What is AOV? (and why it matters for your store)
Average order value is total sales divided by number of orders, and watching it shows how bundles, free shipping limits and pricing change what each customer spends.
AOV stands for average order value. It sounds like a thing for big companies, but it is a small sum you can do with a pen, and it helps you set offers that do not hurt you.
The meaning
Average order value is the typical amount spent per order. You find it by dividing your total sales by the number of orders in the same period.
A worked example
Say three orders came in this week. These numbers are illustrative.
- Order one: Rs 450
- Order two: Rs 700
- Order three: Rs 350
Total sales: 450 plus 700 plus 350 equals Rs 1,500. Number of orders: 3. Average: 1,500 divided by 3 equals Rs 500.
So your AOV for this small sample is Rs 500. Notice that no single order was exactly Rs 500. It is only the middle ground.
Why it matters
Each order costs you roughly the same effort and a similar amount for packing and shipping, whether it is worth Rs 350 or Rs 700. A higher AOV means each parcel carries more sales to cover those fixed costs. A very low AOV can mean you are working hard for thin earnings.
It also affects what you can spend to win a customer. If the average order is small, you cannot spend much on a discount or an ad before the order stops making money. Maximum CAC from first-order contribution shows that link.
How a bundle can change it
Suppose a customer usually buys one Rs 350 item. You create a bundle of two items for Rs 600, which is less than buying them separately at Rs 700. If two of your three customers choose the bundle instead of a single item, the week looks like this:
- Bundle: Rs 600
- Bundle: Rs 600
- Order two stays at Rs 700 as before
Total sales: 600 plus 600 plus 700 equals Rs 1,900. Divide by 3 orders and AOV is about Rs 633. It went up, even though each customer got a small saving.
But check the profit. Selling two items for Rs 600 instead of Rs 700 gives away Rs 100. If the margin on each item is thin, you may earn less per order, not more. Always look at profit, not only AOV. Bundle price vs separate price profit walks through it.
Other ways it moves
- A free shipping limit set just above your usual order value can encourage people to add one more item. See free shipping threshold vs average order value.
- Offering a coupon that needs a minimum order amount.
- Showing related products, or selling small add-ons.
- Raising prices, which also lifts AOV but may change how many people buy.
Average order value lift maths goes deeper.
What not to do
Do not read AOV as a goal at any cost. Pushing people to spend more than they want can lead to returns and unhappy customers. And do not compare yourself to any benchmark you read. Your product, price points and customers are your own. Track your AOV month to month, and compare with itself.
How to find yours
Export your orders from the admin, add up the totals for the month, and divide by the number of orders. Exporting store orders to a spreadsheet shows how. Repeat each month, and note what you changed. If AOV rises after you launched a bundle, you have a hint that it worked. Then check the margin before celebrating.