Gross Merchandise Value of startup in Bangladesh (GMV):
Definition, Formula, Advantages and Disadvantages, and Example
What Is the Definition of Gross Merchandise Value (GMV)?
The total worth of items sold through a customer-to-customer (C2C) exchange site over a certain time period is referred to as the gross merchandise value (GMV). It is a measure of the business’s growth or the use of the site to sell items owned by others.
Because income is a product of gross item sold and fees collected, gross merchandise value (GMV) is frequently used to measure the health of an e-commerce site’s business. It is particularly helpful as a time-series comparison measure, such as current quarter value versus prior quarter value.
GMV is another term for gross merchandise volume; both terms refer to the total monetary value of total sales.
The value of items sold via customer-to-customer or e-commerce platforms is referred to as gross merchandise value (GMV).
The gross merchandise value is estimated before any fees or charges are deducted.
It is a measure of the business’s growth or the use of the site to resell things owned by others on consignment.
GMV analysis from one period to the next allows management and analysts to establish a company’s financial health.
GMV does not accurately represent a company’s revenues because a portion of the revenue goes to the original seller.
Understanding GMV (Gross Merchandise Value)
The gross merchandise value (GMV) is calculated before any fees or expenses are deducted. It provides data that a retail organization can use to monitor growth, typically on a month-to-month or year-to-year basis. A retail business can generally compute the gross value of all completed transactions, albeit goods returns may need to be subtracted from this figure to offer an accurate computation.
Advertising, delivery, refunds, and discounts are examples of accrued fees and expenses.
Simply multiply the quantity of products sold by the sales price of the goods to determine GMV. GMV = Sales Price of Goods x Number of Goods Sold is the formula.
The Benefits and Drawbacks of GMV
Because merchants may or may not manufacture the things they sell, calculating the gross value of all sales offers information about the company’s performance. This is especially true in the customer-to-customer market, where the merchant acts as a third-party intermediary between customers and sellers without actually acting as either.
It may also be beneficial to consignment businesses, who never officially purchase their inventory. Despite the fact that the things are frequently held within a company’s retail location, the business serves as the authorized reseller of another person’s or entity’s merchandise or property, generally for a charge. They are never the genuine owner of the stuff because the person or entity who placed the item on consignment may return and claim the item if they so desire.
Although GMV indicates the overall value of items sold on a C2C exchange, it does not accurately reflect a company’s profitability; specifically, the genuine money earned from fees. For example, if a company’s GMV is $500 for the month, the bulk of that $500 does not go to the company; rather, it goes to the individual who sold the goods. The genuine revenue of the corporation would be the fee charged for the usage of its website. If the fee is 2%, the true revenue of the corporation is $500 x 2% = $10.
GMV may have additional disadvantages depending on the sort of e-commerce site. For example, if a company were an online shop that manufactures and sells its own goods, GMV would reflect revenues, but it would only be one statistic, offering a skewed picture. It would not tell you how many consumers visit the site or how much income comes from repeat customers, both of which are crucial measures of customer happiness and consequently the company’s long-term health.
Advantages: Provides insight into a company’s performance.
Allows for competition comparison.
Calculation is simple and quick to execute.
Not an accurate representation of a company’s real revenue
A limited statistic that does not account for additional aspects such as repeat clients.
Customer-to-customer (C2C) merchants provide a framework, or system, for sellers to display inventory goods and purchasers to identify items of interest. The retailer acts as an intermediary, facilitating the transaction for a charge, but is not a buyer or seller at any stage throughout the transaction.
610 billion dollars
Amazon’s (AMZN) anticipated Gross Merchandise Value (GMV) in 2021, according to the most recent statistics available.1
In many of these customer-to-customer transactions, the retailer arranging the transaction has no physical touch with the goods. Instead, once the financial element of the sale is completed, the seller will ship the item directly to the buyer.
This approach may differ significantly from other retail models in which the retailer obtains things from producers, manufacturers, or distributors and then acts primarily as an authorized reseller of goods purchased by the company.
GMV (gross merchandise value) vs. GTV (gross transaction value)
GMV is defined as the entire dollar value of everything sold through a marketplace in a specific time period, whereas GTV is a calculation of revenue in relation to commissions. GTV is more commonly used in commission-based enterprises because it equals the number of products sold multiplied by the price received.
It is computed by calculating the total number of transactions and things sold by the number of transactions multiplied by the average order value. It is typically utilized by e-commerce businesses with a marketplace where several merchants transact.
eBay and Etsy are two of the most well-known C2C platforms. Assume eBay sells 100 items in the first quarter of the fiscal year. For the purpose of simplicity, all of those items were priced at $5. eBay’s GMV for the first quarter would be 100 X $5 = $500.
Let’s say Etsy sold 80 items in the same quarter, and for the sake of simplicity, all of the items were priced at $4. Etsy’s GMV during the first quarter would be 80 x $4 = $320.
In this case, eBay (EBAY) has a higher GMV at $500 than Etsy (ETSY), which has a lower GMV at $320. However, this is not the entire tale. A percentage of the revenue must be returned to the seller who sold the goods on these sites; eBay and Etsy only keep the fees they charge, which is their true revenue.
In this case, eBay charges a 2% fee, so it would earn $10 ($500 x 2%). Etsy, on the other hand, charges a higher commission: 4% in this case. Etsy would make $12.80 ($320 x 4%). In this case, Etsy did better because it generated more take-home revenue.
What Does GMV Stand For?
GMV stands for gross merchandise value or gross merchandise volume, and it typically refers to the total value of items sold over a specific time period via a customer-to-customer (C2C) exchange site.
Is Gross Merchandise Value and Revenue the Same Thing?
GMV is the same as gross revenue depending on the type of e-commerce site. However, for sites like eBay, it reflects the total worth of products sold rather than the company’s real revenue, because a percentage of those revenues goes to the sellers of the goods. eBay’s actual revenue would come from the fees it charges on sales.
What Is a Startup’s Gross Merchandise Value?
The gross merchandise revenue (GMV) of a startup is the entire revenue generated by the sale of its goods or services. It is critical that GMV be calculated alongside net sales, which account for deductions.
What Is the Definition of Gross Merchandise Value?
GMV is computed by multiplying the total amount of products sold in a given period by their sales price. GMV = Goods Sales Price x Number of Goods Sold.
The entire value of items sold by a customer-to-customer (C2C) exchange site is known as gross merchandise value (GMV), but the term is frequently used to other types of shops. Though GMV is a useful indicator to assess because it reports the total value of goods sold, it must be combined with other metrics, especially for companies that generate revenue through fees.