Glossary · Core metricsTOFU
AOV (Average Order Value)
The short answer
AOV (Average Order Value) is the average amount a customer spends per order. Divide total revenue by the number of orders: ₹12 lakh across 800 orders is an AOV of ₹1,500.
AOV matters because many costs are per order, not per rupee: shipping, packaging, payment gateway minimums and — critically — the ad cost to win the order. A higher AOV spreads those fixed costs across more revenue, which lowers your break-even ROAS.
Ways to raise AOV
- Free-shipping thresholds set just above your current AOV
- Bundles of complementary products at a modest saving
- Cross-sells on product and cart pages based on what's actually bought together
- Larger pack sizes with a better per-unit price
- Tiered offers — spend more, get more — instead of flat discounts
- Post-purchase upsells on the thank-you page
Mistakes
- Discounting to lift AOV, which can lower contribution per order
- Free-shipping thresholds set so high customers abandon instead
- Measuring AOV including returned orders
- Pushing bundles that increase return rates
AOV and acquisition cost
If CAC is ₹600 and AOV is ₹1,200 with a 50% contribution margin, the first order contributes ₹600 — break-even. Raising AOV to ₹1,500 lifts first-order contribution to ₹750, creating ₹150 of profit at the same CAC. See contribution margin.
AOV in practice
A store makes ₹10,00,000 from 2,000 orders in a month: AOV is ₹500. Introducing a free-shipping threshold at ₹699 and bundles lifts AOV to ₹580, improving the economics of every acquired customer.
How to increase AOV
- Bundles and multipacks
- Free-shipping thresholds
- Cross-sells and upsells
- Tiered discounts
AOV in Indian eCommerce
Free-shipping thresholds, combo packs and festive bundles are common ways Indian D2C brands raise AOV. Watch COD orders — higher AOV on COD can increase RTO risk.
Common AOV mistakes
- Raising thresholds so high they hurt conversion
- Discounts that lower margin more than AOV rises
- Ignoring AOV differences by channel
Frequently asked questions
What's a good AOV for Indian D2C?
It varies enormously by category. The right question is whether your AOV supports your costs: shipping, returns and CAC must all fit inside the contribution per order.
Should AOV include tax and shipping?
Define it consistently. Most brands use revenue after discounts and before tax.
Does AOV include GST?
For internal analysis, calculate AOV on net revenue excluding GST so it reflects real income.
Can raising AOV hurt conversion?
Aggressive thresholds or upsells can. Test them and watch conversion rate and revenue per visitor together.
Why does AOV matter for advertising?
Higher AOV raises revenue per conversion, so you can afford higher acquisition costs.
How is AOV calculated?
Total revenue divided by number of orders in a period.
Does AOV differ by channel?
Often — marketplaces, D2C sites and quick commerce can show very different AOVs.
Related terms
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