Small Orders, Big Strategies: Understanding Low-AOV Ecommerce

Ecommerce businesses see a myriad of challenges and opportunities in their day-to-day operations. A common challenge is dealing with small or low average order value (AOV). 

Low AOV means that each sale generates a small amount of revenue, making it difficult for businesses to earn significant profits from individual transactions. 

This situation can be challenging for businesses, as they need to manage resources efficiently and find ways to increase overall profitability despite low revenue per sale. 

Low AOV numbers aside, many businesses can still find opportunities for growth. In this article, I will discuss what makes growth challenging for low AOV ecommerce businesses, and lay out some strategies on how businesses can overcome these challenges.

Understanding the low-AOV ecommerce model

Low-AOV ecommerce models are similar to the ones that you often see in places like your local budget clothing store or the online grocery market. These businesses aren’t selling big-ticket items; instead, they’re the masters of the small sale. 

They have to be pretty clever with their cash to make a decent profit from all those little sales. It’s like making a quilt — lots of small pieces stitched together to create something larger. When they decide to scale, the real trick for them is juggling a ton of these sales without dropping the ball.

Key factors that affect ecommerce AOV

⁤If you’re running an ecommerce store, it’s important to understand what influences how much your customers will spend per order. ⁤⁤Here’s a simpler breakdown. 

Industry.

Different industries usually see different AOVs. ⁤⁤For instance, an electronics store might have higher order values than a bookstore, simply because of the nature of the products. ⁤

Customers’ preferred shopping methods.

Customers shopping on mobile devices often spend less per order compared to desktop shoppers. 

Seasonal changes.

People tend to spend differently at various times of the year. ⁤⁤For example, during the holiday season, you might see a spike in order values because people are buying gifts. ⁤

Pricing structure.

The value of what you’re selling and how you price it can really sway how much people spend. It’s a bit like setting the right price for a yard sale item — too high and no takers, too low and you might not make much profit.

Retention strategy.

Often, the nature of the customer base impacts AOV. It’s generally easier to get people who have already bought from your business to spend more. ⁤⁤They’re familiar with your brand, store and products, so they might be more open to adding extra items to their cart or trying new products.

⁤Understanding these factors can help you determine strategies to encourage higher spending in your ecommerce store, which is key for growing your business. ⁤

Low-AOV ecommerce challenges

Smaller profits-per-sale.

Imagine every time you make a sale, you only get a tiny profit. That’s the reality for these low-AOV businesses. It’s because they’re selling products at such low prices. 

The game plan? Sell, sell, and sell some more. The more you sell, the more small profits start to add up; however, this does not come without its own cost.

New customers are expensive.

Attracting new customers can cost a pretty penny. Sometimes, merchants can even spend more to attract customers than they’ll initially spend at a store. 

These retailers have to get creative with their marketing without burning a hole in their pocket, which is not an easy task.

Some customers are just passing through.

If customers don’t come back for another purchase, their value to the business is limited. It’s all about getting them to stick around and keep buying. 

It’s like making a good friend; you want them to come around more than just once.

Growing pains.

More sales sound great, but they also mean more products to handle, more orders, more customer queries that might go unsatisfied, and more risk and complexity to inventory management. 

In order to avoid these growing pains, there is an initial business investment needed to get internal operations ready for higher sales volumes.

⁤Advantages of low AOV in ecommerce

While low AOV may seem like a problem for some ecommerce sellers, it does come with its own unique set of benefits.

Potentially higher conversions.

When items are priced lower, more people are likely to convert. It’s pretty straightforward — the less expensive the product, the more willing customers are to buy it.

Lower barrier to entry.

By offering more budget-friendly options, you open your doors to a larger group of shoppers. This includes those who are particularly careful about how much they spend.

More upsell opportunities.

With a low-AOV approach, you get plenty of opportunities to increase the value of each order. You can do this by recommending related products or upgrades at the point of sale.

Increase customer loyalty.

When customers feel they’re getting good value for their money, they’re more likely to come back. Affordable purchases that meet customer expectations can foster loyalty.

Adopting a low-AOV model can be a smart move for businesses looking to attract more customers and explore new market opportunities, all while keeping the potential for increased sales and customer loyalty in sight.

Why selling more isn’t always the answer

Let’s take a closer look at why simply boosting sales volumes isn’t always the best move for low-AOV businesses.

Issues with scaling.

When you sell more in a low-AOV setup, you’re not just increasing sales; you’re also upping your workload. 

Handling more orders means dealing with more shipping, more customer questions, and keeping track of more items. This can get expensive and start to eat into your profits, making the idea of scaling a bit less appealing.

Expensive customer acquisition.

It’s great to get new customers, but it’s not cheap, especially online where everyone’s trying to get noticed. Sometimes, it’s better to focus on getting your current customers to buy a bit more, rather than spending a lot on expensive search engine marketing to get new ones.

In a world of small orders, it’s not just about selling more stuff. It’s about selling smarter. Things like suggesting related products or better items (upselling) can help make each sale bigger, instead of just trying to have more sales.

A strain on resources

If you try to sell too much too fast, you might end up with not enough stock or not enough time to help your customers properly. This can make your customers unhappy and hurt your business in the long run.

For businesses with smaller order values, it’s about making the most of each sale, rather than just increasing how many sales you have. This means thinking about how to make each customer’s basket a little bigger and keeping them happy so they come back.

Winning strategies to increase AOV

While it is possible to succeed in low-AOV ecommerce, there are still many challenges to face along the way. To help alleviate some of these issues, businesses can work to increase AOV and bring in more profit for less.

Product bundling.

Why people love it: It’s like getting a meal deal instead of a single item. Customers enjoy the convenience and feel they’re getting more for their money.

The catch: If the bundle feels like it’s just a random mix, customers might not be interested. 

Here are some great tips on how to effectively bundle products:

• Make bundles clear and easy to understand

• Base bundle choices on what sells and customer preferences

• Regularly test different bundle options

• Show customers clearly how much they save with bundles

• Offer discounts on bundle purchases

Upsell and cross-sell products.

Why they work: It’s like when you’re buying a coffee and see a tempting pastry at the counter. Suggesting related or better products can gently bump up the sale.

The catch: Too many suggestions can be overwhelming. 

How can you effectively upsell and cross-sell to your customers? 

• Align upsell and cross-sell items with what customers like

• Ensure your team knows the products well for better recommendations

• Make adding on products simple and quick

• Tailor offers to fit different customer needs

• Keep in touch with customers for ongoing sales opportunities

Free delivery or shipping incentives.

Why it’s effective: Offering free delivery if customers buy a little more can encourage customers to throw an extra item or two into their cart.

The catch: If the threshold is too high, customers might back out altogether. It’s a delicate balance.

Discounts.

Why they’re tempting: Everybody loves a bargain. Discounts can be the nudge customers need to purchase more.

The catch: If you’re always having a sale, customers might never want to buy at full price. They’ll just wait for the next sale. 

Look into smart pricing strategies.

How they can boost sales: Tailoring your prices to what customers are willing to pay, keeping in mind the market trends, can really help.

The catch: If your prices are off the mark, it could turn customers away or make your brand seem less appealing.

Customer loyalty programs.

Why they’re great: Rewards and incentives can keep customers coming back and spending more. It’s about making them feel valued because of their loyalty.

The catch: Your program needs to be worthwhile and easy to understand. If it’s too complicated or not rewarding enough, people might lose interest.

Focusing on these strategies in a way that’s true to your brand and considerate of your customers can help you increase your average order value in a sustainable, customer-friendly way.

Emerging tech applications

When low-AOV ecommerce shops think about integrating augmented reality (AR) and virtual reality (VR), it’s a big step. These technologies make online shopping interactive, but they’re also a big investment. 

For stores where items aren’t too pricey, the decision to invest in AR and VR needs careful thought — will the better shopping experience bring enough extra revenue to cover the costs?

Artificial Intelligence (AI) is a key player, too. It’s great at figuring out shopping patterns, analyzing data, and predicting what customers might want next, which is helpful for inventory planning and marketing. AI adds a personal touch to shopping as well, with product suggestions tailored to customer preferences, potentially boosting AOV. 

It’s also being used more and more for guiding price adjustments based on demand and trends. Finally, AI chatbots are very interesting as they provide a helpful assistant available anytime, offering guidance and product tips, improving the overall customer experience.

The final word

It might seem like a no-brainer, but for any business, profit is key. 

Businesses with low AOV might have a challenging time seeing profitability with low margins, but there are a few key strategies that businesses can practice in order to raise AOV and increase success. 

One of the strategies to increase AOV is to create a more personalized experience for your customer. This can be done in a variety of ways, like bundling similar products together to make a larger sale. 

Businesses can also upsell or cross-sell at specific points during the buyer journey. By simply suggesting similar products as customers add items to their carts, companies can easily add more value to their orders. 

Discounts for bundling or minimum spends can also incentivize higher order values. Businesses can incentivize customers to add a certain amount to their cart by offering free shipping, a free gift, or even a percent discount. Often these small incentives can be enough to push customers to spend more per order. 

These simple strategies are great ways to help your business boost sales in a market where individual products are priced low, aiming for maximum efficiency and profit.