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In eCommerce, AOV stands for "Average Order Value." It's a metric that shows the average amount of money customers spend on each order they place in an online store. For example, if a store sells 10 orders worth a total of $500 in one day, the AOV would be $50 ($500 divided by 10 orders). Businesses use AOV to understand spending patterns and make decisions on pricing, marketing, and promotions.
A low average order value (AOV) can turn a website overflowing with potential into a profit drain. It means you're converting visitors into buyers, but most of your customers are making purchases for relatively small amounts. And they aren't translating into the kind of revenue you need to thrive. Customer acquisition also becomes expensive as you spend the same amount to attract lower-spending customers.
"A small increase in AOV can have a significant impact on your bottom line, especially for stores with high customer acquisition costs."
So, all you need to do is get your customers to buy more items per order, buy more expensive products, or both? Yes, but there’s more to it. In this blog, we talk in detail about how a low AOV e-commerce model can impact your business and the right strategies to increase AOV that could lead to increased sales and greater profits.
A low AOV e-commerce model is very similar to what you see in a clothing store or a fast-fashion retailer where you can buy a t-shirt for $10. On the other hand, a high-AOV model would be a store selling designer clothing for hundreds of dollars per item.
The core of this model is affordability. Low prices are the key to attracting customers who are on a budget or looking for impulse buys. Since the profit from each individual sale is smaller, these businesses need to make up for it by selling a lot of products.
While the low AOV model offers potential high conversion rates and better customer reach, it comes with challenges. It can be expensive for small e-commerce businesses to fulfill a high number of low-cost orders.
From shipping and packaging to even a small increase in cost from suppliers, it can significantly impact profit. Also, with more high order volume comes more customer service issues. To succeed with the low AOV model, one has to be pretty strategic with their cost management and operations to actually make a good profit.
One of the biggest reasons for a low AOV can be limited customer awareness. This means shoppers might not be fully realizing the potential of your store or the value proposition of buying more than just the single item they initially came for.
Ask yourself:
Do you highlight lesser-known products in your promotions or campaigns?
If your answer to any of these questions is no, there may be a potential gap in customer awareness that could be contributing to your e-commerce store’s low AOV.
You walk into a grocery store wanting a single apple. But then you see a sign: "Buy 3 apples, get 10% off!" Now, the thought of buying a few extra apples for a good discount doesn’t sound bad, so you buy 3 apples instead of just 1.
Unfortunately, many e-commerce stores miss this trick, leaving their AOV stuck in the mud. Without discounted pricing for larger purchases, your customers may not want to expand their basket, especially when other stores are offering volume discounts or loyalty programs rewarding repeat business and bigger purchases. It is only natural for buyers to shop elsewhere with better offers and discounts.
But what if you are offering similar incentives and yet have a low AOV? In that case, ask yourself whether you are clearly communicating the benefits of buying more or not. Are you effectively highlighting potential savings through shipping offers or bonus items?
This is important because, without a clear value proposition, your customers might not understand the benefits of buying more and stick to smaller purchases. If you strategically apply such discounts and bundles, you can turn this missed opportunity around and use it to boost your AOV.
How to use discount strategies to improve AOV?
A customer enters your online store, looking for a pair of shoes. They browse through the selection, and find what they like, but then... the checkout process feels like an eternity. Confusing forms, hidden fees, and limited payment options all contribute to their frustration.
By the time they reach the final step, the initial excitement has worn off, and they are thinking of abandoning their cart altogether.
You don't want this to happen to your customers.
The lack of loyalty programs can also play a role. E-commerce stores that reward repeat business with points, discounts, or exclusive offers are likely to have a better AOV than those that don’t offer the same. Without this encouragement, there might be little reason to add extra items to their basket.
By creating a smooth, rewarding customer journey from browsing to checkout, you can not only increase your AOV but also build long-term customer loyalty and get more repeat business.
Want to improve your Shopify checkout experience for better AOV?
Are you following a one-size-fits-all approach with your e-commerce pricing strategy? It might be silently hurting your AOV. Here’s what that means:
Imagine a store where a t-shirt costs $20, but a slightly nicer one with a logo jumps to $40. This big price jump can discourage customers from upgrading, leaving them with a basic t-shirt and a lower AOV for you.
What you can do instead is offer a mix of lower and higher-priced products so those looking for a deal or willing to spend more can find something they like. You can also create bundles of products that people often buy together.
These easy changes can optimize your pricing for better revenue and an increased AOV.
Bonus tip: Explain why a more expensive item is better than a cheaper one. You could even put together bundles with popular items at a discount!
Do you know why so many online stores offer free shipping, but only if you spend a certain amount? It's a clever strategy used to increase AOV that you must apply if you haven’t already.
Imagine you are buying a $15 t-shirt. But shipping costs around $5. So, instead of spending that money on shipping, you decide to add $5 socks to your cart instead. And now you qualify for free shipping, saving you the extra fee and increasing the overall order value from $15 to $20.
Plus, free shipping feels like a bonus to your customers, making the purchase more worthwhile.
H&M clearly communicates the minimum order value of $40 for free shipping right on their homepage.
Here are some ways you can optimize your minimum order value for free shipping and give your AOV a boost:
Product bundles are like a pre-made package deal where stores put together items that go well together and sell them for a bit less than buying them all separately. Customers love them because they save money, time, and the possibility of finding a new favorite product that they would have otherwise not discovered.
Glossier cleverly sells bundles of their best-selling lip balms with additional discounts for a limited time.
However, not all products fit well in bundles. Forcing a bundle by mixing random products together that don't make sense can confuse customers and decrease sales.
Here are some great tips on how to effectively bundle products:
Get started with Easy Bundles and start selling product bundles on your Shopify store in minutes.
How can you increase sales with product bundling strategies?
Let’s say you are shopping online for sneakers. Upselling is like a store suggesting a better and fancier pair. Cross-selling is suggesting you cool socks or laces to go with them. These are clever strategies that e-commerce stores use to increase their sales.
However, it's important to not flood your customers with overwhelming recommendations it can quickly turn a positive experience into an annoying one.
Sephora suggests add-ons and similar products right when a customer adds a product to their cart.
The catch is to personalize these suggestions and make them relevant based on your customer’s browsing history. With Checkoutwiz, you can easily implement upsells and tailor your checkout process for increased AOV. Read more about it here.
For example, if they're looking at running sneakers, recommend breathable socks and performance laces. This way, upselling and cross-selling feel helpful, not pushy. Here are some tips to up-sell and cross-sell effectively:
What are the best upselling strategies to set up on your Shopify store?
You usually grab one bag of coffee, but now you see a discount of 40% off if you buy a box of 3. You buy it instantly thinking who doesn’t like stocking up for a while and saving some bucks? That's volume discounts in action.
Casper offers a discount of 10% on the purchase of two pillows.
However, as an e-commerce store owner, you need to make sure that the discount you offer is tempting enough for the customers to buy more, but not so big that you lose money.
Offering volume discounts is a pretty simple yet impactful strategy where your customers save money by buying more, and your store gets a higher AOV. Kite by Skai Lama is a powerful tool designed for e-commerce stores like yours to boost their AOV and conversion rates by offering volume and tiered discounts with a fully customizable UI here. Read more here.
Here are some tips to effectively implement it:
How can volume discounting boost your sales?
You must have come across those online stores offering to let you try on clothes or see furniture in your own home before you buy. This fancy tech makes shopping more interactive and can convince you to buy that extra outfit or perfect couch.
Warby Parker uses gamification in a great way by giving shoppers an opportunity to try the glasses virtually.
Not just this, think of progress bars filling as you add items, or points earned with every purchase. This "gamification" makes shopping fun for the customers and boosts your average order value (AOV).
It's a win-win: a more exciting and interactive shopping experience for the customers, and potentially higher profit and AOV for the store.
If you're selling products or services that aren't available yet, offering partial payment will be a winning sales strategy to increase AOV. Allowing customers to pay a deposit on Shopify can lead to higher conversion rates and higher average order values when compared to asking them to pay in full weeks or even months before they'll ever receive their order.
This strategy is valuable for Merchants who specialize in hand-crafted made-to-order products with lead times or businesses offering preorders for new products or services. Businesses who switch to using deposits as a way to improve affordability see a boost to their business.
By lowering the commitment a customer has to make up front, they've seen improved online sales and an increase to their Average Order Value.
Our Partner, Downpay is a great tool to offer partial and deferred payments for Shopify stores that want to improve affordability. With a simple setup and the ability to save a customer's card on file, offering deposits becomes a no brainer.
At Skai Lama, we understand the importance of AOV optimization for Shopify store owners. With our team of experts and a suite of apps, we've helped nearly 10,000 Shopify store owners thrive, achieving remarkable results such as a 5x boost in ROI and an average 32% increase in AOV.
Connect with us today to discover how we can help your e-commerce store reach new heights and achieve sustainable growth.
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We are a team of passionate individuals, all driven by a singular goal - to help our merchants succeed.