It’s time to get real.
You’re reading this because you need to gain more knowledge and skills that grow your business and increase its profitability, right?
To this end, you probably heard of the Gross Merchandise Value (GMV) metric. And you probably saw how confusing this metric is.
So, let us shine a light on the ultimate measure of your sales volume – and why it has nothing to do with your revenue.
Don’t worry – it will make sense in a minute.
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.
What Is GMV (Gross Merchandise Value)?
Gross Merchandise Value (GMV) means the total value of all goods a vendor or supplier sells through a specific platform or channel over a set period of time – quarterly, biannually, or yearly.
The Gross Merchandise Value is calculated without deducting returns, discounts, and other costs. Therefore, GMV calculations don’t measure net sales or profitability.
Retail companies use the GMV (also known as Gross Merchandise Volume) metric to assess an organization’s evolution and current market demand for its products.
Gross Merchandise Value vs. Revenue
While closely related, GMV and revenue are different metrics, so be careful not to confuse them.
GMV measures the total revenue from the sales without taking into account returns, discounts, or other costs. It measures the sales volume but not the revenue generated by the sales.
On the other hand, when you calculate the revenue, you calculate the total amount of money you earn from a sale after you deduct the costs we mentioned above. Revenue measures your profitability.
With GMV, you can track the growth of sales volume over time. However, revenue is a better indicator of your overall performance.
Like what you're reading?
Join the informed eCommerce crowd!
We will never bug you with irrelevant info.
By clicking the Button, you confirm that you agree with our Terms and Conditions.
Why Should I Track GMV?
You can’t improve what you don’t measure!
Coming from data geeks like ourselves, it’s no surprise we’re advocating for tracking and analyzing all eCommerce KPIs.
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.
For the tl;dr of this section, here’s the gist. When you calculate GMV, you’re more conscious of your financial performance. You can make better-informed decisions about your future operations and strategy.
Here’s a breakdown of three main reasons to track GMV and its evolution in time.
- Measure your revenue
It goes without saying – when you track the sales value, you know how much $ you’re producing each month.
By combining your total sales value with other metrics, such as the cost of goods sold, you understand whether your sales numbers are enough to keep you profitable or you might need to start the cost optimization process.
At the same time, you can spot any possible inefficiencies that may be impacting revenue.
For example, you might see a product category with high gross revenue but low-profit margins. This would signal you to revisit your pricing strategy to cover the fees and expenses involved in selling that product.
Customers with high lifetime value will buy more, so connect the GMV with the CLV and include value optimization in your GMV growth strategies.
- Compare your MoM or YoY performance
The GMV lets you track and compare the sales volume over set periods. This way, you can identify best-selling products and the most profitable periods.
GMV becomes even more meaningful when you calculate the GMV growth rate. To do so, divide the current GMV by the GMV from the same period the previous year, then multiply the result by 100.
It’s interesting to observe the GMV against the customer acquisition cost in time. You can evaluate whether new customers are really buying enough of your products or whether you need to make the offer more attractive to them.
- Identify sales patterns
GMV can also reveal trends in sales over time. 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.
These insights enable you to orchestrate better marketing campaigns and push the right products at the right time.
In terms of patterns, the Gross Merchandise Value also allows you to see trends in your customers’ behavior.
For instance, you might see that a particular brand sells better at certain times of the year. Again, this insight can help you plan the inventory and adjust your marketing strategies.
How to Calculate GMV?
To identify your Gross Merchandise Value, you must multiply the number of products sold by the price per item.
Here’s the GMV formula for your convenience:
GMV =
Quantity of goods sold x Price of goods sold
For example, if you’re a fashion retailer and want to see the sales volume for your winter jackets, you first need to see how many units you sold. Let’s say you sold 100 units, each jacket costing 550$.
The GMV formula will be:
GMV = 100 x 500 = 50 000
Suppose you wanted to calculate the GMV for the whole winter season, no matter which products you sold. In this case, you need to calculate and add the GMV for all the products sold during the season.
How to Grow Your GMV?
Free Shipping for <X$ spent
If shipping turns out to be too pricey, consumers will abandon their carts and won’t go through with the purchase.
Yet, when shipping costs are included in the order’s total value, we can justify making an online purchase instead of buying the product from a physical store.
Free delivery has a profound psychological impact on consumer behavior, significantly increasing the average orders value.
If you want to increase your GMV, you should definitely consider offering free shipping for orders surpassing a specific monetary value.
Just be careful to identify your appropriate free shipping threshold, and use it as a powerful marketing tool rather than an expensive reward.
Invest in cross-selling strategies
With cross-selling, you’re actively encouraging customers to buy related or complementary products in addition to the product they are currently interested in.
This can increase your business’s Gross Merchandise Value (GMV) by increasing the average order value.
Before you can push cross-selling strategies onto your customers, you must first understand which goods pair together nicely.
What are the typical add-ons that buyers make to their purchases? What goods are frequently bought in bundles? Judging from your store’s data, which combinations were profitable in prior cross-selling initiatives?
Besides products, you also need to identify customers who might be receptive to cross-selling campaigns.
Use your customer data from every touchpoint of the customer journey to identify customer segments who will respond positively to a cross-selling campaign.
Look at customers’ previous buying and browsing behavior or whether they frequently cancel services or return goods. See what type of interactions they had with your customer service teams and what questions they had.
After you identify both products and customer segments that might work well, you can move on to the execution part of the strategy.
Try running Ads in the checkout process or laughing email campaigns directed at recent buyers.
Try out several methods of getting in touch with clients for improved cross-selling conversion rates. Then, modify your strategy in light of your analytics findings.
Bonus – organizing the data you get from customer interactions and purchase histories is far more successful with great CRM software. Try out Omniconvert’s Reveal: the first CRM platform built with Customer Value Optimization in mind. Increase the number of loyal customers and maximize profits with actionable insights for your eCommerce business.
Product bundling
Product bundling refers to selling two or more products at a lower price than the original, singular product.
Consumers are willing to pay extra if they feel they can get more value from a particular product. They perceive product bundling as a deal – having the chance to restock on products they would’ve bought anyway while saving money in the process.
However, this “deal” necessitates making a more significant purchase. As a result, their average order value increases, and, as a result, your total gross merchandise value increases as well.
Bundling products together can increase your profit margins and customer loyalty since consumers appreciate bundled deals’ convenience and cost savings.
Loyalty programs
An incentive-based loyalty program motivates your customers to continue buying from you rather than one of your competitors.
Offering customers exclusive opportunities or prizes not available anywhere else ensures every transaction has the greatest possible monetary value and spikes up your gross merchandise values.
Another loyalty program that increases GMV and yields excellent results is offering referral rewards. This program leads to new customers being brought in through word-of-mouth marketing and another opportunity to increase your gross merchandise value.
Besides driving GMV growth, loyalty programs contribute to increased Customer Lifetime Value, which is the eCommerce metric we should all be watching this year.
Above-and-beyond Customer Experiences
Yes, an “excellent” customer experience simply doesn’t cut it anymore. With customer acquisition becoming more expensive and ineffective by the minute, your best bet today is to earn more from existing customers.
Your GMV is grossly impacted by customer satisfaction and loyalty. Positive experiences lead to repeat purchases and brand recommendations. This, in turn, leads to increased sales and customer retention, so you’ll see a boost in GMV.
Train your customer service teams to answer customers’ questions and concerns quickly and effectively, create an easy-to-use and visually appealing website, and personalize marketing and customer interactions.
The Trap of Gross Merchandise Value
Even if Gross Merchandise Value can help track sales growth over time, it does have its pitfalls.
This is why you must be careful to avoid getting misled by the GMV and combine it with other eComm metrics (such as AoV, CLV, CR, etc.) to get a complete picture of the performance of your organization.
- Profits aren’t reflected by the Gross Merchandise Value
Since the GMV is calculated before deductions, it doesn’t accurately reflect your company’s profitability.
Looking at GMV alone, without considering profits, might lead to some poor marketing decisions.
For example, you might push cheap products that get bought often in bulk but aren’t returning any profits.
Look at GMV vs. Revenue, so you find the balance between “easy to sell” and “bring in profits.” This way, you can push cyclical products that generate recurring revenue for your store.
- GMV doesn’t look at fluctuations in the customer base
Although the gross merchandise value will reveal the highs and lows of your sales value, it doesn’t shine a light on the number of customer visits or the growth in your customer base.
Fluctuations in the customer count help you understand more about the shopping experience, post-purchase flows, and insights that ultimately lead to better marketing decisions.
Unfortunately, GMV doesn’t tell you much about marketing your products or customer acquisition, so make sure you’re also taking into account metrics such as customer churn, stickiness rate, and repeat purchase rate.
- The GMV doesn’t provide customer insights.
In the era of customer-centricity, not getting accurate insights about your customer base is dangerous.
Knowing what your customers want and need helps you refresh your product assortment, understand your products’ value, and which consumers to target.
Yet, you can still get these insights through customer surveys. Combined with the GMV, the qualitative data from surveys highlights the consumers and strategies of use for your best-selling valued products.
Even with these apparent shortcomings, don’t dismiss the wee old GMV – it can still make a difference in the way you conduct your business.
The main reason behind these pitfalls is that the gross merchandise value only evaluates one side of your company.
By measuring additional success metrics, you can overcome the GMV drawbacks and still enjoy the insights it provides.
Wrap-up
There you have it – our ultimate breakdown of the ultimate sales volume measure. You’re more comfortable with this metric and ready to put it to good use.
Just remember: GMV is just one piece of the puzzle, not the be-all and end-all of business metrics.
Combine it with other financial and eCommerce metrics to get a complete picture of your business performance.
Good luck and happy selling!
Frequently Asked Questions about The Gross Merchandise Value
Is GMV same as Revenue?
No. GMV measures the total revenue from the sales without taking into account returns, discounts, or other costs. When you calculate the revenue, you calculate the total amount of money you earn from a sale after you deduct the costs we mentioned above. GMV measures the sales volume, revenue measures your profitability.
What does GMV mean in business?
Gross Merchandise Value (GMV) means the total value of all goods a vendor or supplier sells through a specific platform or channel over a set period of time – quarterly, biannually, or yearly.
The Gross Merchandise Value is calculated without deducting returns, discounts, and other costs. Therefore, GMV calculations don’t measure net sales or profitability.
What is difference between GMV and Nmv?
GMV includes all sales made through a platform, while NMV only includes sales made by the platform’s own merchants.
GMV (Gross Merchandise Value) measures the total monetary value of merchandise sold through a platform or marketplace, including sales made by third-party sellers.
NMV stands for Net Merchandise Volume and is a measure of the total dollar value of merchandise sold through a platform or marketplace, but it excludes sales made by third-party sellers.
What is GMV and why is it important?
GMV, (Gross Merchandise Value), measures the total monetary value of merchandise sold through a platform or marketplace. GMV serves as a benchmark for the performance of a marketplace. Investors and analysts look at the GMV as it can give them a sense of the overall health and potential of a business.
