Profit & margins
What is AOV and how do you increase it?
AOV (average order value) is the average amount a customer spends per order in your store. You calculate it by dividing revenue by the number of orders. A higher AOV means more gross profit per order, which gives you more room to pay for ads and shipping.
The AOV formula
AOV = Revenue ÷ Number of orders
- Revenue
- product revenue for the period, after discounts
- Number of orders
- orders placed in the same period
Worked example: one monthExample numbers
| Input | Value |
|---|---|
| Revenue | $48,000 |
| Orders | 640 |
AOV = $48,000 ÷ 640 = $75
Shopify's analytics also report average order value directly. Calculate it the same way every time, with or without shipping and before or after discounts, so the trend means something.
Why AOV matters for ad profitability
You pay to acquire each order. A bigger order carries more gross profit to pay for it.
| AOV $75 | AOV $85 | |
|---|---|---|
| Gross profit per order (45% margin) | $33.75 | $38.25 |
| Ad cost per order | $30.00 | $30.00 |
| Profit after ads | $3.75 | $8.25 |
A $10 rise in AOV more than doubles the profit left after ad spend on each order in this example, without any extra traffic. That's why AOV is often the fastest lever for ad profitability.
AOV Uplift CalculatorThe extra monthly revenue and profit from raising your average order value.How to increase average order value
1. Free shipping thresholds
Offer free shipping above an order value a little higher than your current AOV. Customers add an item to qualify.
Check the math first: you absorb the shipping cost, so the AOV lift has to cover it. The free shipping threshold calculator shows the break-even AOV.
2. Bundles
Group complementary products at a small discount, such as a starter kit or a complete outfit. Bundles raise AOV and can move slow stock at the same time. The bundle discount calculator checks the margin.
3. Upsells and cross-sells
Suggest a better version (upsell) or a related add-on (cross-sell) on the product page, in the cart or just after checkout. Keep suggestions relevant; random add-ons get ignored.
4. Quantity breaks
For consumables and gifts, offer a lower price per unit for buying more: buy 2, save 10%. It works best on products people use up or buy repeatedly.
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A handful of very large orders can pull the average up, so it stops describing a typical customer.
Worked example: five ordersExample numbers
Orders of $40, $45, $50, $55 and $410.
- Average order value = $600 ÷ 5 = $120
- Median order value (the middle order) = $50
If your average and median are far apart, set things like free shipping thresholds from the median. A threshold of about $130 based on the average would be out of reach for most customers here.
Measuring whether an AOV tactic worked
A higher AOV only helps if it doesn't cost you more in conversion than it gains. The cleanest single number is revenue per visitor:
Revenue per visitor = Conversion rate × AOV
Worked example: AOV up, revenue downExample numbers
| Before | After a new upsell | |
|---|---|---|
| Conversion rate | 2.5% | 2.2% |
| AOV | $75 | $82 |
| Revenue per visitor | $1.875 | $1.804 |
AOV rose by $7, but fewer visitors bought, so each visitor is now worth less. This upsell needs reworking.
Compare like-for-like periods (same weekdays, no big sales in either) and give a test at least a couple of weeks before deciding.
AOV by customer type and channel
A single store-wide AOV hides useful differences. Split it by:
- New vs returning customers. Returning customers often buy more per order, or less if they're restocking one item.
- Channel. Orders from email, paid search and social can have very different basket sizes.
- Device. Mobile and desktop shoppers often behave differently.
If paid traffic has a low AOV, that's where AOV tactics pay off most, because every order there carries an ad cost.
Mistakes to avoid
- Raising AOV with deep discounts. A bigger basket at a much lower margin can leave you with less profit, not more.
- Setting the free shipping threshold too high. If it's far above most baskets, it doesn't change behavior, and you lose the customers who were already near it.
- Watching AOV alone. A higher AOV with a lower conversion rate can mean less revenue overall. Track AOV, conversion rate and profit per order together.
To see how AOV affects how quickly you earn back acquisition costs, see the guide to customer acquisition cost.
FAQ
How do you calculate AOV?
Divide total revenue by the number of orders for the same period. $48,000 of revenue from 640 orders is an AOV of $75.
Should AOV include shipping and taxes?
Be consistent. Most stores calculate AOV on product revenue after discounts, excluding taxes. If you include shipping charges, do it every time, or month-to-month comparisons won't mean much.
What's a good AOV?
It depends on your product prices. The useful question is whether your AOV gives each order enough gross profit to cover your cost of acquiring it. Track it against your CAC rather than against other stores.
Does a higher AOV hurt conversion rate?
It can if you raise it by pushing customers to spend more than they want. Tactics that add genuine value, like relevant bundles or a reachable free shipping threshold, tend to raise AOV without hurting conversion much. Test and watch both numbers.