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Unlocking higher profits in eCommerce hinges just as much on boosting the value of the sales you do make as it does on increasing the number of sales overall.
Here’s a harsh paradox of eCommerce - more customers doesn’t always mean more profit. Whilst you may love to see that your store’s getting a higher conversion rate, by means of getting new customers or getting existing ones to check out once more, there’s another key eCommerce metric that will generate more money to your site - Your average order value (AOV).
With the prevalence of Amazon, Etsy, and other non owned D2C channels, eCommerce retailers are all coming to a stark realisation - Customer Acquisition Cost (CAC) is higher than ever. In such a competitive market, eCommerce retailers across the board are spending more and more on ad costs. And so, with you having invested so much in getting customers to your site in the first place, you want to ensure that you’re not only making sales, but that those sales are sufficiently keeping the gears turning.
Before you can make steps towards increasing your AOV, you need to understand why your AOV is where it is. This requires simply doing some investigating into your eCommerce store, and asking some key questions.
The answers to these questions will go a long way to informing you about why your AOV is where it is, and potentially shine a light on some steps you can take to increase it.
Sounds simple of course, but you’d be amazed at how many eCommerce brands simply refuse to increase their prices out of fear that they’ll lose out on sales. Whilst this is more than likely true, the risk may well be worth the reward, and the trade off of marginally increasing prices may outweigh the loss of sales.
If everything around your product - your marketing, your brand image, your messaging - denotes that you’re a premium product, but you’re not pricing your products as such, that’s not just an opportunity to increase your average order value, that’s money left on the table overall.
One of the most tried and tested ways at increasing the amount a customer spends are product bundles. Whether it be buy one get one half price, two for one deals, or simply throwing in a smaller gift item for free with a larger purchase, these are classic sales techniques. This works especially well for brands whose orders are typically made up of multiple products anyway, such as beauty or skincare brands.
If you spot that customers are often buying one product multiple times within the same order, or there is a pattern of two products being bought together, introducing a bundle might be a good step.
Assuming you have a free shipping boundary, this is a super powerful tool to increase your average order value.
Let’s assume your average order value is £57. With shipping costs, customers are going to be spending roughly £60. If your free shipping boundary is £100, customers won’t feel like they’re close enough to warrant spending the extra £43. However, If you move that boundary down to £70 (assuming you can afford to do so) customers are much more incentivised to add a smaller item to their cart and get that extra value.
You can illustrate this to your customers too, letting them know how far they are from free shipping with pop-ups or additional text once they get to the checkout.
There are so many ways to upsell in eCommerce. We see tons of brands that grandstand when it comes to doing upsells, claiming it’s too salesy and goes against their brand. Those brands don’t tend to make many sales. Even luxury eCommerce brands can integrate pop-ups, upsells, and otherwise “salesy” techniques, so long as they’re designed in the right way.
In fact, for these brands with a higher price point, upselling might be even easier anyway. Customers are already making a big purchase, so adding an extra few pounds to their order won’t feel like they’re breaking the bank much more than they already are.
Depending on the price point of your product, any perceived risk in a purchase is going to dissuade potential customers from A) checking out at all - and B) potentially adding any additional items to their cart. Therefore, if possible, a hassle-free, and more importantly money-free, returns policy is going to do a lot to boost your average order value.
A non-customer serving returns policy is not only going to damage their perception of your brand if they have to make a return, but can potentially stop them from making a purchase at all. We have an entire blog on how to optimise your returns policy if you’d like to learn more.
You may be asking yourself, “If I take steps towards increasing my average order value, surely the amount of sales I make will decrease?
Yes!
Your conversion rate and your average order value are two sides of one big eCommerce scale, meaning as one goes up, the other will go down. Finding balance is key, because there’s a sweet spot where your profitability is maximised. It’s important to test different things, try out different features, and constantly refine.
Finally, ask yourself if increasing your average order value is actually what your eCommerce brand needs right now. Your CAC might be through the roof in the competitive eCommerce landscape, so we do want those acquired customers to be spending a significant amount with us. But, it might be easier to implement methods that lower your CAC overall, giving some breathing room to your reliance on a high average order value.
It’s ultimately an exercise that spans across both your eCommerce store and your marketing channels. So, if you need a full stack eCommerce team to pick up the slack, talk to us to find out more.
