Why increasing SKUs may lower overall AOV

The catalog grew from 400 to 850 SKUs. More products should mean more opportunity for customers to find what they want and build larger carts. But AOV dropped from $78 to $64. More products correlated with smaller orders. The expanded selection seemed to shrink rather than grow customer spending.

Adding products changes what customers buy, not just whether they buy. Understanding how SKU expansion affects order value helps you anticipate the AOV impact of inventory decisions and design catalog strategies that grow rather than dilute transaction values.

Why more products can reduce AOV

SKU expansion affects order value through several mechanisms:

Lower-priced products enter the catalog

Expansion often means adding entry-level options, budget alternatives, or lower-priced accessories. These additions serve more customers but at lower price points. If new SKUs are predominantly lower-priced than existing inventory, they pull average order value downward.

A catalog with $50-$150 products might expand to include $15-$40 items. Customers who previously bought $80 items now have $25 alternatives. Some choose the cheaper option, lowering AOV.

Customers find exact-fit products instead of trading up

Limited selection forces customers toward available options that might be higher-priced than their ideal. Expanded selection lets customers find precisely what they want. If “precisely what they want” costs less than what they would have settled for, AOV drops.

A customer who would have bought a $90 product when only $60 and $90 options existed might now buy a $70 product that perfectly matches their needs. Better fit, lower AOV.

Choice overload reduces add-on purchases

More products mean more to consider. Overwhelmed customers simplify by buying just what they came for rather than exploring additions. Decision fatigue from abundant choice reduces basket-building behavior.

Customers who might have added accessories or related items when choice was simple now focus on completing their primary purchase without extras. Fewer items per order, lower AOV.

Categories with lower AOV gain share

Expansion might concentrate in categories with inherently lower average transaction values. Adding 200 accessories while adding 50 premium items shifts catalog composition toward lower-AOV categories. More purchases happen in the expanded low-AOV categories.

Search and filtering surface lower-priced options

Larger catalogs require better search and filtering. Price filtering often sorts low-to-high by default or customers actively filter for affordable options. Expanded catalogs make finding cheap options easier, which customers then buy.

Promotional mechanics change

More SKUs might mean more items on sale, more clearance products, or more promotional opportunities. If expansion correlates with increased discounting across the catalog, AOV reflects promotional pricing rather than catalog depth per se.

The math of SKU expansion and AOV

Consider how adding products shifts the average:

Before expansion:

400 SKUs, average item price $65

Average items per order: 1.8

AOV: ~$117

After expansion with lower-priced additions:

850 SKUs, average item price $48 (weighted by sales)

Average items per order: 1.7 (slight decrease from choice fatigue)

AOV: ~$82

Both lower average item price and fewer items per order contribute to AOV decline. The expansion succeeded in adding products but those products diluted order value.

When SKU expansion increases AOV

Not all expansion reduces AOV:

Premium products are added

If expansion focuses on higher-priced items, trade-up opportunities increase. Customers who maxed out your previous price range can now spend more. Premium expansion can lift AOV.

Complementary products enable bundling

Adding products that naturally pair with existing items encourages larger carts. Accessories, consumables, and related items increase items per order. Well-chosen complementary additions increase AOV.

Category expansion reaches different customers

New categories might attract customers with different spending patterns. If new categories draw higher-spending customers who also buy from existing categories, overall AOV can increase.

Better fit reduces returns, improving net AOV

More selection might reduce returns by helping customers find exactly what they need. Lower return rates increase retained revenue per order, improving effective AOV even if initial transaction values are similar.

Designing SKU expansion for AOV protection

Expand thoughtfully to protect order values:

Balance price tier additions

For every budget product added, consider adding a premium option. Maintain catalog balance across price points rather than skewing toward one end.

Add products that complement rather than substitute

Expansion through accessories and add-ons increases items per order. Expansion through alternatives might shift purchases from higher-priced to lower-priced options.

Merchandise to encourage trade-up

When lower-priced options exist, prominently show premium alternatives. Help customers understand the value difference. Don’t hide expensive options behind cheap ones.

Bundle expanded assortments

Create bundles that combine new and existing products at attractive total prices. Bundles encourage purchasing across the expanded catalog rather than cherry-picking cheap additions.

Monitor category mix shifts

Track what percentage of sales come from different categories before and after expansion. If low-AOV categories grow share disproportionately, that explains aggregate AOV decline.

Evaluating SKU expansion impact

Measure actual effects:

Track AOV trend alongside SKU count: Plot both metrics over time. Correlation between SKU growth and AOV decline suggests the relationship is real for your business.

Analyze by product cohort: Do products added in expansion sell at different AOVs than original products? Compare new product orders to legacy product orders.

Monitor items per order: If items per order decreases as SKUs increase, choice overload might be reducing basket building.

Segment by customer type: Do new versus returning customers respond differently to expanded selection? Returning customers might navigate large catalogs better than new visitors.

When lower AOV from expansion is acceptable

AOV decline isn’t always problematic:

If total revenue increases

Lower AOV with higher order count can produce more total revenue. More customers buying smaller amounts might exceed fewer customers buying larger amounts. Judge by total results.

If new customer segments are valuable

Lower-priced products might acquire customers who later trade up. Entry-level purchases that create relationships can lead to higher-value future purchases.

If margin structure is favorable

Lower-priced products might have better margins than higher-priced ones. AOV decline with margin improvement can increase profit even as average transaction decreases.

Frequently asked questions

Should I remove low-priced products to increase AOV?

Not necessarily. Low-priced products might acquire customers, complete orders, or serve legitimate needs. Removal might reduce total revenue even if AOV increases. Evaluate holistically.

How many SKUs is too many?

Varies by category and customer behavior. The point where choice overload exceeds selection benefit differs. Monitor conversion and AOV as you expand to find your limits.

Can I have wide selection and high AOV?

Yes, with careful merchandising. Feature premium products prominently, use recommendations to guide toward higher-value options, and ensure navigation doesn’t default to cheap choices.

How do I know if AOV decline is from SKU expansion versus other factors?

Analyze timing and correlation. If AOV declined when SKUs increased and other factors were stable, expansion likely contributed. Compare AOV on new versus existing products to confirm.