What is Gross Merchandise Value?
GMV is the total sales value of merchandise sold through a platform over a specified period, representing the overall volume of business conducted on that platform.
Explanation
Gross Merchandise Value (GMV) refers to the total value of all goods sold through an online marketplace or store within a given time frame, without deducting any fees, refunds, or cancellations. It includes the sales price of the products sold but excludes taxes and shipping charges.
Importance
- Business Growth Indicator: Helps measure the size and performance of an online store or marketplace.
- Revenue Potential: Provides insights into potential revenue, especially for eCommerce platforms.
- Investor Confidence: A high GMV can indicate strong market demand, attracting potential investors.
- Operational Benchmark: Helps in assessing the effectiveness of marketing, inventory, and sales strategies.
How It Works
- Sales Tracking: GMV is calculated by summing the sales value of all transactions within a given period.
- Exclusion of Returns & Refunds: Returns and refunds are not subtracted from GMV, making it a raw measurement of sales volume.
- Shipping & Taxes Not Included: GMV does not account for shipping costs, taxes, or other additional fees. It purely focuses on product sales.
Benefits
- Growth Measurement: Allows merchants to assess the effectiveness of business strategies and overall growth.
- Market Trends: Provides an understanding of consumer demand and purchasing patterns.
- Sales Health Check: Offers a quick snapshot of the sales volume to assess store performance.
- Investor Appeal: GMV can demonstrate the potential and scalability of a business to investors.