What Is Gross Merchandise Value (GMV)?
Gross Merchandise Value (GMV) is the total revenue generated from the sale of merchandise at a business during a specific reporting period. It is usually used by online retail businesses, in particular, marketplaces that facilitate transactions of selling merchandise between third parties.
Gross Merchandise Value is also known as Gross Merchandise Volume.
GMV vs Revenue
For a company, GMV might or might not be equal to revenue, based on the business model of that company.
Let’s take 2 examples from two different business models.
Example 1
Company A is an DTC e-commerce brand that sells its products directly to customers through its website and other channels. The company operates on a normal retail business model, where it sources and buys merchandise from suppliers at low price and sells it at higher price to customers, and this is how it makes money. The company doesn’t have any other sources of revenue, other than the revenue generated from sale of merchandise.
In this case GMV for that company will be equal to its revenue.
If company A has other sources of revenue, such as advertising revenue it generates from its Retail Media Network, then GMV will not be equal to total revenue, as GMV will not include advertising revenue. Adding ad revenue to the GMV in this case will represent the company’s total revenue.
Example 2
Company B is a marketplace that connects buyers and sellers. It operates on a marketplace or consignment model, where it either just connects third parties together or receives the merchandise from the sellers, stores it and delivers it to customers when sold.
In both cases Company B does not buy or own that merchandise, and it makes money through the commission and other related fees collected from sellers.
When company B reports is results it will have different values for GMV and revenue, where GMV will represent the total value of merchandise it facilitated moving through its platform, and revenue will include commission and other fees it collected from the different parties.
So in this case GMV will not be equal to revenue reported on its financial statements.
For example, the above annual report from Ebay shows a GMV of $83.8 billion in 2016, but the actual revenue of the platform for the same year was $9 billion.
Since Ebay does not own the merchandise, it does not recognize the proceeds from its sales as revenue, unlike Company A we had in example 1, which owned and sold the merchandise and also generated revenue from other streams.
- Analyzing the income statement
- Generating relevant reports
- Calculating financial ratios
Amazon’s GMV vs. Revenue
In its 2022 annual report, Amazon explained in details how it reports its revenue.
It has divided revenue under different categories:
- Retail Sales: This includes sales proceeds from products that Amazon sources and sells through its physical & online stores , including digital products.
- Third-Party Seller Services: This includes the commission and fees collected from sellers upon delivery of the sold products
- Subscription Services: This includes the different subscription fees such as Prime memberships and Audible subscriptions.
- Advertising Services: This is revenue collected from advertisers to promote their products on Amazon’s platforms.
- AWS: This is revenue from Amazon Web Services for cloud computing & storage services.
- Other: Includes other revenue such as licensing fees, distribution of content, shipping…etc.
If Amazon was to report a figure for GMV, it would include merchandise sales form its retail sales revenue category, added to it the value of merchandise it helped third-party sellers move through its platform. According to Statista, the value of Amazon’s GMV in 2020 would be $490 billion. This figure would not include any of the other revenue categories we detailed above.
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