What is GMV and why everyone loves it?
In the retailer reports, you can often see the data on GMV growth over time, especially for the BNPL companies. Let’s figure out what it is and why it is required.
The indicator GMV (Gross Merchandise Value or gross value of goods) is the total value of goods sold on the marketplace or lent by the lender for a certain period of time, excluding returns, exchanges and discounts.
GMV has recently become especially popular due to the development of the e-commerce industry boom. The indicator is used by non-food retailers developing along the path of the marketplace.
The BNPL marketplace is a trading platform where goods and services of many sellers are sold. Marketplaces earn commissions from transactions and services for sellers, moreover provide help increasing the brand awareness and customer loyalty.
In their reports, the GMV indicator is published by:
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GMV reflects the activity on the marketplace – the higher the score, the higher the earnings are expected.
Companies may present their variations in the GMV score, but overall, they are fairly similar. Klarna in press releases and presentations provides the GMV indicator, including services, which represents the total value of orders processed through the platform, as well as revenue from services for buyers and sellers provided by the fashion segment, as well as value-added tax minus discounts, returns and cancellations.
Zip reveals financing GMV as purchases in retail stores, paid and delivered online orders, paid shipments to legal entities from warehouses. The indicator includes sales of goods and services that may be owned by a company or agents. GMV includes VAT but excludes refunds and discounts offered to customers during the reporting period.
In the view of the Affirm, GMV includes purchases in retail stores and goods and services sold through the website and mobile application, which may be proprietary and agency-owned. GMV is inclusive of value-added tax, fewer discounts provided to customers, and fewer refunds and cancelled orders made during the reporting period.
GMV is not revenue
One of the most important points: GMV does not match revenue, but the numbers are related.
In a simplified form, the revenue of the trading platform corresponds to the GMV indicator multiplied by the sales commission, that is, the money that the company receives from the turnover. At the same time, the income that the company generates when providing fulfilment services (order execution), as well as the proceeds from the sale of its own goods, can be added here. Thus, revenue is almost always less than GMV.
For example, Klarna’s GMV indicator for 2020 was in excess of $35 billion dollars. with a revenue of 1 billion dollars.
The peculiarity of GMV is that this indicator is growing faster than revenue. This is due to the fact that companies are gradually increasing the share of sales of third-party products on marketplaces, which significantly affect GMV and only marginally – on revenue.
Thus, we can say that GMV reflects the success of the marketplace in terms of popularity with sellers and buyers, trade turnover. The higher the indicator, the greater the volume of commissions and income from services a trading platform can receive. Revenue is the income that falls on the company and directly affects its financial results.
• GMV is the aggregate of the marketplace’s trade turnover for the period, excluding returns, exchanges, and discounts.
• The indicator reflects the activity of trading on the site. The higher the activity, the higher the commission income from the turnover.
• GMV does not match revenue.
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