Finance Fundamentals

Shopify Average Order Value: What It Is & How to Improve It

Nov 7, 2024 | By Leah Tran

Average Order Value (AOV) is a key eCommerce metric that measures the average amount customers spend per transaction in your Shopify store. Understanding AOV helps you assess customer purchasing behavior and optimize revenue without acquiring more customers.

How to Calculate Average Order Value

To calculate AOV, use the following formula:

AOV = Total Revenue / Total Number of Orders

For example, if your Shopify store generates $10,000 in revenue from 500 orders, your AOV would be:

$10,000 / 500 = $20

How Shopify Calculates AOV

Shopify calculates AOV by dividing gross sales (minus discounts) by the total number of orders, excluding refunds or post-purchase adjustments. You can find this metric in your Shopify analytics dashboard.

Why is AOV Important?

A higher AOV directly impacts your net profit margin, ensuring that your store remains profitable after covering costs. This is especially crucial for businesses with thin dropshipping profit margins, where increasing order value can significantly improve overall earnings. This benefits your Shopify store by:

Boosting profitability: Higher AOV leads to more revenue from existing traffic.
Improving marketing efficiency: Maximizing customer value makes ad spend more effective.
Enhancing cash flow: Larger purchases help maintain a steady cash flow for business growth.

Tips to Improve Average Order Value in Shopify

Increasing AOV doesn’t require bringing in new customers—it’s about maximizing the value of each purchase. Here are some effective strategies to help you boost AOV in your Shopify store:

1. Offer Product Bundles & Upsells

Encourage customers to buy more by bundling complementary products. Use Shopify apps like Bold Bundles or ReConvert to create upsell offers at checkout.

Upselling To Increase AOV — *Upselling your customers properly can help improve your AOV significantly*

2. Set Free Shipping Thresholds

Offer free shipping for orders above a certain amount (e.g., “Get free shipping on orders over $50”). This motivates customers to add more items to their carts.

*Discount and free shipping can be an effective leverage to lift up your average order value*

3. Use Volume Discounts

Provide discounts for bulk purchases, like “Buy 2, Get 10% Off.” Shopify’s discount feature allows you to create automatic or coupon-based deals.

4. Implement Cross-Selling Strategies

Suggest related products on product pages or at checkout. For instance, if a customer buys a phone case, recommend a screen protector.

*Cross-selling relevant items that add value to your customers' shopping experience is an efficient way to retain them and increase your AOV*

5. Leverage Loyalty & Rewards Programs

Encourage repeat purchases with rewards programs. Apps like Smile.io help create point-based incentives that increase AOV over time.

*Running a loyalty program can help facilitate your customer relationship and accelerate your sales growth*

Shopify’s Average Order Value is a crucial metric for scaling your eCommerce business. However, it’s also important to track your rate of return, as higher AOV should not come at the cost of increased refunds or dissatisfied customers. By implementing strategies like bundling, upselling, and free shipping thresholds, you can effectively increase AOV and maximize revenue from your existing customer base.

Leah Tran

Leah Tran – Content Executive at TrueProfit & eCommerce Content Specialist Leah Tran is a Content Specialist at TrueProfit, where she crafts SEO-driven and data-backed content to help eCommerce merchants understand their true profitability. With a strong background in content writing, research, and editorial content, she focuses on making complex financial and business concepts clear, engaging, and actionable for Shopify merchants.