What is AOV?
AOV, or average order value, is the revenue a store takes divided by the number of orders that produced it, so it describes what a typical basket is worth.
Formula
AOV = revenue ÷ number of orders
Worked example, not a result
Moving a free shipping threshold
Say a store takes 47,500 in a month across 950 orders. AOV is 47,500 divided by 950, which is 50.
The store sets free shipping at 75. Over the following month, some shoppers who would have bought one item add a second to reach the threshold, and AOV settles at 56. Nothing changed in the ad account, no new traffic was bought, and the same number of orders is now worth more.
The check that matters is what the store gives up. If shipping costs sit around 8.40 an order and a slice of buyers who used to pay for it now do not, the threshold has to lift the basket by more than the shipping the store absorbed. That is an arithmetic question with a clear answer, and it is worth doing before the change rather than after.
All of these figures are made up to show the method. Your own threshold depends on your basket, your shipping cost and your margin.
Why it matters
AOV is one of the four levers behind store revenue, and it is the one you can move without buying another visitor. Every unit of extra basket value flows to the bottom line at close to full contribution, because the traffic, the checkout and the picking are already paid for.
It also loosens the other levers. A higher average order raises what you can afford to pay for a click, which means the visitors lever gets more room. It improves the ratio between acquisition cost and first order contribution, so campaigns that were marginal become worth running. And bundles or multi packs that raise AOV often lengthen the gap before a customer runs out, which changes the timing of repeat purchases.
For a store owner, AOV is where the fastest work usually lives. Thresholds, bundles, quantity breaks and a sensible cross sell on the cart are all changes you control, and they show results in weeks rather than quarters.
Common mistakes
- Raising AOV in a way that lowers order count. A threshold set too high or a minimum spend rule can push the average up while total revenue falls, so always read the two numbers together.
- Ignoring discounts. If AOV is taken before codes are applied, the figure describes a basket the store never actually collected.
- Averaging across products that behave nothing alike. A store selling both a small consumable and a large one off item has two order patterns, and one blended figure hides both.
- Adding cross sells that interrupt the checkout. An offer placed where the buyer is trying to pay can cost more in abandoned carts than it earns in extra items.
Related terms and answers
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