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.
What is a Low AOV E-commerce Model?
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.
Here’s Why Your AOV Might Be Low
Limited Customer Awareness
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:
Are your homepage and category pages effectively showing the full range of products you offer?
Do you suggest other related products based on your customers’ browsing history?
Do you offer product bundles that combine 'frequently bought together' items at a discounted price?
Have you conducted any surveys to understand what customers are typically looking for when they visit your store?
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.
Lack of Discounts & Incentives
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.
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.
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!
Top Strategies on How to Increase AOV
Minimum Order Value for Free Shipping
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:
Keep the minimum order value high enough to boost AOV, but low enough for most customers to reach.
Make the minimum order value for free shipping clear and easy to understand.
Frame free shipping as a benefit, not just an absence of a fee.
Keep checking the impact of your minimum order value and adjust as needed to optimize AOV.
Offer Product Bundles
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:
Pair products customers naturally use together.
Offer bundles at a lower price than buying items separately.
Stick to 2-3 complimentary items in a bundle.
Use limited-time offers or limited quantities.
Offer bundles at different price points.
Allow customers to upgrade specific products in a bundle.
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:
Recommend upgrades or add-ons that genuinely complement their initial choice.
Focus on the benefits of the upsell/cross-sell, not just the price. Show how it enhances their experience.
Employ pop-ups or product placements strategically, not bombarding customers with overwhelming choices.
Offer upsells and cross-sells at natural points in the buying journey, like during checkout or while viewing similar products.
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:
Start offering discounts on a few select products, then expand based on what works and customer preferences.
Promote volume discounts on product pages, at checkout, and even in targeted email campaigns to increase awareness.
Clearly communicate the discount tiers and minimum purchase quantities for volume discounts.
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.
Offer Partial Payment
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.
Conclusion
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.
FAQs
1. Why is AOV important for Shopify stores?
AOV is important as it directly impacts overall revenue. Increasing AOV means more profit without increasing customer acquisition costs (CAC).
2. How often should I monitor my store’s AOV?
Monitoring your store’s AOV weekly or monthly, and during campaigns is ideal to track trends and the impact of marketing efforts.
3. Are there other factors that can influence AOV?
Yes, factors like product assortment, pricing strategy, shipping costs, and customer demographics can significantly influence AOV.
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Yash B
Yash leads Product Marketing and Partnerships at Skai Lama. He talks about eCommerce Growth, App Stacks, and promoting your Shopify store and products across channels.
Boost AOV with Easy Bundles
All-In-One Bundles: Bundle Builder, Box Builder, Build A Box, Gift Box Builder, Mix and Match Bundle
Boost AOV with Build your own Bundles and Gift Boxes!
Boost AOV with Build your own Bundles and Gift Boxes!
Easy Bundles is a seamless Bundle Builder, Build Your Own Bundle, Gift Box Builder app that offers Fixed Price Bundles, Discounted Bundles, & Mix & match Bundles.
Easy Bundles is a seamless Bundle Builder, Build Your Own Bundle, Gift Box Builder app that offers Fixed Price Bundles, Discounted Bundles, & Mix & match Bundles.
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