If you’re a Shopify seller, then you know that increasing your average order value (AOV) is crucial to your success.
After all, the more money each customer spends on average, the more profit you’ll make.
In this article, we’ll explain what Shopify average order value is, how to calculate it, and how sellers can improve their AOV when selling online.
Keep reading to learn more!
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What is Average Order Value on Shopify?
Average order value (AOV) is a metric that measures the average amount of money spent by a customer on your Shopify store.
How do you calculate AOV?
To calculate AOV, simply take the total sales revenue for a given period of time and divide it by the number of orders placed during that same period.
For example, let’s say that your Shopify store had $10,000 in sales last month and 200 orders were placed.
Your average order value would be $10,000 / 200 = $50.
Why is Average Order Value Important?
Average order value is important because it directly impacts your online store’s profitability.
The higher your AOV, the more profit you’ll make (all other things being equal).
A major driver of this is the fact that your AOV has a direct impact on your customer acquisition cost (CAC).
In general, the higher your AOV, the lower your CAC will be.
This is because it costs less – in relative terms – to acquire a customer who spends more on your store.
For example, if your average order value is $50 and it costs $25 to acquire a new customer you are left with $25 to cover cost of goods sold, operational expenses, taxes and (hopefully) some profit left over.
However, if your average order value is $100 and your customer acquisition cost is still $25 you’re left with a lot more money in the bank for each and every order.
With rising advertising costs across platforms like Meta and Google, it’s more important than ever to improve your average order value to allow you to continue acquiring new customers at scale and maintain strong business health.
What is a good Shopify AOV?
Unfortunately, there is no definitive answer to this question.
A good AOV depends on a number of factors, including the type of products you sell, your target market, your pricing strategy, and more.
In general, though, a good AOV is widely regarded to be anything above $50 as this gives room for customer acquisition, shipping costs and other associated fees.
Anything below $50 is considered to be below average as it gets harder to turn a profit on a customer’s first order.
Of course, the higher your AOV is, the better.
eCommerce sellers should never arrive at a “good AOV” and instead should track average order value with a view to be continually testing & improving this crucial metric.
How can I improve my Average Order Value?
There are a few key strategies you can use to increase your average order value, which we’ll discuss in more detail below.
Offer Discounts and Free Shipping Thresholds
One of the easiest ways to increase AOV on your Shopify store is to offer discounts and free shipping thresholds.
In general, customers are more likely to spend more money on an order if they feel like they’re getting a good deal.
You can offer discounts in a number of ways, including sales, coupons, and discounts for bulk orders.
You can also use free shipping thresholds, which is when a customer only pays for shipping once they reach a minimum order value.
For example, you might offer free shipping on all orders over $50.
Doing this encourages customers to add more items to their cart so they can reach the free shipping threshold and save money on shipping fees.
You can easily set up a free shipping bar with the popular Shopify app Privy.
This announcement bar at the top of the page will show the free shipping price threshold and dynamically update based on a shopper’s cart value.
For instance, if your free shipping threshold is set at $50 and the customer has a $20 product in their cart, the free shipping bar will tell the customer they only have to add $30 more to their cart to access free shipping.
Don’t forget: this strategy can be used in a variety of ways.
You don’t just have to offer free shipping but can offer threshold-based discounts and promotions too.
Just remember to set the minimum order value higher than your current AOV to ensure this strategy does in fact increase your average order value.
Up-sell and Cross-sell Products
Another effective way to increase your AOV is to up-sell and cross-sell products to customers.
Up-selling is when you offer a customer a more expensive version of the product they’re interested in.
For example, if a customer is looking at a pair of $50 shoes on your store, you might up-sell them to a more expensive pair of $100 shoes.
Cross-selling is when you offer a customer complementary products to the ones they’re already interested in.
For example, if a customer is looking at a pair of shoes on your store, you might cross-sell them to a pair of socks.
Both up-selling and cross-selling are effective ways to increase your AOV because they encourage customers to spend more money on each order.
To test upsells on your online store, check out Zipify OneClickUpsell, a popular app that automates post-purchase upsells to increase average order value.
If you’d rather test cross-sells, Privy has a great feature that dynamically inserts pop-ups, allowing customers to add relevant additional products to their cart when shopping.
Offer product bundles
Product bundles are another great way to increase your total revenue and your AOV.
A product bundle is when you offer a group of products for sale together at a discounted price.
For example, you might sell a pair of shoes for $50 and a pair of socks for $20 but bundle them together for $60.
This is an effective way to increase AOV in Shopify stores because it encourages customers to buy more than one item at a time, which can lead to larger orders.
When you bundle products it also helps when running paid traffic to your store as you have already spent the money on acquisition, but maximizes the return on that advertising investment.
Improve your product pages
The design and layout of your product pages also play a role in how much money customers spend on each order.
If your product pages are well-designed and easy to navigate, customers will be able to find the products they’re looking for more easily.
If your product pages clearly display trust factors such as social proof (reviews, press features, user-generated content), customers will have more confidence in placing an order.
These factors together can lead to higher conversion rates, which means more sales and a higher AOV.
Whereas customizing product pages on Shopify stores used to be very difficult, there is now a range of options available to sellers.
Having released the Online Store 2.0 update Shopify has now given sellers access to more customization options by moving to a ‘sections everywhere’ principle.
However, if you still find your chosen theme limiting the flexibility you have to create a high converting product detail page there are many page builder apps available to you.
The best Shopify page builders in our experience are Zipify Pages, Shogun, and Page Fly.
Offer payment plans
Payment plans are another great way to increase your AOV.
With a payment plan, customers can spread the cost of their purchase over a period of time.
For example, you might offer a customer a payment plan for a $100 pair of shoes where they pay $10 per month for 10 months.
This is an effective way to increase your AOV because it allows customers to purchase more expensive items that they might not be able to afford outright.
Shopify’s own Shop Pay platform even provides this buy now pay later option right out of the box.
It includes a 4-month interest-free option where you get paid upfront, but the customer gets to spread the cost at no extra expense.
Payment plans also encourage customers to make repeat purchases, which can lead to even higher AOVs over time.
Create a customer loyalty program
A loyalty program is a great way to encourage customers to spend more money on each order whilst also increasing customer lifetime value.
With a loyalty program, customers can earn points for every purchase they make.
These points can then be redeemed for discounts on future purchases.
This is an effective way to increase your AOV because it encourages customers to shop more often and spend more money each time they shop.
There are a number of loyalty apps available that can help you set up a loyalty program for your store, such as Smile.io and Referral Candy.
Remarket to existing customers
Many studies have shown that the most valuable customers you can attract are the ones who have already purchased from you.
This is because they already know, like, and trust you, which makes them much more likely to buy from you again.
That’s why it’s so important to create a system for remarketing to your existing customers.
There are a number of ways to do this, but one of the most effective is to use email marketing.
Email marketing with a tool like Klaviyo allows you to send targeted messages to your customers based on their past behavior.
For example, you might send an email to customers who have purchased from you in the past but haven’t made a purchase in the last 6 months.
The key is to make sure you’re providing value with your emails in the form of a discount code, free shipping, or exclusive access to new products.
Whatever it is, make sure it’s something that will encourage more customers to make an additional purchase at an improved average order value.
Conclusion: The Importance of Average Order Value
Increasing your Shopify average order value is a great way to boost your eCommerce business as it creates higher profit margins to fuel your scale.
There are a number of effective strategies you can use to increase your AOV, including offering discounts and free shipping thresholds, up-selling and cross-selling products, offering product bundles, improving your product pages, and offering payment plans.
Implementing just one or two of these strategies can have a significant impact on your AOV, customer lifetime value and ultimately and your bottom line helping your grow your eCommerce business further, faster.
If you want to join a community of entrepreneurs building successful eCommerce brands, check out all there is on offer inside Brand Builder University today.