What is Gross merchandise value (GMV)?

Gross Merchandise Volume (GMV) represents the total value of all products sold on an e-commerce site within a particular period – be that quarterly, annually, or any desired timeframe. It is one of the most critical metrics in the e-commerce industry because it measures the growth rate of a business. This figure does not consider any additional costs such as cost of goods sold (COGS), overhead costs, or return expenses. GMV serves as a benchmark for popularity, although it doesn’t directly relate to firm profitability.

Formula

Gross Merchandise Value (GMV) = Total number of goods sold x Price of goods

Example

For instance, if an e-commerce company sells 100 products, each priced $10, in a given month, the GMV would be 100 x $10 = $1000.

Why is GMV important?

The chief value of GMV lies in its ability to measure the scale or volume of transactions on an e-commerce platform without the need to factor in costs or expenses. As such, it presents a straightforward way to examine the company’s growth over time.

Which factors impact GMV?

Several factors can impact GMV, including product quality, price, competition, market size, and the overall user experience on the e-commerce platform.

How can GMV be improved?

There are several strategies to improve GMV, including increasing product offerings, improving customer service to encourage more sales, increasing promotional activities, and optimizing the pricing strategy to attract more customers.

What is GMV’s relationship with other metrics?

GMV can overlap with other eCommerce metrics. For example, while GMV may increase with sales, revenue may not if the products are sold at low-profit margins. Therefore, for the sake of a more comprehensive insight, GMV should be analyzed alongside net sales, profit margins, or conversion rate.