Average Order Value is a key sales metric for Shopify store.
It’s not the only metric you should watch but if it gets too low, your store could be hurt in various ways. Some clear, some complex.
The most visible way is that with a drop in AOV, you’ll be earning less per order. Usually that will decrease your margin and profit, but not always.
The percentage of your non-inventory per-order costs will often rise because your pack, pick, and ship process will cost the same while the total income will drop.
In the mid-term, a lower AOV will impact your customer acquisition the most. With smaller order sizes you’ll need to acquire more customers to maintain your net profit. That usually means scaling up your marketing channels which can result in higher acquisition costs.
The big problem with low AOVs is that you don’t have a lot of flexibility or freedom of choice. A business operating that way can easily get stuck in a rut or taken out by a competitor.
Low AOVs can be okay but you’ll have to pay a lot of attention to your margin, variable costs, and most of all, your product mix (and its changes).
With everything else the same, a higher AOV will always be better than a lower AOV.
Are you measuring your AOV? Are you watching how it changes over time?
Or is it something that you only check now and then and just go by your gut feel of "it looks good"?
If you’d like to better track it, Repeat Customer Insights can analyze your entire customer base and figure it out (along with a dozen other metrics).
You might even spot a problem before it gets too bad to correct.
Use cohorts to find out who the best customers are in your Shopify store
Repeat Customer Insights will automatically group your customers into cohorts based on when they first purchased. This will let you see how the date customers bought would impact their behavior.