It’s the holiday season! That late Q4 push where DTC brands are looking to increase their sales and maximize their Average Order Value (AOV) is in full swing. Black Friday & Cyber Monday 2022 saw Shopify merchants set a new record with $7.5 billion in sales, a 19% increase from the previous year! 

Needless to say, this time of year is a huge opportunity for brands to offer discounts, create product strategies, and explore aggressive marketing activations to increase their customers’ cart values. As you close out the year and get going for Q1 2023, we’re bringing you an overview of Average Order Value, how you can optimize your AOV, and a look back at AOV growth that Peel customers experienced in 2022 vs 2021.

Let’s back up for a sec and revisit the age old questions - what is AOV and why does it matter?

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Average Order Value - What is it & why does it matter for your DTC brand?

Average Order Value (AOV) shows you the average dollar amount spent by your customers in their individual orders. It’s a metric that serves as a barometer for how much value you’re getting out of each of your transactions.

Moral of the story, higher AOV means customers are either buying higher volume or higher ticket items, which are both healthy for your brand. 

DTC brands try to increase their AOV through:

• Email and SMS product recommendations
• Discount strategies
• Free shipping thresholds
• Free gift when reaching a cart amount
• Product bundles
• On-page upsells
• In-cart upsells
• Cross selling
• Subscription add-ons
• Loyalty rewards

That’s just a shortlist of the marketing and product strategies brands take, which can help you increase AOV and see real growth.

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Why AOV is Important for the Holiday Season and Beyond

It’s that time of year when brands are offering up all the incentives for buying more. Black Friday, Cyber Monday and the holiday season are synonymous with doorbuster deals and huge discounts.

But what’s really behind DTC brands and retailers giving up portions of their margins is a bid to increase their volume of items sold, which is a natural AOV booster since customers are adding more items to their carts.

So, why is it important for merchants to use their increased BFCM and holiday traffic to boost AOV? Higher AOV means overall growth. Sure, volume of transactions plays a factor here too, but boosting your AOV is always a goal for DTC brands. 

Whether your customers are buying more items per checkout or purchasing higher priced products, if you’re increasing AOV, you’re also making strides toward building a healthier long-term customer base with improved loyalty. In fact, simple AOV incentives like loyalty rewards and free shipping thresholds can go such a long way in improving your retention and repurchase rate.

Better repurchase rate and retention = sustainable growth.

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AOV Metrics in Peel

Peel covers Average Order Value from every angle you need to measure your customer behavior and, ultimately, your growth.  We have 16 different AOV metrics! Here’s the breakdown:

The first 4 are measured across New Customers Only, Returning Customers Only, and Blended (New & Returning) making for 12 unique AOV metrics to help you drill down to the specifics. They are:

• AOV Total Sales (New Customers)
• AOV Total Sales (Returning Customers)
• AOV Total Sales (Blended - New & Returning)
• AOV Net Sales (New Customers)
• AOV Net Sales (Returning Customers)
• AOV Net Sales (Blended - New & Returning)
• AOV Gross Sales (New Customers)
• AOV Gross Sales (Returning Customers)
• AOV Gross Sales (Blended - New & Returning)
• AOV* Net Sales not including Returns (New Customers)
• AOV* Net Sales not including Returns (Returning Customers)
• AOV* Net Sales not including Returns (New & Returning Customers)

No matter which of your sales dimensions you want to look at, and which of your customer groups you want to zoom into, we have you covered.

Want to know the AOV using Net Sales for your New Customers customers during BFCM? ✅

AOV using Total Sales of your Returning BFCM Customers? ✅ (Great way to measure your post-BFCM retention efforts).

Hint: Peel allows you to take your AOV data down another level and segment by products, discounts, campaigns, customer tags, and dozens of other filters in just a couple clicks!

The next 4 are our Cohort Analyses:

• Cohort AOV - Gross Sales
• Cohort AOV - Net Sales
• Cohort AOV - Total Sales
• Cohort AOV* (Net Sales not including Returns)

Cohort is a fancy word for group, and in ecommerce, cohorts just mean groups of customers. Cohort Analysis follows the new customers that you acquire each month and analyzes them across a bunch of metrics – including AOV. So you can measure your customers’ AOV over time. Does their AOV increase on repeat purchases? Or  does it increase during the months when there is a promotional discount or seasonal discount?

Example: If you want to learn if your BFCM discount strategy was effective at pumping up AOV of your November customers, you could simply segment your Cohort AOV metric by a specific discount code. It takes seconds with just a couple clicks and you can see the AOV of your November customers who used that code (which you can continue to track through the end of the year and beyond).

We’ve created a pre-made AOV dashboard template that you can get on your Peel account today.

If you’re already using Peel, just chat in and we can add it to your account. If you’re considering Peel, hop on a free 7-day trial and we can add this template to your account too! Check it out:

What We’re Seeing in AOV - 2021 vs 2022

We compared 2021 and 2022 AOV stats from Peel users and here’s what we found!

67% Food & Beverage Brands using Peel had a higher AOV in 2022 than in 2021.

CPG brands using Peel are really thriving. Many of them have built-in repurchase drivers like subscription programs or just the simple need for the customers to restock on their products. With Peel, they can track repurchase behavior across their customers and identify the perfect times to engage their customers with offers, product replenishment reminders, and bundles based on their purchasing behavior.

This shortens sales cycles, boosts lifetime value (LTV), and increases AOV as customers buy more products, more often as a result of targeted messaging..

The Home Industry – which ranges from kitchen, to bedding, to mattresses, and furniture – saw a 39.67% increase in AOV overall.

Home goods and accessories brands were the big AOV winners this year. People are still frequently purchasing high quantities of home furnishings.

Apparel Brands saw an almost 9% increase in AOV overall.

Merchants in the Apparel Industry have found ways to increase their AOV this year compared to 2021. Peel is helping them focus on the right pockets of customers to drive higher repurchase rates, better loyalty, and ultimately, improved AOV.

Despite all the warnings that ecommerce was set to slow down this season based on the uncertainty of the economy, our customers are showing strong growth numbers across AOV and a variety of other growth metrics available in Peel. With a record-setting BFCM weekend in the books for Shopify merchants, many brands are looking to improve their strategies and drive growth into 2023.

Our biggest piece of advice is to change the mindset around your newly-acquired BFCM customers. That shouldn’t just be a huge sales windfall when all is said and done. That weekend should be your biggest acquisition event of the year, and a great opportunity to convert one-time holiday customers into repeat purchasers throughout the next year!

Peel helps you unlock the data to understand how to engage those customers, based on what they purchased, how they purchased it, and when they are likely to come back, if you just give them the right nudge, with the right data-informed campaign.

Get a free 7-day trial of Peel today and we can help you retain more customers through timely communications, better product strategy, and more targeted promotional campaigns backed by data for sustainable growth.