The retail market of e-commerce is now increasingly “hot” and attracts a lot of businesses. Therefore, in order to keep a foothold, businesses need to be flexible, agile, and use many different measuring tools. GMV is known as one of the popular indicators of this online business environment. So what is GMV? What is the importance and formula to calculate GMV? In this article, let’s VIO find out now.
What is GMV?
GMV with full name Gross Merchandise Volume is the total volume of goods sold to a certain market. This is an indicator used to measure the growth of a business. This term is commonly applied in industries related to e-commerce.
GMV plays an important role in determining what needs to be done in the business. In simple terms, GMV is considered as the total amount of goods that a business has acquired over a period of time. GMV helps businesses distinguish how revenue and profit goals have been achieved. From there, let them find business vulnerabilities and take measures to fix them in time.
This metric is increasingly used by businesses to determine the performance of their business. Especially in today’s online retail industry. GMV will cover all fees and be charged to quarters or year-end periods.
What is the meaning of GMV?
- Helps businesses have more information to calculate specific expenses. From the actual numbers, bring the orientation for the development of the business. With fierce competition in the market today, it is important to capture the numbers of total goods or expenses. It will help a lot in your business.
- From GMV, businesses can easily capture the company’s performance through quarters and years. Bringing traders the most accurate measurements.
- Show professionalism, grasp the operation situation through the total merchandise of retail businesses.
- E-commerce is increasingly gaining strong traction in the market. Therefore, determining the GMV index also helps businesses to have orientation. To keep yourself a sustainable foothold against your competitors.
The importance of GMV in marketing
Importance of GMV
Marketing activities not only build brands but also contribute to promoting the buying decision process of customers. Today, GMV plays an extremely important role in the marketing activities of enterprises.
- After knowing the total value of goods before depreciation, from GMV enterprises will have more necessary information to measure quantity effectiveness of the operation.
- Calculate total sales value from expenses spent on advertising, PR, sales…
- GMV is very useful in today’s online retail market. When correctly determining this indicator, businesses will get information for their business processes. Especially for businesses operating in the field of consignment because they will not buy back inventory items.
Some limitations of GMV
- The biggest disadvantage of GMV is that even though it is a unit to represent the total value of goods. However, this index does not reflect the profit of the business.
- Does not provide detailed, specific information about item types when sold.
- Does not include other costs such as discounts, exchange fees…
- While determining the GMV, the business cannot calculate for net revenue. This causes many misconceptions for many businesses. So it is easy to give wrong directions, affecting business performance.
Although it is considered an important indicator, it helps a lot for retail businesses in the market. However, GMV still has many disadvantages. Therefore, when choosing to calculate GMV in marketing activities, businesses need to consider. To be able to bring about optimal efficiency.
GMV formula
From the formula to calculate GMV, help businesses maximize efficiency in their business activities. Here is the most accurate GMV calculation formula:
GMV = Price per item * total number of products
GMV: Total weight of the goods
Example: A retail business is doing business online in the marketplace. In particular, the product that they provide handbags with the price of 30 USD / bag. The number of products is 100 bags. Find GMV?
We have:
Average 1 product is 30 USD
The total number of products is 100 bags.
So the GMV in this case will be calculated as follows:
GMV = 30 * 1000 = 3000 USD
In addition to knowing the GMV formula, businesses need to have market analysis information and experience. Thus, it will be easy to find the holes, helping business operations bring high efficiency.
Hope the article we bring will help you have more knowledge about what is GMV? It can be seen that the application of GMV will bring a lot of benefits in marketing activities of enterprises. However, the index still has a few limited, so businesses should combine and measure many different business metrics. Thereby, increase the accuracy and get more necessary information for yourself.
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