Ecommerce growth creates the opportunity for your business to operate more efficiently. If you scale effectively, then your revenue will grow faster than your costs and your workload. But that only happens when your processes evolve as order volume and operational complexity increase.
Evaluating cost per order provides a very practical way to track that relationship. When you look at it alongside average order value and margins, you can see whether your business is actually becoming more efficient as it grows and where there’s scope for improvement.
Calculating your cost per order and breaking it down into its constituent parts is the first step in identifying where you can improve efficiency and what you should scale.
Your ecommerce business can grow without scaling, and that’s when you start to feel the pain. Growth means your ecommerce business is doing more. Scaling means it can do more without costs and workload rising at the same rate.
When you’re scaling ecommerce effectively, your store revenue will grow faster than your cost of doing business.
If you go from 100 orders a day to 500, that’s growth. If, in order to process those 500 orders, you now need 5 times as many people, then you’ve grown, but you haven’t scaled well.
The same applies throughout the business. Adding hundreds of SKUs is growth. Managing those SKUs with the same manual product updates is a scaling problem. Going into a new market is growth. Entering a new market means adding another disconnected system and another layer of admin each time, which makes that growth much more expensive.
Good scaling changes the relationship between volume and cost. Revenue and orders go up faster than the resources needed to support them. That’s why cost per order is so useful. It’s a way of measuring whether increased volume is actually resulting in greater efficiency.
Grab a calculator and work out the monthly cost of running your ecommerce platform and technology stack. Take that total and divide it by the number of orders you’ve processed over that same period. That’s the simple formula:
Cost per order = Total monthly ecommerce costs / monthly orders
Include costs such as platform or licensing fees, hosting, apps and extensions, payment processing, and transaction surcharges.
Want a more comprehensive view of operational efficiency? You can run the calculation to include fulfillment and labor costs. But ensure the inputs are the same when you’re comparing one period to the next.
Say a store processes 5,000 orders a month at an average order value of $80 (so $400k GMV per month). Their ecommerce costs might look like this:
For this example, assume payment processing costs 2.9% + $0.30 per transaction.
Using our formula: $15,000 in costs / 5,000 orders = $3 per order.
So, is that good? It all depends on your operation. The best way to use cost per order is to monitor how it behaves as volume increases in line with AOV and margin. A higher cost per order isn’t necessarily a bad thing if each order is also becoming more valuable.
The cost-per-order figure on its own is only of limited value. The useful bit is understanding how each cost behaves as order volume and revenue increase.
The $3 per order is the base cost. Break it down as you scale to see which of the costs will go down and which won’t. Apply the same logic to labor and fulfillment, and you’ll start to identify where growth is actually becoming expensive.
Now investigate what’s driving your cost per order up. Look at the software, staff time, and manual work required to handle more products and orders. Automation can keep those fixed costs from going up in line with volume.
If per-order costs are rising, start with inventory, fulfillment, and shipping. When percentage-based fees are eating into your margins, look at payment fees and the economics of new selling models, markets, and channels. Do specific costs increase when you exceed a threshold? Look at your hosting, infrastructure, and service tiers. Know what the next step up will be before you hit it.
You don’t need to optimize everything at once. Find the cost that’s moving in the wrong direction and start there.
When orders increase faster than the number of people available to manage them, small administrative tasks start to become a labor problem. Slowly but surely, busywork bogs people down as you grow without scaling your ecommerce business effectively.
The team manually updates stock levels, product information, sends emails, follows up on failed payments, and moves information between disconnected systems. Individually, none of those tasks are particularly expensive. Over thousands of orders and hundreds of products, they quickly start to eat up a massive amount of time.
Hiring more people will obviously take some pressure off, but first, look for work that doesn’t require a person at all. What could you automate? Start with the tasks that are repetitive, rule-based, and are triggered by something predictable. If the same action happens every time an order hits a certain status, when a product runs low, or when a customer meets certain criteria, then you’re very likely to be able to automate it.
That also applies to catalog management. Updating 500 products individually is an operational issue rather than an inevitable result of having a large catalog. You can absolutely manage catalog growth without it creating an equal amount of admin work, thanks to bulk editing, imports, inventory sync, and standardized product data.
There are also some interactions which simply shouldn’t be automated. Customer service, merchandising decisions, exception handling, and the like all still require a human element. Automation is most useful when it takes out the rote work surrounding those decisions.
Scale and automate with WooCommerce
WooCommerce deals with a number of these functions at the core level. You can bulk-edit product data, automatically update your stock when an order is placed, and send various transactional emails as an order progresses through the purchasing process.
AutomateWoo takes it further with workflows triggered by store activity (e.g., customer follow-ups, order status changes, abandoned carts, subscription events).
For example, you could create an AutomateWoo workflow that fires when an order is completed, checks whether it’s their first order, and then sends a welcome email an hour later. Rather than someone having to identify the new customer and then manually follow up, you have the same workflow run every time those conditions are met.
The automation payoff is on the fixed-cost side of your cost per order. If your order volume doubles without requiring twice as many admin hours, your labor costs are spread across twice as many orders.
Fulfillment costs get repeated every time an order ships. So small inefficiencies in picking, packing, inventory management or shipping rates get multiplied by volume.
Inventory inaccuracies of course lead to all sorts of inefficiencies. If your stock levels are wrong across your warehouses, stores, and sales channels, you end up with a lot more manual checking, split shipments, overselling, and delayed orders. Getting your inventory systems linked and synchronizing stock changes across the organization eliminates a whole lot of unnecessary work.
Shipping is another area where you can review processes. You can compare what the customer pays with what carriers actually charge and see how much staff time goes into labeling, service selection, and shipment processing. At volume, the impact of batch processes and, of course, negotiated or discounted rates can be quite significant on the fulfillment cost per order.
WooCommerce Shipping can handle labels and fulfillment from your admin area. For stores with very high order volumes, multiple warehouses, or more in-depth 3PL integrations, a dedicated platform like ShipStation can handle much of the work and centralize operations.
You don’t need to replace everything. You’ll want to connect and streamline the systems that are already doing useful work and then add in the specialist tools when the volume or complexity of the work makes it worthwhile. Given that these are costs which are incurred with every shipment, even a small improvement in efficiency becomes more valuable as your order volume increases.
Selling in new ways brings with it a whole set of considerations when it comes to scaling. Look at the economics before you do anything. A new geo market will have currency conversion fees and different payment costs. Subscriptions will have recurring billing issues. Marketplaces and sales channels will take their own commissions/transaction fees. B2B will have different pricing, payment terms, and checkout.
Factor in any changes to your product mix as well. Selling more of your higher-priced items will increase the dollar cost of % fees, while shifting to smaller/lighter products will reduce your shipping cost per order. A figure that may seem small actually warrants greater consideration as GMV increases. One percentage point on $100k of monthly sales is $1k. On $1M, it’s $10k.
WooCommerce gives merchants a lot of flexibility in how they add models. The official extensions will support subscriptions, memberships, bundles, and other sales models. WooPayments supports multiple currencies. WooCommerce can also be connected to other payment gateways and B2B tools if you need different pricing or payment options.
Before you add a new selling model, you need to work out its expected revenue and the associated percentage costs.
Infrastructure can feel more expensive when the increase hits suddenly. Your hosting costs may stay flat as your traffic and transaction volume go up, but there’s a big jump when you need to increase capacity or exceed your current plan’s limits.
Pressable is a good example. At their current annual billing rates, the Signature 5 plan is $129.17 per month and includes up to 400,000 visits per month and 80GB of storage. The next level up (Signature 6) is $291.67 per month and includes up to 1 million visits per month and 200GB of storage.
Hosting providers often charge you for overages on visits and storage. So upgrading isn’t the only way your infrastructure costs can go up. Pressable, for instance, charges $1.20 per 1k visits and $1 per GB of storage over your plan’s included allowance.
Your hosting plan’s price point is only one aspect of the story. An ecommerce store also needs sufficient capacity to handle periods of high activity (think the holidays), when there will be a large number of people on the site at the same time, browsing, adding to their carts, and checking out. You need to test performance under real transaction loads, particularly prior to any promotions and during peak seasons.
Compare those requirements to your host’s pricing model. Know what constitutes an overrun, what the next tier of service will cost, and at approximately what point your growth will justify it. Plan for the next step while you’re still in the current arrangement.
Another way to assess the efficiency of your ecommerce stack is to compare platform costs against GMV. If you’ve managed to reduce your operational waste and your ecommerce stack is still taking an ever-increasing slice of your revenue, then you need to look at that more closely.
I recommend keeping your ecommerce platform TCO below 1% of GMV, with that figure either staying the same or indeed going down as the business grows.
The TCO definition goes far beyond the platform, hosting, and software costs that we’ve already looked at. It also includes development, integrations, operational costs, external resources, upgrades, and other associated costs.
Treat 1% as a benchmark rather than a rule in all cases. The real indicator is whether your total platform TCO is getting more efficient as the business scales.
Use the WooCommerce TCO calculator to work out those costs for your store.
About
Kathryn Marr
Kathryn Marr is the co-founder and Chief Creative Officer of Blue Ivory Creative, where she combines design expertise with a deep understanding of ecommerce and WordPress. She helps brands turn complex ideas into clear, compelling content that connects with their audience — whether they’re just starting out or firmly positioned among the world’s leading companies.
