, Food & Drink, Health & Wellbeing and Kitchen & Home Appliances all averaging 3+ items in each sale.
Is Average Order Value the Best Success Metric for ECommerce Stores?
Average order value is an important and valuable metric, no doubt. You could make the argument that it’s the best success metric for an online store, though it doesn’t necessarily tell the whole picture on its own.
For example, a high average order value doesn’t matter much if you have few total orders. While a low AOV may not be such a bad thing if you have a lot of orders coming in, each customer makes a lot of separate purchases, or your profitability metrics are outstanding.
Other metrics that play a large part in revenue and profitability include:
- Number of orders
- Conversion rate
- Customer lifetime value (CLV)
- Customer acquisition cost (CAC)
- Cost of goods sold (COGS)
Improving any of these metrics (including AOV) will boost revenue and/or profit.
To boost revenue, there are three things you can do:
- Get more customers (through more traffic or a higher conversion)
- Sell more in each order (higher AOV)
- Sell to each customer more often (higher CLV)
Reducing CAC and COGS, on the other hand, will increase profitability. Average order value, conversion rate and customer lifetime value all have a positive impact on profitability as well.
So, since increasing AOV increases both revenue and profitability, we can be safe in saying it’s at least one of the most important ecommerce KPIs.
5 Ways ECommerce Stores Can Increase AOV
Increasing average order value is almost always the low-hanging fruit for boosting your store’s overall revenue and profitability. Generally it’s easier to get a little more revenue out of your existing traffic than to get more customers or make your customers come back and shop more often.
Here are five proven and effective ways to increase ecommerce AOV.
Set a Free Shipping Threshold (or Increase It)
AOV is the reason why so many companies set a minimum spend to be eligible for free shipping.
Most consumers are strongly averse to spending money on shipping. If there’s an easy way to get free shipping we’ll take it, even if that means buying more than we initially planned to.
When our cart is at $30, and we see that we can get free shipping if we spend $40, most people will add another $10 worth of products to make it up to the free shipping threshold.
If you don’t have a free shipping threshold, look at your average order value and offer free shipping on orders that reach a threshold around 30% above your AOV.
If you already have a free shipping threshold in place, think about running a test to raise the threshold and track the results on your AOV.
Promote Product Bundles
Getting customers to buy more products in each purchase is key to increasing average order value.
Bundles are a great way to do that. You can pair products that go well together, such as knife and knife sharpener, or a shampoo and conditioner set, and offer them as a slight discount compared to the cost of buying them separately.
A lot of customers who came to buy just one product will figure they might as well buy the bundle instead, spending more than they would have originally.
You could also offer discounts or a free gift when people buy multiple products, such as a “Buy 3 get 1 free” promotion, to encourage customers to spend more in each order.
Show Cross-Sells and Up-Sells
Cross-sells and up-sells are possibly the simplest, most cost-effective way to increase average order value. It doesn’t cost you anything (like offering free shipping or discounts), and it works at getting customers to buy more a lot of the time.
Amazon has huge success with this, with their “Frequently Bought Together” section, which makes it extremely easy to add additional items to your order.
Cross-promoting complementary products is a powerful tactic. Alternatively, you can promote smaller impulse buys. These work great as part of the checkout flow, just like how grocery stores place confectionery next to the register.
Set Up a Loyalty Program
Aside from the promise of free shipping, there’s nothing that’s better at convincing us to spend more money than earning points. Loyalty programs are used all over retail, from earning points with your credit card, to Starbucks, to Uber.
The main function of a loyalty program is to boost return customers (and thus lifetime value), but it’s also a strong incentive to spend more in a single order, as we feel like we’re getting more for the money we spend.
Launch a Mobile App
If you want a more creative way to increase average order value, while getting a host of other benefits, launch your own branded mobile app.
This data shows us a couple of things.
- More people shop and buy on mobile than desktop.
- Desktop has a comparatively higher average order value, as mobile’s revenue share is lower than their share of visits and orders.
The takeaway is that it’s harder to convert visitors on mobile, mostly due to the suboptimal user experience offered by mobile websites.
You can fix that by launching an app. The app experience is smoother, faster and more immersive than mobile websites, resulting in more time spent shopping in apps, more products viewed and higher conversion rates.
All this correlates to a higher AOV. Besides this, there are many additional benefits you can get from launching your own app, such as increased retention (and thus higher CLV), increased trust (which leads to a higher conversion rate), and the ability to get into the app stores, which provides a low-cost acquisition channel and makes your brand look more authoritative.
How to Easily Create a Mobile App for Guaranteed ROI
The generally perceived notion is that only high-level brands with huge budgets can afford to make their own app.
If you’re talking about coding custom native apps from scratch, this is true. But by doing it a different way, any ecommerce store can launch their own app.
MobiLoud is a tech-enabled service that lets you directly convert your website into Android and iOS apps. Your website and app are totally in sync, and the app fully replicates everything you’ve built for the web, with some small touches (such as native navigation and menus, plus native push notifications) to make it feel like a true native app.
This is all for a very minimal investment, something that any ecommerce store making steady revenue can afford.
Many online stores have launched apps this way and found excellent results.
“The only reason more people haven’t done it [built apps] is because everybody’s experience with apps is that they’re very expensive and a pain to maintain. MobiLoud knocks both of those hesitations down.”
- David Cost from Rainbow Shops
With MobiLoud, you:
- Don’t need any technical expertise to do with mobile app development.
- Don’t need a big budget or outside investment to launch an app.
- Can launch an app in less than two weeks.
- Get ongoing support to keep your app up to date and maintained (which will cost you tens of thousands per year, at least, if you build a custom app)
- Will get your brand into the app stores, which is a huge show of social proof (MobiLoud even handles the app store submission and publishing process for you).
To explore the process deeper, book a personalized demo with a MobiLoud project manager. If you move forward, it’s more or less hands-off from there, as the MobiLoud team builds, tests, compiles and ships your app for you.
With minimal work required and very little cost (plus a 60-day money back guarantee), there’s almost no risk to launching a mobile app for your brand. Even if you get zero app users, the brand authority you get from an app store presence alone could increase your average order value and deliver a positive ROI.
One of the best ways to simultaneously boost your store's revenue and profitability is to increase the average dollar amount spent in each transaction.
While you still need to take into account other metrics, such as customer lifetime value, total orders and revenue, and profitability metrics like COGS and CAC, increasing average order value is the holy grail for online businesses.
In this article we gave you a few ideas for how to increase average order value, from harnessing the attractiveness of free shipping, to volume discounts and cross-selling, to launching a loyalty program.
But if you want to do something that none of your competitors are, launch a mobile app. Your customer base is already skewed towards mobile users, and that share is only going to rise as mobile commerce becomes more mainstream.
Get the most out of your mobile customers by giving them what they want - an app.