Key takeaways
- Gross merchandise value measures total sales on your platform before deducting fees, returns, or taxes, offering a snapshot of business activity
- Use GMV to assess operations, identify best-selling products, and evaluate marketing effectiveness
- Platforms like Statista track GMV to analyze eCommerce growth in marketplaces, regions, or countries such as China. Shopify also uses it for its own financial reporting
- Multiply product prices by quantities sold and sum the results to calculate GMV
- Increase sales through upselling, cross-selling, offering free shipping, creating product bundles, providing excellent customer service, and ensuring a seamless return process
GMV, which stands for Gross Merchandise Value, is one of the most commonly used metrics in the eCommerce industry.
Whether you’re running a small Shopify store or leveraging platforms like TikTok for sales, understanding and calculating GMV is crucial.
This metric reflects the business volume by capturing the total value of sales, either on a quarterly or annual basis.
Comparing GMV to other key performance indicators (KPIs) gives a clear definition of your business’s health and can help you identify products that may need attention or those that attract more customers and increase profits.
For example, in that Reddit thread, you can see how a Shopify user uses GMV to determine whether to upgrade to a higher plan.
In this guide, we’ll break down the formula for calculating GMV, explain its benefits and limitations, and discuss how to avoid relying solely on it for decision-making.
We’ll also share advanced tips to help you boost your GMV in straightforward and effective ways, ensuring your eCommerce business thrives.
What is GMV? A different definition for each business
1. What GMV means in eCommerce and retail
The definition of Gross Merchandise Value (GMV), often shortened to GMV, refers to the total gross value of sales. This includes canceled orders, returns, and commissions—essentially anything intrinsic to the product itself. Shipping costs, taxes, and other elements that don’t directly contribute to the financial growth of the company should not be included in a GMV calculation.
2. What GMV means in finance
GMV in finance represents the total transactional value processed by a platform, such as a payment gateway or trading app. It focuses on the volume of money flowing through the system, helping to assess the platform's activity and growth potential.
3. What GMV means in marketing and sales
GMV in marketing relates to the sales generated by specific campaigns or channels. It measures how effective a marketing effort was in driving revenue, attributing sales directly to actions such as ads or influencer collaborations.
How to calculate GMV: Understanding the formula
To calculate the GMV , multiply the price point of the sold products by the number of products sold. You can follow the simple formula presented below:
GMV formula = Sales price of the products x Number of products sold
Most retailers have a catalog of dozens of products, in this case, you’ll need to account for all of the products of which you sold at least one unit and multiply it by its price.
Thanks to automation tools, GMV can be quickly calculated, without the headaches caused by the use of discounts and the management of a wide catalog of products.
However, if your operations are still on the smaller side, you can still manually calculate the GMV of your business with the aforementioned formula.
3 Real examples of how to calculate gross merchandise value of a business
1. Example for a fintech business
Scenario: A fintech platform processes various types of transactions in a quarter:
- Payments for goods and services: $5,000,000
- Peer-to-peer transfers: $2,000,000
- Corporate payroll processing: $3,000,000
Calculation: The GMV in this case represents the total value of all transactions facilitated by the platform. The formula is:
GMV = Payments for goods/services + Peer-to-peer transfers + Payroll processing GMV = $5,000,000 + $2,000,000 + $3,000,000 = $10,000,000
2. Example for an eCommerce
Scenario: An online marketplace records sales in a month from multiple sellers:
- Seller A sells 1,000 units of electronics at $300 each: $300,000
- Seller B sells 500 units of clothing at $50 each: $25,000
- Seller C sells 200 units of furniture at $1,000 each: $200,000
Calculation: The GMV is calculated by summing the total value of goods sold across all sellers, excluding platform fees and shipping costs.
GMV = (Units sold by Seller A x Price per unit) + (Units sold by Seller B x Price per unit) + (Units sold by Seller C x Price per unit) GMV = $300,000 + $25,000 + $200,000 = $525,000
3. Example for a marketing agency
Scenario: A marketing agency runs a multi-channel campaign for a client, generating the following results in one month:
- Social media ads result in $120,000 in sales.
- Email campaigns drive $80,000 in sales.
- Paid search ads bring in $150,000 in sales.
Calculation: The GMV attributable to the marketing campaign is calculated by summing the sales driven by each channel.
GMV = Sales from social media ads + Sales from email campaigns + Sales from paid search ads GMV = $120,000 + $80,000 + $150,000 = $350,000
How to track GMV and what to do with the information
Tracking Gross Merchandise Value (GMV) is vital for understanding the performance and direction of your eCommerce business.
The key to tracking GMV effectively lies in maintaining accurate records of all transactions.
This means ensuring your eCommerce platform is synced with your inventory management and accounting software to capture real-time sales data without manual effort.
Platforms like Shopify or professional analytics tools make this process straightforward, as they automatically compile GMV data by integrating with your inventory and sales systems.
GMV vs. Revenue
One of the dangers of relying solely on gross merchandise value as a metric for success or failure is the fact that it doesn’t account for the revenue that the company will be making.
For this reason, it’s important to keep operative costs behind the sale in mind and use alternative eCommerce metrics instead of tracking only GMV.
How you can use GMV insights effectively
Once you have GMV figures, the next step is to interpret them. That is some key information that you can get:
- Identify trends: analyze GMV over time to spot seasonal patterns, growth rates, or dips, helping you adjust marketing and inventory strategies accordingly
- Evaluate product performance: determine which products contribute the most to GMV to focus on expanding or promoting those items, while re-evaluating underperforming ones
- Optimize inventory management: use GMV data to ensure stock levels align with demand, preventing overstocking or stockouts for high-performing products
- Refine marketing strategies: allocate budget to the campaigns, channels, or audiences driving the highest GMV, and discontinue those that deliver minimal results
- Improve customer retention: GMV growth comes from one-time buyers, consider strategies like loyalty programs or personalized offers to encourage repeat purchases
- Assess overall business health: compare GMV with metrics like net revenue, profit margins, or customer acquisition costs to ensure growth is sustainable and profitable
- Support forecasting and planning: use GMV trends to set realistic sales targets, plan for peak seasons, and inform future resource allocation
- Evaluate discounts and returns impact: GMV is high but profits are low, it may highlight issues with returns or excessive discounting that need attention
How to increase GMV in eCommerce: 5 bullet-proof techniques
1. Implement upselling and cross-selling strategies
One of the first steps you can take to increase your GMV is to implement marketing strategies to promote new collections, launches, special campaigns for events as well as discounted items.
This can be done in many different ways and we suggest you combine at least a few of them in order to reach its full potential.Â
For example, you can add a banner to your store to redirect price-sensitive buyers to your discounted section.
This can be easily implemented alongside the promotion of a new collection on the tracking page. Hereby, those customers who already showed a real interest in your store through a purchase, will be impacted by another call-to-action whenever they check on the status and location of their order.
You can also use product recommendation software and include new products in each shipping notification to encourage your customers to make additional purchases.
2. Offer free shipping
Yes, we suggest offering free shipping, but not like most retailers (including yourself) do it.
This can be a bit tricky and needs to be carefully considered — and calculated properly — since free shipping, regardless of the quantity spent, can quickly transform sales into a source of greater cost than profit.
For international retailers and larger operations, this may be only possible to offer to clients in the same city, region or country. However, when we talk about cross-country shipments or more complex items, like furniture, this is impossible to offer without perceiving a clear impact on your GMV — and not the kind of impact you were looking for —.
For this reason, this strategy can only be viable if your items have average size and weight, meaning that your shipping methods and costs are standard, and if the more affordable products in your catalog already make up for the standard shipping costs.
Source: Nordstrom
3. Create product bundles or kits
Although it may not be a possibility for every retailer out there, product bundles or kits can be an easy and cost-effective way to increase the GMV without a considerable investment of resources.
Kitting technique is at the core of many retailers, such as subscription boxes, but can be definitely taken advantage of by any business whose products are somehow related to each other. For instance, if you sell cosmetics, you can create a bundle with your top sellers or a kit where products with the same scent (or in the same format) are combined. You can even sell multiples of the same product at a small discount. Loyal buyers will appreciate the effort and, in terms of packaging, you won’t need to do much.
Source: Sephora
4. Introduce loyalty programs
Loyalty programs have existed for a long time already. However, in the last decade, a number of platforms have been created to reward buyers, across many online stores. I’m talking about cash-back platforms.
Even though more traditional loyalty programs, such as point collections, promotional codes and freebies will always work, partnering with cash-back programs is a good idea to offer more to your customers and potentially increase both your AOV and your GMV. It’s affordable and fast and, since it is commission-based, you’ll only pay whenever a customer makes a purchase while using the cash-back platform.
5. Turn returns into revenue
A well-optimized returns process can significantly enhance customer confidence, which in turn drives higher sales and boosts GMV. When customers know they can return products easily and without hassle, they feel more comfortable making purchases, even if they are unsure about an item. This trust removes hesitation and often leads to increased sales volume.
Additionally, the returns process itself can be an opportunity to encourage repeat purchases. For example, instead of offering a direct refund, providing store credit or an easy exchange option can motivate customers to shop again. This transforms a potential loss into a new sale, increasing the total value of transactions over time. An efficient and customer-friendly returns system not only retains customers but also fosters loyalty, leading to consistent growth in GMV.
Conclusions
GMV is a great start, but a bad place to stop. Since this metric can’t be fully relied on — because it doesn’t take costs into account —, it needs to be tracked together with other key eCommerce KPIs in order to have a clear and trustworthy vision of the financial situation of your business.
Now that you know what gross merchandise value is and how to calculate it, the next step is to implement some or all of the ideas we shared that will help you increase the value of your sales without dramatically increasing the costs associated with them.
