In plain words
Average order value is revenue divided by the number of orders over a period. Bundles, upsells and free-shipping thresholds are usually sold as ways to raise it.
It is a blunt number. Two stores with the same AOV can have very different orders: one with most orders near the average, another with many small orders and a few very large ones. Offers that act on order value, thresholds especially, depend on that shape and not on the average.
Formula
- AOV = total order revenue ÷ number of orders
Worked example
In the free-shipping example, 980 orders a month spread from $25 to $100 average $41.73. The usual rule of thumb sets free shipping at AOV plus shipping cost divided by margin, $55.37 here.
At $50.00, 240 of those orders already qualify, and the threshold gives away $1,680.00 of shipping a month. The average never shows that.
The example order
A $40.00 bag of coffee, shipped free, every cost counted
2 declared kinds cost nothing on this option
| Step | Grain | Amount |
|---|---|---|
| Revenue | – | $40.00 |
| cogs | per unit | −$12.00 |
| pick_pack | per order | −$1.18 |
| packaging | per parcel | −$0.50 |
| shipping | per parcel | −$7.50 |
| processing_fixed | per order | −$0.30 |
| refunds | percent | −$2.00 |
| processing | percent | −$1.16 |
| Gross margin | – | $15.36 |
| 2 kinds costing nothing | – | $0.00 |
Computed by the margin engine in Offer Suite's own code, in whole cents, from a $40.00 bag of coffee with a $12.00 unit cost.
A higher AOV is not higher profit
AOV rises when a discount makes customers buy more, and profit can still fall if the discount costs more than the extra units earn. Report contribution margin per order or profit per visitor next to AOV, and treat AOV on its own as a direction, not a result.
Using it
Use it to watch a trend, alongside the distribution of order values. Before setting a threshold or a bundle tier, look at the orders around the level you have in mind: how many sit just below it and could top up, and how many already sit above it and will take the benefit for free. Those two counts decide the result, and neither is in the average.