What is Gross Merchandise Value (GMV)?
Gross merchandise value or GMV is a measuring metric used to calculate the amount of merchandise sold on the e-commerce store or marketplace during a specific period. This metric is highly useful in determining an e-commerce business’s sales growth during different times.
It is a comparative way of representing the total sales volume that occurred on a platform during different time periods, including the value of all goods or services sold, excluding discounts, returns, and other related expenses.
How to Calculate GMV?
Calculating the Gross Merchandise Value is a simple process. Here’s how you can calculate it:
- Determine the Time Period:
Decide the specific time period for which you want to calculate GMV, whether daily, monthly, quarterly, or annually.
- Identify the Number of Units Sold:
Count the total number of units (products or services) sold during the chosen time period. This could be individual items or the quantity of services rendered.
- Determine the Average Price per Unit:
Calculate the average price of each unit sold. This is done by dividing the total revenue generated by the total number of units sold.
This is the final formula to calculate the GMV:
Gross Merchandise Value = Sales Price of Goods x Number of Goods Sold
How to boost your GMV?
The simplest and most practical way to boost your gross merchandise value is to increase the number of goods sold on your platform. Here are some ways through which you can achieve this:
1. Improve the average order value:
To boost your gross merchandise value, improve your average order value. Implement cross-selling and upselling strategies or provide added benefits on bigger purchases to improve the number of goods.
2. Add more products to your sellable catalog:
Expand your catalog by offering more products and services. Attract a diverse audience and enlarge your customer base to improve the number of goods sold on your platform.
3. Offer discounts and coupons:
Another way to improve the number of goods sold on your e-commerce is to provide exclusive discounts, and offers and improve your overall AOV by letting customers in on the perks.
4. Improve customer retention:
Improve customer retention by building long-term customer relationships to encourage repeat business.
Keeping track of your e-commerce sales in shorter periods is a good practice for businesses to identify growth areas more efficiently.
However, various other e-commerce KPIs help businesses determine their revenue and sales growth; gross merchandise value or GMV can help businesses stay consistent in understanding their sales patterns.
If used in combination with other metrics, GMV can be especially helpful if you sell through marketplaces like Amazon or C-2-C platforms like eBay.