# Gross Merchandise Value (GMV): Understand, Calculate, and Analyze

![Gross Merchandise Value](https://www.investopedia.com/thmb/R5HckRwScdY1Kzrxp0eSBjB1S4U=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/gross-merchandise-value.asp-80aac267540b4692a5a0896020191678.jpg)

*— Investopedia / Ellen Lindner*

## What Is Gross Merchandise Value (GMV)?

Gross Merchandise Value (GMV) represents the total monetary value of goods sold over a specified period via [customer-to-customer (C2C)](https://www.investopedia.com/terms/c/ctoc.asp) or e-commerce platforms. Primarily used to evaluate the growth and health of these businesses, GMV provides a snapshot of a company's sales dynamics and operational performance. In this article, we'll explore GMV's calculation and application, alongside its benefits and limitations.

### Key Takeaways

*   Gross Merchandise Value (GMV) measures the total value of goods sold on C2C and e-commerce platforms, accounting for business growth but not actual net revenue.  
    
*   GMV is calculated by multiplying the sales price of goods by the number of goods sold, excluding deductions for fees or expenses.  
    
*   While GMV offers insights into company performance and growth, it fails to account for the actual revenue a company retains after sellers' share and other expenses.  
    
*   It is useful to compare GMV over different periods, like quarters, to assess the growth or health of e-commerce businesses.  
    

## How to Calculate Gross Merchandise Value (GMV)

Gross merchandise value (GMV) is calculated before the deduction of any fees or expenses. It provides information that a retail business can use to measure growth, often on a month-over-month, quarter-over-quarter, or year-over-year basis. A retail business can generally calculate the gross value of all completed sales but merchandise returns may have to be removed from this number to provide an accurate calculation.

Simply multiply the number of goods sold by the sales price of the goods to calculate GMV.

The formula is: **GMV = Sales Price of Goods x Number of Goods Sold**.

> **Important**
>
> Accrued fees and expenses may include advertising, delivery, returns, and discounts.

## Pros and Cons of Using GMV

GMV has its advantages and drawbacks just like most other growth measurements.

### Advantages

Measuring the gross value of all sales helps gauge a company's performance, regardless of whether [retailers](https://www.investopedia.com/terms/r/retail-sales.asp) produce the goods. This is especially true in the customer-to-customer market where the retailer serves as a third-party mechanism for connecting buyers and sellers without actually participating in the transaction.

GMV helps [consignment](https://www.investopedia.com/terms/c/consignment.asp) retailers since they don't officially purchase their [inventory](https://www.investopedia.com/terms/i/inventory.asp). The items are often housed within a company’s retail location but the business functions solely as the authorized reseller of another person’s or entity’s merchandise or property, often for a fee. They're generally not the true owner of the items because the person or entity that placed the item on consignment may return and claim the item if they choose to do so.

### Disadvantages

While GMV shows the total value of goods sold on a C2C exchange, it doesn't show a company's profitability. It primarily shows the true [revenue](https://www.investopedia.com/terms/r/revenue.asp) that a company earns from fees. The entire $500 doesn't go to the company if its GMV was $500 for the month. The majority will go to the individual who sold the goods. The company's true revenue would be the fee it charges for the use of its site. The company's true revenue would then be $500 x 2% = $10 if the fee was 2%.

GMV can have other disadvantages depending on the type of e-commerce site. For an online retailer producing its own goods, GMV shows revenue but offers a limited view. It wouldn't tell you how many customers visited the site or how much revenue was received from repeat customers. Both are important indicators in terms of [customer satisfaction](https://www.investopedia.com/terms/c/customer-service.asp) and the long-term health of the company.

Pros

*   Provides insight into a company's performance
    
*   Allows for comparison with competitors
    
*   Simple and quick calculation to perform
    

Cons

*   Not a true reflection of a company's actual revenue
    
*   A limited metric that doesn't consider other factors such as repeat customers
    

## How Customer-to-Customer (C2C) Retailers Utilize GMV

Customer-to-customer (C2C) retailers provide a framework or system for sellers to list items they have in inventory and for buyers to find items of interest. The retailer functions as an intermediary, facilitating the transaction, commonly for a fee, without actually being a buyer or seller at any point in the transaction.

The retailer facilitating the transaction never comes in contact with any of the physical merchandise in many of these customer-to-customer sales. The seller will send the item directly to the buyer when the financial portion of the sale is complete.

> **Fast Fact**
>
> The estimated gross merchandise value (GMV) of Amazon (AMZN) was more than $700 billion in 2023.

This model differs from others where retailers buy merchandise to resell as authorized dealers.

## Comparing GMV and GTV: What’s the Difference?

GMV is the total dollar value of sales in a period, while GTV focuses on revenue from commissions. GTV is used more in businesses that operate on commissions because it's equal to the number of items sold multiplied by the price collected.

GTV is calculated by multiplying the number of transactions by the average order value by the total number of transactions made and the items sold. It tends to be used by e-commerce companies in marketplaces where multiple sellers transact.  

## Example of GMV

Two of the most well-known C2C sites are [eBay](https://www.investopedia.com/articles/markets/042815/how-ebay-makes-its-money-ebay.asp) and Etsy. Assume that eBay sold 100 goods during the first quarter of the fiscal year. All those goods were priced at $5. eBay's GMV would be 100 X $5 = $500 for the first quarter.

Now let's say that Etsy sold 80 goods in that same quarter and all the goods were priced at $4. Etsy's GMV would be 80 x $4 = $320 for the first quarter.

eBay ([EBAY](https://www.investopedia.com/markets/quote?tvwidgetsymbol=ebay)) has a better GMV at $500 than Etsy ([ETSY](https://www.investopedia.com/markets/quote?tvwidgetsymbol=etsy)) does at $320 but this doesn't tell the whole story. A portion of the revenue on these sites has to go back to the seller that sold the goods. eBay and Etsy only keep the fees they charge. This is their actual revenue.

eBay charges a fee of 2% so it would bring in $10 ($500 x 2%). Etsy charges a higher fee of 4%. Etsy would bring in $12.80 ($320 x 4%). Etsy performed better because it brought in higher take-home revenues.

## What Does GMV Mean?

GMV means gross merchandise value or gross merchandise volume. It usually refers to the total value of merchandise sold over a given period through a customer-to-customer (C2C) exchange site.

## Is Gross Merchandise Value the Same As Revenue?

GMV can be the same as gross revenue depending on the type of e-commerce site. It's a reflection of the total value of goods sold for sites like eBay but not the actual revenue the company makes because a portion of those revenues goes to the sellers of the goods. The actual revenue that eBay makes would be from the fees it charges on the sales.

## What Is Gross Merchandise Value in a Startup?

GMV is the gross merchandise revenue of a startup. It's the total revenue that a company generates through the sale of its goods or services. IGMV is measured in conjunction with net sales that take deductions into account.

## How Is Gross Merchandise Value Calculated?

GMV is calculated by multiplying the total amount of goods sold by their sales price in a given period. GMV = Sales Price of Goods x Number of Goods Sold.

## The Bottom Line

Gross Merchandise Value (GMV) is a crucial metric for measuring the total value of goods sold through customer-to-customer (C2C) and e-commerce platforms. While GMV provides insights into the growth and performance of a business, it's important to remember that it doesn't directly reflect a company's profitability.

Instead, GMV should be complemented with other financial metrics to gain a comprehensive view of a company's financial health. By understanding GMV alongside other indicators, businesses and investors can make informed decisions about revenue potential, growth trends, and competitive positioning.

> **Article Sources**
>
> 1.  Marketplace Plus. "[Amazon Sales Top $700 Billion in 2023](https://www.marketplacepulse.com/articles/amazon-sales-top-700-billion-in-2023)."
>     
> 2.  Law Insider. "[Gross Transaction Value Definition](https://www.lawinsider.com/dictionary/gross-transaction-value)."