Gross Merchandise Value (alternatively Gross Merchandise Volume or GMV) is a term used in online retailing to indicate a total sales dollar value for merchandise sold through an online marketplace over a certain time frame.
GMV for e-commerce retail companies means sale price charged to the customer multiplied by the number of items sold. For example, if a company sells 10 books at $100, the GMV is $1,000. This is also considered as "gross revenue". However, it does not tell the net sales as GMV does not include discounts, cashbacks, costs involved and returns of products.
GMV is a metric commonly used by e-commerce businesses to measure total sales transacted through their online platforms. In China, e-commerce giants Alibaba and JD.com both use GMV to measure transactions conducted during its shopping events, such as Alibaba’s Singles’ Day on November 11 and JD.com’s 618 shopping festival.
GMV has traditionally been an important metric for online retail companies, which often see it as a measure of growth on a monthly, quarterly or annual basis. Some investors also use GMV as a key factor when determining the valuation of an e-commerce firm.
Since GMV often takes into account the total value of the transaction without factoring in any returns or cancellations, the figure does not accurately represent actual revenue. For example, in its annual report Alibaba defines GMV as the total value of confirmed orders closed over its marketplace platforms, regardless of whether the transactions are ultimately completed. However, during Singles’ Day, GMV is defined as transactions settled via the AliPay platform.
JD.com on the other hand, excludes transactions valued at over CNY 2,000 (US$291) that are not ultimately sold or delivered. However, for its GMV, it does take into account shipping charges paid by buyers.
Additionally, when GMV is seen as a primary growth metric, e-commerce companies are incentivised to push expensive, big-ticket products such as electronics, since these products will help boost the total transaction value. However, the margins on such products are often much lower than cheaper products such as clothing. Excessive discounts and cashbacks are offered to drive the GMV further, neglecting margins in the process. GMV is therefore not necessarily an accurate representation of an e-commerce company’s performance.
In recent years, companies are increasingly distancing themselves from GMV as a target. In 2016, Alibaba founder and executive chairman Jack Ma also said that GMV can be “misleading” and stated that it is no longer an important metric that represents Alibaba’s performance.
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Bibliography
Wikipedia. (2018). Gross Merchandise Volume. Retrieved from https://en.wikipedia.org/wiki/Gross_merchandise_volume
Will Kenton. (2018). Gross Merchandise Value. Retrieved from https://dictionary.cambridge.org/dictionary/english-chinese-simplified/silk
Zen Soo. (2017). What is GMV (Gross Merchandise Volume)? Retrieved from https://www.scmp.com/tech/e-commerce/article/2119589/explainer-what-gmv-gross-merchandise-volume
Nupur Parik. (2016). Why GMV Is a False Indicator of Your Startup’s Success? Retrieved from https://yourstory.com/2016/06/gmv-e_commerce-startup-success/
Gross Merchandise Value (GMV)
Reviewed by 浪子
on
January 02, 2019
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Reviewed by 浪子
on
January 02, 2019
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