Skewed up Average Order Values

Average Order Value (AOV) is a metric used all over in ecommerce and retail.

But it sucks at some things.

If your store a range of order sizes like very small and/or very large orders, then it can get off. Stores with wholesale customers buying in their regular store see this a lot as those large orders swing the average up.

There’s statistical ways to adjust for those (outliers) or you can use a different measurement (e.g. Median Order Value) but those aren’t commonly used. At least not as often as AOV is touted.

What ends up happening is that accepting wholesale orders drives the AOV up. That leaves you have to adjust it down whenever you’re looking to use it. For example, if you use your AOV for ads (e.g. AOV * margin > CAC) then those wholesale orders might cause you to overspend on ads.

AOV skew goes the other way too, many tiny orders pull the AOV down. That would mean you under-spend on ads. Not as big of a deal, you’ll have extra profit, but you could have missed out on some orders that would have been profitable.

AOV isn’t going to be replaced though. It’s too embedded in the industry and it’s good for a quick measurement. Just don’t be too precise when using it.

Repeat Customer Insights calculates your base AOV along with various others. For example, the Cohort Report includes the AOV for each Cohort for every month they are actively ordering (that’s a lot of AOVs, like a flock of AOVs right?)

That’ll let you spot some really interesting trends.

Eric Davis

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