Average Order Value

Average order value decides how much revenue each per-order cost is spread over, so it is one of the strongest levers on logistics cost as a percent of sales. Pick fees, boxes, and much of postage cost about the same whether the order is $40 or $90. Brands set free shipping thresholds and bundles around it. For example, $360,000 of revenue from 4,800 orders is a $75 AOV. With $10 of per-order logistics cost, that is 13.3% of revenue. At a $90 AOV, it falls to about 11%.

AOV = total order revenue ÷ number of orders

How does average order value affect fulfillment costs?

Per-order costs such as the base pick fee, box, and much of postage stay similar as AOV rises, so fulfillment and shipping as a percent of revenue fall. For example, a $10 per-order logistics cost is 20% of a $50 order but 10% of a $100 order.

How do you calculate average order value?

Divide total order revenue by the number of orders in the same period. $360,000 across 4,800 orders is a $75 AOV.

Where should a free shipping threshold be set?

A common starting point is somewhat above your current AOV, so customers add an item to qualify. Test it and watch conversion and contribution margin, not just AOV.

• Units per OrderUPOAverage items in each order
• Fulfillment Cost as Percent of RevenueShare of revenue spent on fulfillment
• Shipping Cost as Percent of RevenueShare of revenue spent on postage
• Contribution MarginWhat each order leaves after variable costs