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January, 31, 2023

What is Average Order value?

Like the rest of the world, India's e-commerce market has undergone significant upheaval. Numerous business owners opened their internet stores as in-store transactions are very less and online selling became the "new normal". They started selling products moving from necessities to niche products. As the online orders starts to boom the next challenge that the business owners have to deal with is order management. That is where the concept of Average order value comes in to play.

This article walks you through the process of managing your order using the idea of average order value.

What is Average Order Value?

Average order value, a major e-commerce business metric, represents the typical amount each consumer has spent at a store. It calculates the average sum of all orders made with a vendor during a specific time frame. Using the following formula, you can easily determine the average order amount for your online store


Average order value= (Total revenue generated/total number of orders)


Making data-driven business decisions, such as maximizing product pricing and spending on marketing, is a crucial goal for all companies. Additionally, it is a Key Performance Indicator (KPI) that may assist you in comprehending the purchasing patterns of people who visit your online store.

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Why does AOV matter?

Why are we focusing an entire report on average order value? you might be wondering!

What makes this measure so crucial?

Simply said, you can generate more income from a given number of consumers the greater your AOV. That implies that you can raise sales without also raising marketing and sales expenses. Another tool that marketers can use to expand their company is AOV optimization.

Other key considerations regarding average order value include:


  • It should be checked on a regular basis, whether that's daily, weekly, or monthly.
  • It should be closely scrutinized for any peaks or dips to determine what caused them.
  • You can design marketing campaigns or put up flash deals for your consumers based on trends in your store's average order value.

Do not forget these E-commerce crucial Indicators


Increasing your average order value alone can be a wonderful strategy to boost your gross profit, but make sure you're also monitoring a few other crucial indicators:


Conversion Rate: The conversion rate is calculated by dividing the total number of visitors by the number of conversions. You don't want your total conversion rates to plummet after raising your AOV.


Revenue per Visitor: Revenue per Visitor (RPV) is a metric used to determine how much money is made each time a consumer sees your website.


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Benefits of High Order Value?

  • Higher profit

Of course, making more money is the primary motivation for raising your average order value. By raising the amount, a consumer spends on each purchase, you can make more money. You can take home a bigger share of the action and make a huge profit with an increase in AOV.


  • Better pricing achieved through cost reduction

A higher average order value will result in more of each transaction going toward your earnings. This indicates that you can sell your goods for less money while yet making more money by raising your AOV. Additionally, by using this technique, you can draw in new clients who are searching for greater offers and discounts on the goods they need.


  • Better standing with other sellers

When other companies realize that you can raise your AOV, they might be more likely to collaborate with you or form partnerships with you to achieve comparable results. Another way that raising your average order value might help your entire e-commerce community is if these connections result in sales for them. It can be extremely motivating to participate in the success when it appears that everyone is getting rich.

Ways to increase AOV?

  • Emphasize popular products

Highlight popular products on your website to increase their visibility. Make sure your product pages have attractive photographs, and if there are any special discounts, make sure they are prominently featured. These tactics might raise the average order value.

  • Make exclusive deals to new clients

Offering unique deals to draw in new clients is a terrific strategy to win their business. For first-time buyers, you can offer bundles. Once consumers are satisfied with the goods and the shopping experience, they will return for more, increasing the average order value.


  • cross-sell and upsell products

Cross-selling is the practice of recommending related products to clients. For instance, as a cross-sell tactic, you might suggest makeup brushes to a consumer purchasing cosmetics goods.  An upsell persuades customers to purchase additional products or more expensive variants of the same item. An increased average order value results from the two.


  • Offer a lenient return policy

Customers' decisions to purchase from you again are likely to be impacted if they have a negative return experience. Being open and accommodating will assist reduce a customer's concerns about making a purchase from you. On your website, make sure to clearly state your return policy. If a consumer returns a product they bought, be accommodating to keep them coming back. Increases in repeat business contribute to the average order value.


Therefore, if your average order value is low, there are a number of things you can do to raise it. You can, for instance, provide discounts or free delivery for orders that include multiple items, as well as a loyalty program that rewards customers for making purchases from you. By raising your AOV, you will be able to maximize the profit from each of your transactions and see the expansion of your company as a whole. So, are you prepared to experience an increase in sales? Then, it's time to begin putting some fresh changes into practice. Start selling online with zelloz.

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