What is Gross Merchandise Value GMV
For example, if an online company sells 15 customized notebooks at $10 per notebook, the GMV would be $150. India’s e-commerce market is expected to witness significant uptrend in the coming years and touch $200 billion in terms of gross merchandise value , says a Bank of America Merrill Lynch report. Gross merchandise value alludes to the volume of goods sold by means of customer-to-customer or internet business platforms. The GMV represents only the total financial value summed up from all the sales performed from a company. On the other hand, Revenue (or „Gross Revenue“) is the proper amount of money that will be accounted for each sale.
The retailer functions as an intermediary, facilitating the transaction, commonly for a fee, without actually being a buyer or seller at any point within the transaction. GMV is also known as gross merchandise volume; both phrases indicate the total monetary value of total sales. Service companies provide services to customers who are attracted by their expertise and innovation to generate income. The high sales are thanks to strategic marketing and promotion to make room for the next batch of products. The cyclical behavior continues throughout the year, accounting for other special days such as Thanksgiving, Memorial Day, Father’s Day, Labor Day, and Christmas Day.
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It’s an important metric for tracking growth, and you can obtain a clear picture of your brand’s health by combining it with other crucial metrics. Acquire highly focused and affordable Cutting-Edge Peer-Reviewed Research Content through a selection of 17 topic-focused e-Book Collections discounted up to 90%, compared to list prices. Collection topics include Diversity, Equity, and Inclusion , Artificial Intelligence, Language Learning, Marketing and Customer Relations, Religious and Indigenous Studies, and more.
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What is GMV in a business?
Used in marketplaces it’s the total value of all goods sold during a given period. This means the total value of the consumer’s spending but not necessarily the revenue the marketplace generated from these sales. Also, it’s one thing to increase GMV; it’s another thing to maintain excellent customer service when you have more orders. Take care of your customers first to create an incredible shopping experience for them, and you’ll improve your bottom line sooner or later. Approximately 95% of customers say that customer service is important to their choice of and loyalty to a brand.
- It is most helpful as a comparative measure over time, for example, current quarter value versus previous quarter value.
- GMV/GTV is a good indicator of the growth of the company, as this measures the volume and value of merchandise sold or the number of transactions handled.
- The quarterly/monthly GMV figure is projected for the full year to arrive at the annualised GMV run rate.
- Growing eCommerce brands, in particular, can usually benefit more from selling large volumes of small-ticket items, as the profit margins are typically higher.
- Winc is just one example of an online store that has capitalized on an opportunity for product education and curation with subscription boxes.
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GMV doesn’t calculate profits
He works extensively throughout US and Europe, with clients including global brands, large retailers and household names in consumer goods. We discuss the latest cutting-edge marketing strategies, evergreen tactics and share a roadmap for you to improve efficiencies, profitably grow revenue and build lifetime customer loyalty for your Shopify brand. GMV is also known as Gross Merchandise Volume, and it’s best to calculate it once per financial quarter, or once a year at the absolute minimum.
- Contingent upon the type of web based business site, GMV is equivalent to gross revenue.
- Udaan, the business-to-business e-commerce platform, has kick-started the new year with a fund-raise of $280 million, largely from its existing investors including China’s internet giant Tencent.
- Most e-commerce companies, especially when they first became popular, used the metric instead of revenue and/or sales data.
- Accrued fees and expenses may include advertising, delivery, returns, and discounts.
With a branded tracking page, you can strengthen your brand image and also leverage post-purchase marketing opportunities. Your customer acquisition cost is the amount spent to acquire a given number of customers, divided by the total number of customers. The online marketplace Etsy uses GMV to gauge seller success, buyer satisfaction, the health of its ecosystem, and the growth of its business. For an e-commerce company involved in e-tailing, revenue for financial reporting purposes is typically the GMV.
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Depending on the type of e-commerce site, GMV can also have other disadvantages. For example, if a company was an online retailer that produced and sold its own goods, GMV would indicate the revenues of a company, but it would only be one metric that can often be limiting. Since retailers may or may not be the producers of the goods they sell, measuring the gross value of all sales provides insight into the company’s performance. This is especially true in the customer-to-customer market, where the retailer serves as a third-party mechanism for connecting buyers and sellers without actually participating as either. Most e-commerce companies, especially when they first became popular, used the metric instead of revenue and/or sales data. Ultimately, using GMV as a standalone reference or instead of other metrics became widely considered as ineffective.
Gross Merchandise Value, in and of itself, can be a valuable figure to use as a raw estimate of company earnings, as well as its function as a metric or unrefined predictor of growth. India’s online food delivery industry has recovered 75-80% of its pre-Covid sales. However, dining-in at restaurants is still at just 8-10%, according to a report by restaurant discovery and food delivery platform Zomato. Restaurants in Delhi NCR and Chennai are worst hit, with 88% and 91% respectively still closed for dining-in business, with the outlook looking bleaker. It is a measure of the growth of the business or utilization of the site to resell products owned by others through consignment. For instance, in a manufacturing company like Apple, which sells different products such as iPhones, iPads and Airpods, the GMV would be the sum of the values of all the total products sold.
How to calculate GMV
For a more granular calculation of GMV, the sale price of goods – separated by each product segment – can be used instead of the AOV. The formula for calculating GMV consists of multiplying the number of total transactions by the average order value . For eCommerce websites, this will be one of, if not the most important KPI to track.