Gross Merchandise Value (GMV)

How to Calculate GMV (Step-by-Step)

GMV, an abbreviation for gross merchandise value and often used interchangeably with “gross merchandise volume,” is defined as the total volume of revenue generated across a given period of time.

In particular, the gross merchandise value is a crucial metric to track for e-commerce companies such as:

• Amazon
• eBay
• Alibaba
• Etsy

GMV Formula

The formula for calculating gross merchandise value consists of multiplying the number of total transactions by the average order value (AOV).

The number of transactions is self-explanatory, while the AOV is the amount spent on average per customer order.

For a more granular calculation of GMV, the sale price of goods – separated by each product segment – can be used instead of the AOV.

How to Interpret Gross Merchandise Value

The gross merchandise value metric can help measure the growth of a company and gauge the prevailing market demand for the company’s products/services.

By assessing the changes in GMV year-over-year, you can determine the financial health of the company – in particular, project the future growth trajectory with more accuracy (i.e. quantify market traction).

The shortcomings of the gross merchandise value (GMV) are similar to gross revenue (i.e. as opposed to net revenue), as the amount is prior to deductions for fees and expenses.

Like gross revenue, GMV neglects the following:

• Discounts
• Taxes
• Delivery Fees
• Product Returns
• Additional Side Costs (e.g. Maintenance Per Warranty)

Therefore, since the gross merchandise value does NOT factor in any returns and discounts, the metric requires more in-depth diligence as GMV is a “raw” metric.

While GMV can provide insights regarding the revenue potential of the company, it fails to depict the profitability of the company.

In other words, the amount of revenue generated that flows down and reaches net income (i.e. “bottom line”) is left unknown.

Furthermore, gross merchandise value as a standalone metric is not too practical as the value fails to give information about:

• Repeat Customers → Recurring Purchases vs One-Time Purchases
• Churn Rate → % Lost Customers
• Customer Concentration → % Revenue Contribution

GMV Calculator – Excel Model Template

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eCommerce GMV Calculation Example

Suppose an e-commerce store sells t-shirts for $20 on Amazon with a commission rate to Amazon of 10%.

• Average Selling Price (ASP) = $20.00
• Commission Rate = 10%

If the company sells 50k shirts in 2021, the GMV is the product of the average selling price (ASP) and the number of units sold, which comes out to $1 million.

• Number of Units Sold = 50,000
• GMV = $20 × 50,000 = $1 million

Here, we see the earlier point that GMV is part of gross revenue, but NOT net revenue.

The revenue split is as follows:

• E-Commerce Company = $900,000
• Amazon (10% Commission) = $100,000