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On March 31, 2023 by Josh Arrowsmith
Explore more: Experiences & Industry Insights | Case Studies | Testimonials
In a heavily saturated eCommerce market where buyers have a plethora of choices at their disposal, increasing Average Order Value (AOV) can be challenging, but if achieved, is a decisive factor in growing your eCommerce business’ revenue in 2023. But what exactly is Average Order Value, and what can you do to increase it?
The UK’s eCommerce market revenue will hit £184bn in 2023 – up 12.5% compared to 2022 – making it the fourth largest market in the world.
The eCommerce market boom can be part-attributed to the rise of off-the-shelf eCommerce platforms like Shopify and WooCommerce. Their user-friendly and affordably priced pre-built store templates allow individuals to quickly create and open an online store. This has made the world of eCommerce completely accessible and appealing to many budding online store owners. In 2022, there were over half a million eCommerce-enabled websites in the UK – 13% more than in 2020.
Today, in an increasingly competitive space, challenges lie in not only differentiating yourself from rivals, but in competing for consumer attention, whose collective spending power has stagnated during a cost-of-living crisis.
Whether you are an established brand or only getting started, if you’re looking at options for what you can do to grow revenue, placing an emphasis on increasing Average Order Value can be a key step.
Average Order Value is a metric that tracks the average spend each time a customer makes a purchase from your online store.
Store owners often focus their marketing efforts on growing website traffic, typically via pay-per-click advertising, however focusing on increasing AOV can be more impactful and profitable overall.
Average Order Value is calculated by dividing total revenue by total number of orders received:
Average Order Value (£) = Total revenue (£) / number of orders
Tracking AOV is a key performance indicator of overall business health, allowing you to benchmark customer behaviour and use the information to inform decision-making. An increase over time suggests you are successfully cross-selling products or selling more expensive items.
An increasing AOV suggests you’re selling more stock, meaning you will have less capital tied up in static products. Stock moving through your supply chain faster can help finance reinvestments or an expansion into new ranges.
Understanding AOV coupled with conversion rates will help you forecast future revenue as well as help direct funds and focus on marketing activity.
There are several proven methods store owners can adopt to increase AOV, one of which is by offering free delivery. If you’re not already offering free delivery, now is the time to implement this. Free delivery taps into consumer psychology of how shoppers rationalise their online behaviour and the value placed on the concept of “free”.
The stats themselves back this up, as research suggests extra costs such as delivery charges can lead to an abandonment rate of 49%.
Once you’ve calculated AOV, add a set percentage above this figure and use this number as the minimum spend that qualifies for free delivery. – (Important: remember to factor in your delivery costs). As a result, customers will be more inclined to add extra items to their orders to qualify for free delivery.
Check out Finishing Line’s pick and pack services to see how we could support your eCommerce business’ fulfilment operations when handing large order quantities.
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Bundle deals and discount offers play a critical role in supporting an increased AOV. When customers perceive something as a great deal and feel they’re getting more value for their money, they are more likely to spend more. Grouping products and selling them as a bundle or applying a discount when a certain order threshold is met can incentivise added spending.
The research backs this up. New Study Shows Deals and Promotions Affect Every Part of Shopping Experience.
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“How about this shirt to go with your trousers?” or “Customers who purchased this jacket also purchased these gloves”
Promoting similar or complimentary items to a customer, based on the product they have just purchased or are currently viewing/and or reserved in their basket, raises the customer’s awareness of your complete product lines. Online clothing retailers such as Asos and Net-a-Porter often do this to significant effect.
Pairing items together has been proven to help prompt additional purchases.
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When customers earn rewards or future discounts every time they make a purchase, you help build loyalty and encourage repeat custom.
A discount on your next purchase or loyalty points that can be built and redeemed on future orders can often lead to increased spending as they look to hit rewards targets. Such a system helps develop brand loyalty – customers are more likely to return and shop with you if they are getting something back in return. Indeed, 48% of an eCommerce store’s revenue comes from repeat buyers, so looking after them is critical.
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When it comes to payment, are you offering customers all that they now come to expect? Beyond a smooth checkout process, increasing payment options provides greater flexibility for buyers, and can help increase your AOV too.
Apps like Klarna offer consumers the chance to spread their payments over a few months, but as a merchant, you get paid upfront. Klarna claim online retailers can expect a boost of up to 58% in AOV when using their product!
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Consumer psychology plays a key role in developing a strategy to increase AOV. Free shipping and customer rewards are powerful tools that can be deployed to support this, and through the introduction of product bundles and Buy Now Pay Later (BNPL) payment options, eCommerce businesses can gain market share and increase revenue.
Finishing Line support eCommerce brands in keeping their supply chain moving. Our specialist eCommerce Fulfilment services get your products to your customers in a fast, efficient, and exact manner. Contact us today about how we can support your business growth in 2023.
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Here at Finishing Line, our goal is to provide you with comprehensive industry insights surrounding the fulfilment industry in 2023, giving you expert tips and advice on fresh topics, as well as the best fulfilment practices that you too could be taking advantage of within your own business that other eCommerce companies of today are currently exploiting.
If you have found this article on the eCommerce sector a valuable read in how to increase your business’ Average Order Value, feel free to sign up to our email newsletter below to gain even more insights that we at Finishing Line can provide you, with 35+ years of experience. Check out our services; ecommerce fulfilment warehouse, pick & pack, product returns management, contract packing services, warehouse management system.
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