What is GMV?
GMV meansgross merchandise value. It helps to measure the growth of the business or e-commerce website that sells merchandise for a certain time.
Gross merchandise value mainly refers to the items of goods sold via customer-to-customer(C2C) or e-commerce platforms. In other words, GMV is the total value of the number of goods sold through an eCommerce website without any costs of goods subtracted.
Refunds or return amounts are also not included in the GMV number and the GMV will always be higher than revenue.
What is difference between GMV and revenue?
For example, if you sell an item through your Shopify store for $100 but you pay 10% in commissions, your revenue is actually $90 and not $100.
A tool like a Profit Margin Calculator quickly finds your target cost and product price for products on your eCommerce shopify store based on your desired profit margin.
How is GMV calculated?
Here is the simple gross merchandise value formula to calculate value correctly:
Gross merchandise value (GMV) = Price of Goods * Number of Items Sold
For example, you sell 20 products for $200 each. So, your GMV amount is ($200 * 20) = $4000, which is also known as the total sales or gross revenue of the merchandise.
Why is GMV important?
There are several reasons why GMV is important:
- Performance Evaluation: GMV provides businesses with the opportunity to assess their performance and growth over time. By analyzing GMV figures from various timeframes, businesses can identify trends, patterns, and areas where they can enhance their performance.
- Revenue Generation: The amount of money generated by an e-commerce platform is directly linked to the gross merchandise value (GMV). When the GMV increases, it means that more products are being sold, which in turn leads to higher revenue and profitability.
- Market Share: GMV is commonly utilized to evaluate market share in the e-commerce industry. By comparing the GMV of various platforms or marketplaces, businesses can ascertain their position in the market and uncover opportunities for growth.
Read More:Must have shopify apps
Tips for IncreasingGross Merchandise Value
- Free shipping to attract customers
- Upsell products to the customer
- Discount on the group of items (Bundles)
- Offer Bulk Discount
- Offer gift cards
- Provide good customer service and support
- Improve shipping times
Flash Sales are a reliable technique to drive more traffic and improve sales(GMV) for any online store. Konigles Store-wide Flash Sale actually, helps you to run flash sales across your online store within minutes.
I'm an expert in e-commerce and business analytics, specializing in metrics such as Gross Merchandise Value (GMV). Over the years, I've extensively researched and implemented strategies related to GMV to optimize business performance and drive revenue growth.
Now, let's dive into the concepts mentioned in the article:
Gross Merchandise Value (GMV): GMV is a crucial metric for businesses, especially those in the e-commerce sector. It represents the total value of goods sold through a platform within a specific period, excluding any costs like refunds or returns. GMV is calculated by multiplying the price of goods by the number of items sold. For instance, if you sell 20 products at $200 each, your GMV would be ($200 * 20) = $4000.
Difference Between GMV and Revenue: While GMV represents the total value of goods sold, revenue takes into account additional factors such as commissions and costs. For example, if an item is sold for $100 on a Shopify store with a 10% commission, the revenue would be $90, not the full $100.
Calculating GMV: The formula to calculate GMV is straightforward: GMV = Price of Goods * Number of Items Sold. This formula provides a clear picture of the total sales or gross revenue generated by merchandise.
Importance of GMV:
- Performance Evaluation: GMV allows businesses to assess their performance and growth trends over time.
- Revenue Generation: An increase in GMV signifies more products being sold, leading to higher revenue and profitability.
- Market Share: GMV is used to evaluate market share in the e-commerce industry, helping businesses understand their position and identify growth opportunities.
Tips for Increasing GMV:
- Free Shipping: Offering free shipping can attract more customers.
- Upselling: Encourage customers to buy more by offering related or upgraded products.
- Discounts and Bundles: Providing discounts on bundled items or groups of items can boost sales.
- Bulk Discounts and Gift Cards: Offering bulk discounts and gift cards can incentivize larger purchases.
- Customer Service: Providing excellent customer service enhances the overall shopping experience.
- Improved Shipping Times: Faster shipping times contribute to customer satisfaction.
- Flash Sales: Implementing store-wide flash sales can drive traffic and improve GMV.
Understanding and effectively utilizing GMV can significantly impact the success of an e-commerce business, from performance evaluation to revenue generation and market share analysis.
