AOV (Average Order Value)

What is AOV?

AOV is the abbreviation for average order value (in German durchschnittlicher Bestellwert) and refers to the amount that customers of an online shop or retailer spend on average per order. Equivalent terms are average basket value and, in bricks-and-mortar retail, average receipt value. AOV is the revenue of a period divided by the number of orders in that period. A bookshop that issues 200 till receipts totalling EUR 5,000 on a Saturday reaches an average order value of EUR 25 that day. An online shop calculates in the same way, only with orders instead of till receipts.

The order value is a basic e-commerce metric. Together with the number of shop visitors and the conversion rate, the share of visitors who actually order, it explains revenue: visitors times conversion rate times order value. The metric appears in marketing and monthly reporting, in the financial model of retail companies and in the review by investors or buyers.

Calculating AOV: formula and questions of definition

Formula: AOV = revenue of a period / number of orders in the same period

Simple as the formula is, it requires many decisions. Whether revenue is taken with or without VAT, before or after returns, before or after discounts and vouchers, changes the value considerably. It is also open whether shipping costs paid by customers count towards the order value and whether cancelled orders are included. The most meaningful figure is a net value after returns and discounts that is defined in the same way in every period.

The mean is sensitive to outliers. A few large orders from business customers raise it markedly even if nothing else changes. The median is therefore often considered in addition, that is, the value that exactly half of the orders exceed and the other half fall below.

Levers for a higher AOV

• Product bundles: several related items at one total price.
• Minimum order value for free delivery: customers add to the basket to reach the threshold.
• Additional sales (cross-selling): suitable complementary products offered in the basket or at checkout.
• Higher-value variant (upselling): a larger or better-equipped product instead of the one originally chosen.

Each of these measures feeds back on the conversion rate. A high threshold for free delivery or intrusive additional offers can cause customers to abandon the purchase. A rising order value is therefore a success only if the total contribution margin also rises, not just the value per order. The contribution margin is the amount left of revenue after deducting all variable costs.

AOV and contribution margin per order

The contribution margin per order says more about the profitability of an online shop than the order value does. The variable costs of an order behave differently here. Cost of goods and percentage-based payment fees grow with the order value. Order picking, that is, assembling the ordered goods in the warehouse, as well as packaging, shipping and fixed fee components, by contrast, arise per order regardless of its value.

It follows that small orders are disproportionately burdened and in individual cases make no positive contribution. As the order value rises, the fixed costs per order are spread over more revenue. Discounts used to buy a higher order value eat up this advantage again. The order value therefore belongs to the unit economics of a retail company, the profitability calculation per unit.

AOV in due diligence

Buyers and investors look at the order value not as an overall average but by cohort, that is, by customer groups that first ordered in the same period. A cohort analysis shows whether repeat orders are higher or lower than the first and how the behaviour of new customer groups changes. It is also checked whether a change stems from price increases, a different product mix, more items per order or discount campaigns.

Worked example: calculating AOV and contribution margin per order

An online shop generates net revenue of EUR 420,000 a month from 6,000 orders. Cost of goods is 45% of the order value, shipping and packaging cost EUR 6.50 and order picking EUR 2.00 per order. The payment fee is 1.5% of the order value plus EUR 0.25.

• Order value: 420,000 divided by 6,000 = EUR 70
• Variable costs per order: EUR 31.50 cost of goods + EUR 6.50 shipping and packaging + EUR 2.00 order picking + EUR 1.30 payment fee = EUR 41.30
• Contribution margin per order: 70.00 minus 41.30 = EUR 28.70; per month 6,000 × 28.70 = EUR 172,200
• Measure: product bundles without an additional discount raise the order value to EUR 80. Some customers do not want the larger offer and abandon the purchase, so the number of orders falls to 5,600
• Variable costs per order: 36.00 + 6.50 + 2.00 + 1.45 = EUR 45.95; contribution margin 80.00 minus 45.95 = EUR 34.05
• Contribution margin per month: 5,600 × 34.05 = EUR 190,680, that is, EUR 18,480 more than before
• Minimum number of orders for the measure to pay off: 172,200 divided by 34.05 = around 5,057

The result means: the order value rises by 14.3%, but the contribution margin per order by 18.6%, because shipping and order picking are spread over a higher amount. Although 6.7% fewer orders come in, the total contribution margin rises by 10.7%. The measure remains advantageous as long as the number of orders falls by no more than around 15.7%. If it fell to 5,000, the contribution margin, at EUR 170,250, would be below the starting value.

Distinction: AOV, ARPA, LTV and ROAS

• ARPA (average revenue per account): the average recurring revenue per paying customer account, usually per month, typical for subscriptions. The order value relates to the individual order, ARPA to the customer and a period. If a customer orders three times a year for EUR 60 each, the order value is EUR 60 and the customer's revenue is EUR 180 a year. Without a subscription, this is better described as revenue per customer than as ARPA.
• LTV: the customer value over the entire customer relationship. In simplified terms, it results from order value, number of orders per customer and margin.
• Items per order: counts the number of units in the basket, not their value. Both metrics together show whether a higher order value stems from more or from more expensive items.
• ROAS (return on ad spend): measures revenue per euro of advertising and, other things being equal, rises with the order value.

Common mistakes

• Gross and net mixed. Values with and without VAT, or before and after returns, are compared in one time series.
• Order value considered without margin. A higher value that arises from discounts or low-margin items can reduce the contribution margin.
• Conversion rate ignored. Measures are judged by order value even though they deter customers from buying.
• Outliers in the average. Large individual orders raise the mean and suggest a trend that does not exist in the core business.

Frequently asked questions

How is AOV calculated?

The revenue of a period is divided by the number of orders in the same period. A shop with monthly revenue of EUR 420,000 from 6,000 orders has an AOV of EUR 70. For comparisons over several months, revenue and orders must be defined in the same way each time, for example net and after returns.

What does marketing use AOV for?

Above all to set how much advertising may cost per order. In the worked example, EUR 28.70 of contribution margin remains from an order value of EUR 70 before advertising costs. If winning an order costs more, the first order does not cover its advertising costs. This corresponds to a break-even ROAS of 70 / 28.70 = around 2.44, that is, at least EUR 2.44 of revenue per euro of advertising.

Do shipping costs count towards the order value?

Each company decides this for itself. The value of the goods without shipping costs is easier to compare; shipping costs paid are then shown separately.

Is a rising order value always a good sign?

No. It can also stem from price increases that make customers leave in the long run, or from discount campaigns that reduce the margin. It becomes meaningful only together with contribution margin and conversion rate.

Why do first orders and repeat orders differ?

Because with the first order customers often use an introductory offer or first test the range. If repeat orders are consistently higher, customer value rises.

What is a good AOV?

There is no generally good value. Consumables lead to smaller, frequent orders, durable products to larger and rarer ones; the value is comparable only for similar ranges. Economically, a good order value is one at which a positive contribution margin per order remains after cost of goods, shipping, order picking and payment fees.

The Roemer Capital view

For online retailers, Roemer Capital defines the order value for investors as a net value after returns and shows it separately for first and repeat orders. This makes visible whether a rising value stems from prices, product mix or discount campaigns.

In the financial model, Roemer Capital never sets the order value in isolation but together with conversion rate, order frequency and contribution margin per order. Growth assumptions thus remain traceable and withstand review by investors. Orders that deliver no positive contribution margin after shipping and order picking are reported separately, so that it is visible how large this share is.