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How do I measure average order value and avoid being misled by it?
Average order value (AOV) is total revenue divided by the number of orders in the period. If 100 orders bring in 5,000 currency units, AOV is 50. It tells you how much a typical basket is worth.
It matters because raising AOV through bundles or free-shipping thresholds can lift profit without more traffic.
Commonly misread:
- A rising AOV can come from a few very large orders. Check the median as well.
- Revenue-based AOV ignores discounts, returns and margin. A higher AOV with deeper discounts may earn less.
- Mixing wholesale and retail orders in one figure.
- Comparing across periods with different promotions.
Track AOV alongside gross margin per order and return rate, and segment by channel and customer type.
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