While a chief financial officer (CFO) may not focus on GMV, it’s a strong indicator of growth that digital marketers can easily calculate. Yes, it’s still an important metric as it essentially calculates your total gross sales value. Of course, you want this figure to be relatively high as sales are the lifeblood of any eCommerce business. The gross merchandise value (GMV) metric can help measure the growth of a company and gauge the prevailing market demand for a specific product. Calculating the gross merchandise value (GMV) metric consists of multiplying the number of total transactions by the average order value (AOV). In this example, eBay (EBAY) has a better GMV at $500 than Etsy (ETSY) does at $320.
- He currently researches and teaches economic sociology and the social studies of finance at the Hebrew University in Jerusalem.
- Now that we have gone over the formula and basics of calculating GMV, let’s look at a couple of examples to help you easily understand how it works.
- It’s a metric that is most commonly used in the eCommerce industry and is also sometimes referred to as Gross Merchandise Volume.
- For example, you might see spikes in your total sales during the summer season and a halt in the winter season – when people are worried about energy costs, so they’re more careful with how they’re spending their money.
- It’s a more realistic look into how your business is actually performing as it takes into account costs, refunds, etc.
Before you can push cross-selling strategies onto your customers, you must first understand which goods pair together nicely. To identify your Gross Merchandise Value, you must multiply the number of products sold by the price per item. For instance, you might see that a particular brand sells better at certain times of the year. https://personal-accounting.org/gross-merchandise-volume/ Again, this insight can help you plan the inventory and adjust your marketing strategies. These insights enable you to orchestrate better marketing campaigns and push the right products at the right time. So, let us shine a light on the ultimate measure of your sales volume – and why it has nothing to do with your revenue.
This can increase your business’s Gross Merchandise Value (GMV) by increasing the average order value. If shipping turns out to be too pricey, consumers will abandon their carts and won’t go through with the purchase. It’s as simple as using data insights to take control of your profit margins & updating your processes so you’d be more profitable in the long run. While closely related, GMV and revenue are different metrics, so be careful not to confuse them. We take monthly bookkeeping off your plate and deliver you your financial statements by the 15th or 20th of each month. When you upsell and cross sell, you can make the deal more attractive by showing how much they can save.
What is GMV in Retail?
EBay is rolling out a mobile consignment concierge, mirroring the convenient and seamless selling experience offered on the marketplace. Another great way to encourage your customers to buy more (without being too pushy about it) is to offer bundles and packaged deals. Not only is this effective for getting rid of some of your less-popular inventory, but it also can significantly improve your GMV.
- You can also put the savings on the back end, like it gets cheaper each time they order up to a certain point.
- It is used to determine the progress of an e-commerce site as a comparative financial metric by enabling online store owners to review the total sales volume from one recording period and compare it to another.
- It is calculated by multiplying the number of transactions by the average order value by the total number of transactions made and items sold.
In terms of economics, GMV is a raw figure that doesn’t offer much insight into the value of the items sold because it doesn’t factor in any costs accrued by the retailer. Additionally, GMV doesn’t include discounts or returns, or the cost of keeping and storing inventory before it’s sold. When used for the financial analytics purposes of an e-commerce business, Gross Merchandise Value takes into account the goods or services transacted through an online platform.
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The second way it is used is as an indicator of the total volume of sales by an individual seller over a recent period of time, as a method of monitoring sales performance and business health. The most simple formula for a retailer is to take the sales price charged to the customer and multiply it by the number of items sold. In other words, if you sell 10 widgets in your eBay store for $100 each, your GMV would amount to $1,000. Gross merchandise volume (GMV) is another way for you to calculate your gross revenue that refers to the total volume in dollars of sales over a given time period on e-commerce sites such as eBay.
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If you own an e-commerce store or operate an online marketplace, read on to learn the importance of understanding and properly incorporating Gross Merchandise Value into your business strategy. For instance, if digital marketers are putting resources into marketing a specific product, they can compare the previous month’s GMV for the product with this month’s GMV for the product. Of course, it would be wise to subtract advertising costs from this to measure the true return on investment (ROI).
What is GMV?
In this blog post, we’re breaking down what GMV is, how to calculate it, and, most importantly, how to use it to make your business more profitable. You’ll have your Profit and Loss Statement, Balance Sheet, and Cash Flow Statement ready for analysis each month so you and your business partners can make better business decisions. With that in mind, you can use the following strategies to increase your GMV. Like with anything else, Gross Merchandise Value has its benefits and drawbacks. Let’s delve into each to simplify your decision-making process when evaluating if you should implement Gross Merchandise Valu into your financial calculations and reports.
It is simply calculated as the total value of merchandise sold over a set period of time. We can then say that GMV is the total sales done through the platform over a set period of time. “Retailers” may refer to ecommerce stores or customer-to-customer (C2C) retailers, like eBay or Etsy.
The Downside of Using GMV
First, determine what time period you are going to make the GMV calculation for. Then, to get the Total Number of Transactions, just look at the total number of orders that you got and processed during that given period. Aron Hsiao began selling on eBay in 1998 and joined the site’s Trust and Safety Department in 2003, helping to resolve buyer and seller conflicts and marketplace rules violations. From 2013 through 2017, he served as senior communications manager for Terapeak, which offers marketplace research and listing analytics to online sellers. We define the non-GAAP financial measures of FX-Neutral net revenues as net revenues minus the exchange rate effect. We define exchange rate effect as the year-over-year impact of foreign currency movements using prior period foreign currency rates applied to current year transactional currency amounts.
Gross merchandise volume doesn’t take into account the production, manufacturing, and advertising costs.GMV also lacks discounts and return data, skewing the reflected net income. It is also valuable in its role as a metric or unrefined way to predict growth. Still, companies should use gross merchandise value along with other financial metrics to get the most well-rounded and accurate picture of their financial health and growth potential. The gross merchandise value (GMV), sometimes called the gross merchandise volume, is a metric used to describe the volume of sales your business makes.