Average Order Value is a metric that many stores like to boast about.
It's great to have a high average and you want to feel good about it, but comparing your average order value to another store's can be a waste of time.
Imagine if you will, three stores.
Jake's Jewelry, Sally's Soaps, and Mary's Machines.
Jake sells mid-range jewelry and has an average order value of $345.
Sally creates and sells handmade soaps with an average order value of $32.
Mary sells used construction vehicles with an average order value of $44,253.
If this was a contest of whose AOV was the largest, Mary would beat everyone else.
But that doesn't mean her business is better than Jake or Sally's.
What if it cost Mary $30,000 to acquire a vehicle, $5,000 in commissions and selling costs, and $2,000 to ship it?
(Unfortunately for Mary, USPS doesn't have a flat-rate box large enough for her.)
Mary is spending $37,000 in direct costs to make $44,253. Not bad, but what if she only sold one per month? Is the $7,253 net income enough for her business?
Look at Sally now. Her soaps cost $3 per order in supplies, $5 in labor, and another $5 in shipping.
She's paying $13 for every $32 order but is selling at a much higher volume at 1,000 orders per month. $19 net income per order becomes $19,000 for the month.
While these examples are extreme, they highlight why you can't compare Average Order Value between very different businesses.
You can look at your industry as a whole (jewelry, cosmetics, heavy equipment, etc.), you can look at close competitors, or you can look at yourself in the past.
But don't look at a specific store that is so different from yours.
There's too many differences to draw any conclusion without a bunch of more data.
In Repeat Customer Insights I calculate your Average Order Value along with a dozen other metrics. Seeing how the different metrics relate gives you a much clearer picture of how your store is doing than just your Average Order Value alone.
Eric Davis
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