Gross Merchandise Value – otherwise known as GMV – what is it? GMV is the total end-value to the customer of the products sold through a marketplace, or the total value of the goods sold by an eCommerce startup. This KPI is not an accounting term – AICPA does not have a GAAP definition of gross merchandise value. This means that every company is responsible for defining the term for themselves.
How to calculate GMV
For a marketplace, GMV is traditionally calculated as the total value paid by the purchaser-side of the marketplace – so it does NOT include the deduction of expenses such as marketplace fees, refunds, etc. It’s important to note that for many companies this is NOT the same as the GAAP defined revenue. For many of our clients this metric does not appear on the Income Statement (or on any of the financial statements) – talk with your accountant to figure out the best way to calculate your marketplace startup’s revenue.
For eCommerce companies, this KPI is much more likely to be equal to product sales revenue (but does not include shipping, transaction fees, ad platform revenue, handling, insurance or other add-ons). Again, working with an experienced eCommerce accountant can help your startup avoid common pitfalls.
Why present the metric at all?
GMV provides a solid view of how much product or goods (maybe even services at some people-focused marketplaces) move through a company. For a retailer, who likely does not produce some or all of the goods that they sell, it helps understand end customer activity.
A major issue some startup founders have with the KPI is that it can become a vanity metric. For example, if a marketplace has a high amount of refunds, the GMV may start to provide a false sense of value transacted through the platform.
Talk to an experienced startup accountant – us – about this important metric and its impact on your financial metrics.