Average order value is total revenue divided by the number of orders. If you took £24,000 across 300 orders last month, your average order value is £80.
It is the most improvable number most businesses have, because it works on customers who have already decided to buy. Winning a new customer takes marketing spend and time. Raising what an existing customer puts in the basket takes a threshold, a bundle or a well-placed suggestion, and the extra revenue arrives at close to full margin because the costs of taking and fulfilling the order barely change.
The Bottom Line
- AOV = total revenue ÷ number of orders. Measure it monthly, by channel, over the same period both figures come from.
- A larger order at the same stop is nearly pure margin, because picking, packing and delivery cost roughly the same either way.
- Set a free delivery threshold above your current AOV, not at it. Guidance ranges from 5–15% above to a 30% rule.
- Bundles beat discounts. Both raise order size; only one costs you margin per unit.
- Raising AOV improves lifetime value proportionally, which makes marginal acquisition channels viable.
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How to calculate average order value
Average order value = total revenue ÷ total number of orders
Three details to get right.
Use the same period for both figures. Obvious and frequently botched when revenue comes from accounting software and order counts come from somewhere else with a different cut-off.
Decide on gross or net and stay consistent. Including delivery charges and excluding them both produce defensible numbers; switching between them produces a trend that is an artefact of the method.
Segment it. A single blended figure across every channel and customer type hides most of what is useful. Wholesale accounts and one-off retail buyers have entirely different order sizes, and averaging them describes neither. Calculate AOV per channel, and ideally per customer type.
Omniconvert cites an ecommerce average of around $133.77, via Growcode. Treat that as trivia rather than a target: order value varies so much by product category and price point that a cross-industry average has no diagnostic use. Your own figure last quarter is the benchmark that matters.
Why average order value matters more than it looks
The case for working on AOV comes down to where the costs sit.
Most of what it costs to serve an order is fixed per order rather than per pound of order. Taking the order, picking it, packing it, the paperwork, and above all the delivery: a van stopping at an address costs roughly the same whether it drops £40 of goods or £140. So the incremental revenue from a larger order carries almost no incremental cost, and it flows almost entirely to profit margin.
This is why small orders are so often unprofitable for anyone who delivers. Work out your full cost per drop, including vehicle, fuel, driver time and insurance, and set it against the gross profit on an average small order. For many businesses the small orders are subsidised by the large ones, which is tolerable until the mix shifts.
The second-order effect is on acquisition. Customer lifetime value is a function of order value, order frequency and retention, so a 20% rise in AOV raises lifetime value by 20% at no acquisition cost. Channels that were marginal become viable, which is a real strategic unlock and shows up in the revenue growth metrics as a higher ratio of lifetime value to acquisition cost.
Set a delivery threshold above your current average
The most reliable single tactic. Free delivery over a stated amount, with the amount set deliberately.
Place the threshold above your current AOV, far enough that it requires adding something and close enough to feel achievable. Published guidance ranges from 5–15% above current AOV to a 30% rule; the lower end is the safer starting point, and you can raise it once you see the response.
It works because of how people weigh a delivery charge. Spending another £12 on goods to avoid a £6 charge is not rational arithmetic, and it is extremely common behaviour, because the goods feel like value and the charge feels like waste.
Two failure modes. A threshold far above the typical order gets ignored and simply reads as expensive delivery, and can increase abandonment rather than order size. And a threshold below your break-even point on delivery means you are buying order-size growth at a loss, so calculate the true cost per drop before you set the number.
Make the gap visible at the point it matters. “Add £9 for free delivery” at checkout does the work; a threshold mentioned only in a footer does not.
Bundle rather than discount
Bundling raises order value without conceding price per unit, which is what separates it from a discount.
A customer buying one item at £30 is a £30 order. The same customer buying a three-item bundle at £85 is an £85 order, and while you have given up £5 against buying separately, you have gained £55 of revenue at the cost of £5 of margin. A straight 15% discount to encourage a larger order would have cost you considerably more.
What makes bundles work:
Combine things that get used together. The bundle has to make sense to the buyer before the price does. Products that solve one problem jointly sell; arbitrary pairings do not.
Make the saving explicit but modest. Enough to notice, not enough to make the components look overpriced.
Price bundles just above the delivery threshold. This is the underused move. The customer gets the bundle saving and free delivery simultaneously, two reasons to take it, and you have solved the “what do I add” problem for them.
Let customers build their own. Pick-any-three at a set price raises order size while letting people choose, which converts better than fixed bundles for anyone with varied tastes.
Minimum order values, and when they are the right answer
A threshold incentivises a bigger order. A minimum requires one.
Minimums are the correct answer when small orders are loss-making and no incentive is going to fix it. If your cost per drop is £11 and your gross profit on a £25 order is £8, that order should not be fulfilled, and a threshold that merely nudges does not solve it.
The objection is losing small customers, and some will go. The question is whether they were worth having, and in a delivery business the honest answer is frequently no: their orders consumed a van slot that a profitable order could have used. That is an opportunity cost, not just a thin margin.
Soften the edges rather than the number. Offer collection as an alternative, allow a paid delivery option below the minimum at a rate that covers cost, or set the minimum by route so that dense areas carry a lower bar than outlying ones. Before setting one, run it as an ROI calculation: the gain is the margin recovered on the orders that scale up, the cost is the gross profit on the orders you lose.
Upsells and add-ons that do not annoy people
The point of sale is where order value is decided, and most businesses leave it to chance.
Suggest at the right moment. A relevant add-on shown as the order is being assembled gets taken; the same suggestion after payment does not.
Suggest one thing, not five. A single well-chosen recommendation outperforms a grid of options, which produces decision fatigue and gets skipped entirely.
Choose complements, not alternatives. Showing a cheaper version of what someone is already buying reduces order value. Showing the thing that goes with it raises it.
Offer a larger size. The simplest upsell there is, and often the best value for both sides: the customer pays less per unit and you ship one order instead of two.
Train the person taking the order. In a business where orders come by phone or in person, the question “shall I add the usual?” outperforms any software. It requires knowing the customer, which is the advantage a small business actually has.
Measuring AOV properly
| What to measure | Why |
|---|---|
| AOV by channel | Phone, web and wholesale behave differently; the blend hides both |
| AOV by customer type | New customers order smaller; mixing them distorts the trend |
| Median order value | Reveals whether a few large orders are carrying the mean |
| Orders below break-even | The count that justifies a minimum or a threshold |
| AOV against order frequency | Guards against raising one by suppressing the other |
That last row is the important check. A threshold or minimum that raises order size while reducing order count can leave total revenue flat or lower. Watch both, and judge the result on revenue per customer per quarter rather than on AOV alone.
Also watch the cash effect. Larger, less frequent orders change the rhythm of money arriving, which matters if you are financing stock in advance, so keep an eye on the cash conversion cycle when you make a significant change.
And watch sentiment. Minimums and thresholds are the kind of change customers have opinions about. If net promoter score dips after you introduce one, the comments will tell you whether the policy or its communication was the problem, and it is usually the communication.
Average order value sits in the growth group of the small business metrics worth tracking.
Frequently asked questions
How do you calculate average order value?
Divide total revenue by the total number of orders for the same period. Decide whether delivery charges are included, and keep that choice consistent so the trend stays comparable.
What is a good average order value?
There is no cross-industry figure worth using, because order value depends almost entirely on what you sell and at what price point. The benchmark is your own AOV last quarter, and the one number that matters is whether it exceeds your cost to fulfil an order.
Where should I set a free delivery threshold?
Above your current average order value, commonly in the range of 5% to 30% above it, and never below the order size at which delivery becomes profitable. Start at the lower end and raise it once you see how customers respond.
Is bundling better than discounting?
For protecting margin, yes. A bundle raises order size while conceding only a small amount per unit, whereas a percentage discount concedes margin on everything in the basket including items the customer would have bought anyway.
Can raising average order value reduce total revenue?
Yes, if the tactic suppresses order frequency, which minimum order values sometimes do. Measure revenue per customer per quarter alongside AOV so you can see the trade rather than just the headline improvement.
Where to start
Calculate your AOV for last month, then calculate your true cost to fulfil one order. The gap between them is the figure the rest of this depends on, and for businesses that deliver it is frequently narrower than expected.
Then set a delivery threshold about 10% above your current average and display the remaining gap at checkout. It is a single change, it costs nothing to implement, and it is the most reliable way to find out how much room you have.
