Definition
Average order value (AOV) is the revenue a store took in a period divided by the number of orders placed in that period. It answers how much a customer spends in one visit to the checkout. In the revenue equation of traffic, conversion rate, order value and purchase frequency, AOV is the lever that changes what a store can afford to pay for a customer without needing a single extra visitor.
Formula
AOV = Total revenue ÷ Number of orders
- Total revenue
- Revenue for the period on a stated basis: product revenue after discounts is the most common, with shipping charged to the customer and tax included or excluded consistently
- Number of orders
- Count of orders placed in the same period, on the same basis, with test orders, wholesale invoices and point of sale transactions excluded unless you mean to include them
The same month, measured on two bases
- Orders placed
- 1,420
- Product revenue after discount codes
- $121,180
- Shipping charged to customers
- $8,520
- Sales tax collected
- $14,300
- AOV on product revenue
- 121,180 ÷ 1,420 = $85.34
- AOV including shipping and tax
- 144,000 ÷ 1,420 = $101.41
Illustrative figures. Both calculations are arithmetically correct and they describe different things. Trouble starts when a target is set on the first basis and progress is reported on the second, so the basis is written down once and used everywhere.
Why it matters
AOV matters because it raises the ceiling on everything upstream of it. A store that lifts its typical order from 85 dollars to 100 dollars can afford more per click, tolerate a longer payback and reach audiences that were priced out before, with no change to traffic or conversion rate. It also shapes fulfilment economics: a larger basket spreads the same pick, pack and carrier charge over more units, so contribution margin grows faster than revenue does. Because it moves through merchandising decisions the store controls, such as bundling, thresholds, size options and cross-sells, it is often the fastest lever available when media costs are rising.
Where it goes wrong
- Reading the mean when the distribution is lumpy: a handful of wholesale or bulk orders can pull the average well above what a typical shopper spends, so the median order is checked alongside it
- Mixing channels in one figure: subscription renewals, point of sale and wholesale each carry a different basket shape, and a blended average hides which of them actually moved
- Buying AOV with margin: a threshold that hands over free shipping and a discount to reach it can raise the average while leaving less money behind on every order
- Ignoring refunds: an average built on gross orders looks healthy in a category where a share of the baskets comes back, so net of returns is the honest view for planning
- Comparing the figure with another store's: catalogue mix, price band and shipping policy decide AOV, which makes an outside number useless as a target
Questions about AOV
Does average order value include shipping and tax?
That is a choice, and the only rule is consistency. Most stores report AOV on product revenue after discounts because that is the number merchandising decisions act on. Whichever basis you pick, use it in the dashboard, in the ad targets and in the board report, and note it beside the figure so nobody recalculates it differently next quarter.
How can a store raise AOV without discounting?
Give the basket somewhere to grow rather than a reason to be cheaper. Bundles and kits that solve a whole job, size or quantity upgrades priced per unit, genuinely relevant cross-sells on the cart and post-purchase upsells all add units without cutting the price of the first one. Free shipping thresholds work too, but only when the threshold is set above the current average and the margin covers the freight.
Is average order value or conversion rate the better thing to work on?
Whichever is further from where the catalogue should sit. Multiply sessions, conversion rate, order value and purchase frequency, then change one at a time and see which produces more revenue for the effort involved. Stores with a wide catalogue and a low basket usually find order value easier to move; single product stores usually have more room in conversion rate.