Purchase costs are rising more than twice as fast as prices. For Australian online retailers, increasing average order value has never mattered more.
The cost of running an online retail business in Australia is climbing fast, and on multiple fronts. Fuel, freight, energy, and supply costs are all up. The NAB Monthly Business Survey1 shows that purchase cost growth (in quarterly terms) lifted sharply to 4.5% in April, outpacing final price product growth at 1.8%.
The cost to buy and move products is rising more than twice as fast as what businesses are charging for it. NAB Head of Australian Economics Gareth Spence noted that “Pressure on margins is increasing, as purchase cost growth is more than 1ppt higher than prices in all industries.”
The Australian Bureau of Statistics (ABS) released data this month looking at the March Year-on-Year (YoY) trend in monthly household spending2. That data showed more promising changes in consumer spending, such as a 2.1% lift in the Clothing and Footwear category for NSW, a 2.9% boost in Furnishings and Household Equipment for QLD, and 3.1% rise in Miscellaneous Goods and Services for the ACT.
It appears the opportunity for retailers is still very much present, though balancing that opportunity with rising costs is crucial.
Australia Post will increase its fuel surcharges3 for contract customers for the second time in as many months. Domestic parcel deliveries and StarTrack Courier services will see surcharges rise from 12% to 19.5% from 01 June, following a hike on 23 April when the rate jumped from 4.8% to 12%. StarTrack Express and StarTrack Premium services also face a steep increase, moving from 22.7% to 30.2%.
Many retailers may instinctively cut costs and hold on. However, there is an alternative play around earning more from every order. The core idea hinges on average order value (AOV), which is the average amount a customer spends per transaction. Increase that number and retailers can see more revenue from the same number of shoppers, the same marketing spend, and the same logistics infrastructure. It does not solve every problem, but right now focusing on AOV may be the most effective response.
Here are three core strategies every retailer needs to know to increase AOV while keeping customer acquisition costs stable.
Rather than discounting individual products, retailers can group complementary items and offer them together at a slight saving versus buying separately. Shoppers receive more value and retailers actively reduce logistics costs by shipping one order instead of two. Retailers who use technology to recommend relevant product bundle combinations, when a customer is already in buying mode, can maximize the potential of this strategy.
Athos Commerce Predictive Product Bundling automatically recommends relevant product combinations at the point of purchase so retailers can lift AOV without the manual work.
Adrian R. Camilleri, Associate Professor of Marketing at UTS Business School writes4, “When a transaction involves a cost, we instinctively weigh the downside. But when something is entirely free, we experience a positive emotion and perceive the offer as more valuable than it is mathematically.”
Retailers can tap into the Zero Price Effect, a cognitive bias where consumers overvalue free items, by setting free shipping thresholds. When retailers set these free shipping targets at healthy levels above their AOV, they can entice shoppers while protecting margins.
A shopper looking for running shoes doesn’t need a generic “you might also like” carousel. What they may need are socks, insoles, or a hydration vest. Personalized product recommendations driven by browsing history and past purchases can lift AOV by creating relevance rather than randomness. Personalization and merchandising tools can help put the right products in front of the right shoppers.
Athos Commerce Personalization goes beyond recommendations, combining AI-powered search ranking, behavioural signals, and segment-driven targeting. Every shopper receives a tailored experience, from the first search to their final checkout.
There is a version of AOV that appears positive in a report while damaging margins. Over-discounting to drive bundle adoption, or setting free shipping thresholds too low, are common traps that end up costing retailers.
The goal is profitability. Retailers should review margin per order alongside AOV to ensure things are moving in the right direction. A clear warning sign is when AOV is up but margin per order has fallen.
With purchase costs rising more than twice as fast as final product prices, every dollar lost to low order values is harder to recover than it was a year ago. Retailers who get AOV right grow revenue and protect what is already there.
Athos Commerce brings together off-site discovery, on-site search, intelligent merchandising, personalization, and product bundling in one platform. Every tool works together to increase AOV across your entire product catalogue. Connect with the Athos Commerce team now to find out what your store’s order value could look like with the right foundations in place.
Average order value is the average amount a customer spends per transaction. It matters because it determines how much revenue each order generates against a fixed cost base, including shipping, payment processing, and customer acquisition. When those fixed costs rise, a higher AOV is what keeps margins intact. With Australian purchase cost growth running at 4.5% against final product price growth of just 1.8%, every order needs to work harder than it did a year ago.
Bundling groups complementary products together at a slight saving versus buying each item separately. Unlike discounting, which reduces the price of a single item, bundling increases the total transaction value. A shopper buying a cleanser might not have considered adding a toner. However, when presented as a bundle at the point of purchase, the combination feels logical. The shopper spends more, the retailer ships one order instead of two, and no price was slashed to make it happen.
The Zero Price Effect is a cognitive bias where people assign disproportionate value to anything that is free. In ecommerce, free shipping is the most common application. When a retailer sets a free shipping threshold above their current AOV, shoppers with a small gap left to fill do not see a barrier — they see a target. That near-miss instinct is a reliable driver of incremental cart value, provided the threshold is set high enough to protect the retailer’s margin.
Fuel surcharges sit on top of base postage rates and move independently of product pricing. Australia Post has increased its domestic parcel surcharge from 4.8% to 19.5% across two hikes in April and June 2025. That cost either compresses margin or gets passed to the customer. Retailers with a higher AOV spread that fixed shipping cost across a larger order value, which means the surcharge takes a smaller percentage cut from each transaction.
Start with free shipping thresholds and product bundling, as both can be implemented quickly and produce measurable results without significant technical lift. Set your threshold above your current AOV to give shoppers a clear target to reach. Then identify your most commonly bought product combinations and test bundling them at a modest saving. Layer in personalised recommendations and smarter on-site search once the foundational strategies are proven and generating returns.
