What Is Gross Merchandise Value (GMV)?

Gross merchandise value (GMV) is the total value of merchandise that's sold over a given period through a customer-to-customer (C2C) exchang🌊e site. It's a measurement of the growth of the business or the use of the site to sell merchandise owned by others.

Gross merchandise value (GMV) is often used to determine the health of an 澳洲幸运5官方开奖结果体彩网:e-commerce 𒁏site's business because its revenue will be a function of gross merchandise sold and 𓆏fees charged. It's most useful as a comparative measure over time such as current quarter value versus previous quarter value.

GMV is also known as gross merchandise volume. Both phrases indicate the 🌺total m💞onetary value of total sales.

Understanding Gross Merchandise Value (GMV)

Gross merchandise value (GMV) is calculated before the deduction of any fees or expenses. It provides information that a retail business can use to measure growth, often on a month-over-month, quarter-over-quarter, or year-over-year basis. A retail business can generally calculate the gross value of all completed sales but merchandise returns may have to be removed from this number to provide an accurate calculation.

Simply multiply the number of goods sol♕d by💮 the sales price of the goods to calculate GMV.

The formula is: GMV = Sales Price of Goods x Number of Goods Sold.

Advantages and Disadvantages of GMV

G💧MV has its advantages and drawbacks just like most other growth measurements.

Advantages

Retailers may or may not be the producers of the goods they sell 🌌so 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 participati𝐆ng in the transaction.

GMV may also provide value to retailers in the 澳洲幸运5官方开奖结果体彩网:consignment sector because they never officially purchase their 澳洲幸运5官方开奖结果体彩网:inventory. The items are often housed within a company’s retail location but the business functions solely as the authorized reseller of another person’s or entity’s merchandise or property, often for a fee. They're generally ꦚnot the true owner of the items because the person or entity that pla𒁃ced the item on consignment may return and claim the item if they choose to do so.

Disadvantages

GMV represents the total value of goods sold on a C2C exchange but it doesn't truly reflect the profitability of a company. It primarily shows the true revenue that a company earns🌸 from fees. The entire $500 doesn't go to the company if its GMV was $500 for the month. The majority will go to the individual who sold the goods. The company's true revenueꦇ would be the fee it charges for the use of its site. The company's true revenue would then be $500 x 2% = $10 if the fee was 2%.

GMV can have other disadvantages depending on the type of e-commerce site. GMV would indicate its revenues but it would only be one metric, providing a limited view, if a company were an online retailer that produced and sold its own goods. It wouldn't tell you how many customers visited the site or how much revenue was received from repeat customers. Both are important indicators in terms of 澳洲幸运5官方开奖结果体彩网:customer satisfaction and the long-term health of the company.

Customer-to-Customer Retailers

Customer-to-customer (C2C) retailers provide a framework or system for sellers to list items they have in inventory and for buyers to find items of interest. The retailer functions as an intermediary, facilitating the transaction, commonly for a fee, wit✱hout actually being a buyer or seller at any point in the transaction.

The retailer facilitating the transaction never๊ comes in contact with any of the physical merchandise in many of these customer-to-customer sales. The seller will send the item directly to the buyer when the financial portion of the sale is complete.

This model can differ drastically from other retail m🅰odels in which the retailer purchases merchandise from producers, manufacturers, or distributors and then essentially functions as an authorized reseller of goods the company has purchased.

Gross Merchandise Valꦉue (GMV) vs. Gross Transa💧ction Value (GTV)

GMV can be defined as the total dollar value of everything sold through a marketplace in a given period but gross transaction value (GTV) is a calculation of the revenue relative to commissions. GTV is used more in businesses that operate on commissions because it's equal to the number of items sold multiplied by the price collected.

GTV is calculated by multiplying the number of transactions by the average order value by the total number of transactions made and the items sold. It tends to be used by e-commerce companies in marketplaces where multiple sellers transact.

Example of GMV

Two of the most well-known C2C sites are eBay꧟ and Etsy✅. Assume that eBay sold 100 goods during the first quarter of the fiscal year. All those goods were priced at $5. eBay's GMV would be 100 X $5 = $500 for the first quarter.

Now let's say that Etsy sold 80 goods in that same quarter and all the goods were priced at $4. Etsy's GMV would be 80 x $4 = $320 for the first quarter.

eBay (EBAY) has a better GMV at $500 than Etsy (ETSY) does at $320 but this doesn't tell the whole story. A portion of the revenue on these sites has to go back to the seller that sold the goods. eBay and Etsy only kee🐻p the fees they charge. This is their actual revenue.

eBay charges a fee of 2% so it would bring in $10 ($500 x 2%). Etsy charges a higher fee of 4%. Etsy would bring in $12.80 ($320 x 4%). Etsy performed better because it brought in higher take-home revenue𝐆s.

The Bottom Line

Gross merchandise value (GMV) is the total value of goods sold by a customer-to-customer (C2C) exchange site but the metric is often applied to other types of retailers. GMV is a handy metric to calculate because it reports the total value of goods sold but it should be taken into consideration with other metrics, particularl🧸y for those companies that generate revenue through fees.