What Is Gross Merchandise Volume (GMV)?

Don't rely on GMV alone to understand a company's financials

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Gross merchandise volume, or GMV, refers to the total volume in dollars of sales over a given time period on an e-commerce site such as eBay. This figure was commonly used in place of sales or revenue figures in the early days of e-commerce but has become a somewhat outdated way to measure value of a company.

There are a few ways to calculate GMV. The most simple explanation for a retailer is that GMV is the sales price charged to the customer, multiplied by the number of items sold.

So if you sell 10 widgets in your eBay store for $100 each, the GMV would be $1,000. In other words, it's another way to calculate gross revenue. 

But in terms of economics, GMV is a raw figure that doesn't offer much insight into the value of the items sold, or factor in any costs accrued by the retailer. GMV doesn't include discounts or returns, or the cost of keeping and storing inventory before it's sold. It's not even a good predictor of net sales, which are a more accurate representation of a company's overall financial health. Even for e-commerce sites like Amazon, the site revenue is not calculated based solely on the dollar value of items sold. 

How GMV Could Be Used on eBay

In the context of eBay, GMV refers to the total volume in dollars of sales on eBay and eBay-branded trading websites in a given economic period. It is commonly used in reference to two kinds of information.

The total volume of goods sold on eBay as a whole, across the entire website, as a measure of eBay's performance and status as a marketplace.

It also is used to indicate the total volume of sales by an individual seller over a recent period, as a method of monitoring sales performance and business health.

Depending on the context, a seller may be talking about either one, or  both, for example: "eBay's GMV is slightly down year-over-year, but I'm seeing much worse in my own business—GMV has fallen 20 percent this month, as compared to last month at this time."

But this is a flawed measurement, and if you're trying to determine the economic health of an eBay store or any other retailer, a figure like GMV isn't going to offer enough insight. 

More Accurate Than GMV

If you're examining the earnings of a publicly-traded company, their quarterly SEC filings will tell you more about the company when you put them in context. Looking at a company's net income, for instance, doesn't really mean much unless you have something to compare it to. Is this quarter's figure higher or lower than last year's figure for the same quarter? Is this a pattern of increased revenue, or has revenue been declining? Were there special factors in a given quarter, such as sale of a property, that had a one-time impact on the company's bottom line? 

As you can see, there are many ways to calculate a company's health, and using GMV just doesn't give an accurate enough picture.