In ecommerce inventory management, the acronym ‘AOV’ stands for average order value. This is an important metric that tracks the average dollar amount of every order placed on a website or mobile app over a designated period of time. Average order value is one the most important KPIs for any online store or retailer, since it drives decision-making related to your brand’s advertising spend, product pages, and pricing.
To calculate your company’s unique AOV, all you need to do is divide total revenue by the number of orders: average order value = [revenue ÷ number of orders]. Keep in mind, AOV is determined using sales per order, not sales per customer. So although a single customer may make multiple purchases with your brand, each order would be factored into AOV separately. And although AOV does not tell you about gross profit or profit margins, it does offer awareness around how your revenue growth comes to be.
Let’s say your company sells lamps, and for the month of May your online sales were $50,000, with a total of 1,000 orders. Using the AOV formula, you’d divide your revenue ($50,000) by your number of orders (1,000) to discover the average order value for that time period was $50. Although this is a simple calculation, it still provides useful insight into the customer journey.