Gross Merchandise Value (GMV) is a key metric used by e-commerce businesses to measure the total sales revenue of products sold over a certain period, excluding returns, discounts, and shipping fees. GMV is often used to assess the size and performance of online marketplaces, platforms, and retail stores. In this guide, we’ll explain how to calculate GMV, why it matters, and provide an easy-to-use GMV calculator.

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What is Gross Merchandise Value (GMV)?

Gross Merchandise Value (GMV) refers to the total sales value of merchandise sold through a platform or marketplace within a specific period, regardless of whether the sales were paid for or shipped. GMV helps assess the overall performance of an online marketplace or e-commerce platform and is often used to gauge growth over time.

Formula for GMV

The formula to calculate GMV is:

GMV = Number of Units Sold × Price per Unit

Where:

• Number of Units Sold: The total number of products or services sold.
• Price per Unit: The average selling price of each product.

Important Notes:

• GMV does not take into account returns, cancellations, or discounts.
• GMV reflects the total value of all transactions but does not account for the actual revenue or profit the business retains.

For example, if a customer buys 100 items at $50 each, the GMV for that sale would be $5,000, even if the business only receives $4,000 after discounts, returns, and shipping.

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Why is GMV Important?

1. Sales Performance Indicator

GMV gives a snapshot of the sales volume on a marketplace, which is an important indicator of a business’s success or growth. For e-commerce platforms like Amazon, eBay, or Alibaba, GMV is often used to compare overall sales performance.

2. Growth Measurement

By comparing GMV over different periods (month-over-month or year-over-year), businesses can assess their growth trends. A rising GMV typically indicates an increase in sales activity, whereas a falling GMV could point to declining sales or market saturation.

3. Investor and Market Sentiment

Investors often use GMV to evaluate e-commerce businesses, especially in the absence of profit or net revenue data. A strong GMV figure can indicate that a company is gaining market share, attracting more customers, or expanding its product offerings.

4. Marketplace Comparison

Comparing GMV between different marketplaces or e-commerce platforms can help businesses gauge their competitiveness. If two similar platforms have significantly different GMV figures, it may suggest one is outperforming the other in terms of product demand and consumer engagement.

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How to Calculate GMV

To calculate GMV, simply multiply the number of units sold by the price per unit. The process is straightforward, but let’s break it down with an example:

Example Calculation:

• Number of Units Sold: 500 products
• Price per Unit: $20

Step 1: Use the GMV formula

GMV = Number of Units Sold × Price per Unit

GMV = 500 × $20

GMV = $10,000

So, the GMV for this example is $10,000.

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GMV Calculator

Inputs:

1. Number of Units Sold: The total number of units sold during a specific period.
2. Price per Unit: The selling price of one unit of the product.

Calculation:

Simply multiply the number of units sold by the price per unit to calculate the GMV.

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GMV Calculator Example

Input	Value
Number of Units Sold	500
Price per Unit	$20
Gross Merchandise Value (GMV)	$10,000

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GMV in Different E-Commerce Models

1. Marketplace Model (e.g., Amazon, eBay)

In a marketplace model, GMV is often used to measure the total sales volume of products sold by third-party sellers on the platform. It does not reflect the actual revenue the platform earns, as the platform only takes a commission on sales.

• Example: If a marketplace like Amazon processes $10 million in sales of third-party products, the GMV will be $10 million. However, Amazon’s actual revenue will be much lower due to commissions, fees, and other expenses.

2. Direct Sales Model (e.g., Walmart, Shopify)

In a direct sales model, GMV can reflect the total sales of the business, as the company sells the products directly to customers.

• Example: If a business on Shopify sells 1,000 units of a product priced at $50 each, its GMV is $50,000.

3. Subscription-Based Model (e.g., Netflix, Spotify)

For subscription-based platforms, GMV might include the value of subscriptions sold over a period. However, it’s typically more useful to look at Monthly Recurring Revenue (MRR) or Annual Recurring Revenue (ARR) to assess performance in these types of businesses.

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GMV vs Revenue: What’s the Difference?

While GMV measures the total value of goods sold, revenue refers to the actual income a business earns after accounting for discounts, returns, cancellations, and costs like shipping or payment processing fees.

Here’s the key distinction:

• GMV: Total value of goods sold, before deductions.
• Revenue: The actual amount a company earns after deducting any returns, discounts, and transaction fees.

For example, if an e-commerce store sells 100 items for $50 each, the GMV is $5,000. But if there’s a 10% discount and 5% of the items are returned, the actual revenue might be lower.

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Example Comparison: GMV vs Revenue

Metric	Value
Gross Merchandise Value (GMV)	$5,000
Returns	5%
Discounts	10%
Revenue	$4,275

In this example:

• GMV = $5,000
• Revenue = $4,275 (after accounting for 5% returns and 10% discount)

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Frequently Asked Questions (FAQs)

1. Is GMV the same as Revenue?

No, GMV measures the total sales value of goods sold, while revenue is the actual income earned by the company after discounts, returns, and other factors.

2. How does GMV impact business growth?

A high GMV can indicate a growing customer base and strong sales, but it’s important to remember that GMV doesn’t show profitability or efficiency. High GMV without corresponding profit margins could suggest low conversion rates or high operational costs.

3. Why is GMV important for investors?

Investors often use GMV as a proxy for a company’s growth and market share, particularly when evaluating e-commerce businesses or platforms that may not yet be profitable.

4. Does GMV include shipping fees?

No, GMV excludes shipping fees. It focuses on the sales value of products or services, not the additional charges or revenue derived from shipping or other services.