To anyone in the eCommerce industry, it’s no secret that many terms and acronyms are thrown around daily. Whether it’s for tracking performance, measuring growth, or understanding revenue, deciphering the meanings of these terms is a crucial step in running a successful eCommerce business.
One of those terms that you should learn more about is gross merchandise volume (GMV). GMV is an essential metric to measure your store’s growth and can provide valuable information when you have access to your financial data. In other words, understanding GMV is the key to making informed business decisions and ultimately increasing total sales.
Let’s take a closer look at what GMV is and how you can use it to increase your store’s revenue on Shopify. From calculation methods to strategies you can implement, this article will provide the guidance needed to maximize your store’s GMV on Shopify. Let’s get started.
Understanding Gross Merchandise Value (GMV)
Gross merchandise value (GMV) is a metric used to measure the total dollar amount of products sold through an eCommerce platform or website over a certain period. It is a useful metric for gauging an online store’s overall performance since it indicates how much revenue a business generates from sales.
You should measure your eCommerce gross merchandise value (GMV) at least once per year or every financial quarter. That way, you can compare sales numbers over time and track your progress more accurately. Keep in mind that the GMV calculation is made before any fees or expenses related to the sale of products have been deducted. It includes shipping costs, discounts, advertising expenses, and returns.
An accurate GMV figure will help you gauge your sales performance and better understand your finances. This information can be valuable when making strategic decisions about your business’s future.
How To Calculate Gross Merchandise Value?
To easily determine GMV, use the following formula:
- GMV = Sales Price of Goods x Number of Goods Sold.
An example would be if you sold 10 products for $100 each, your GMV would total a remarkable $1,000. It’s simply the price charged to your customer multiplied by the number of items sold.
GMV Vs. Net Sales
Comparing gross merchandise value and net sales is essential to understanding how to increase GMV. The former, also known as gross sales, is the total amount of money made from goods sold before subtracting any discounts or taxes. In contrast, net sales are gross sales minus those same deductions.
For example, a company might generate $100,000 worth of gross merchandise from selling 10 items, each valued at $10. Once discounts or taxes are deducted from that total, the company might have a net sales of $90,000.
Why is Gross Merchandise Value Important for eCommerce?
For Shopify eCommerce businesses, GMV is a key performance indicator (KPI) used to measure the total value of merchandise sold through an online store.
1. Company Performance Insights
You can use GMV to track your company’s performance over time, such as month-over-month growth or seasonality. It can also provide insights into what products are selling well and which ones need improvement. Also, tracking GMV can help you identify opportunities to increase efficiency and profitability.
2. Comparative Measure Over Time
GMV is also useful for measuring a company’s performance against competitors and tracking changes in customer demand and trends in the eCommerce industry. You can compare metrics such as average order value, customer acquisition cost, customer lifetime value, conversion rate, and total orders to understand better how your business is doing compared to others.
3. Targeted Promotions
GMV can help you determine which promotions yield the best results for your Shopify eCommerce store. You can quickly assess its success and adjust accordingly by tracking changes in GMV before and after launching a promotion. You can focus on the most effective strategies to generate more sales and revenue.
4. Customer Retention Strategies
Tracking GMV can also help you identify the most effective customer retention strategies. For example, by analyzing customers’ spending habits over time, you can create targeted promotions or loyalty programs designed to keep them coming back and increasing their overall spending.
How To Increase Your GMV On Shopify?
Several factors can influence your GMV on Shopify, including pricing, inventory management, and marketing. Here are some tips to help you increase your GMV:
1. Analyze Your Current Pricing
Ensure that the price of items in your store is set to maximize profits. Consider using dynamic pricing to adjust prices based on demand or offer discounts for bulk purchases. Consider implementing a loyalty program or offering free shipping to keep customers returning. Also, make sure you stay competitive with other stores.
2. Manage Your Inventory
Make sure your inventory is correctly sized and managed at all times. Regularly review stock levels to avoid overstocking or running out of products. Utilize data from past sales to make informed decisions about future orders, ensuring you have the right amount of available products. Also, consider partnering with other stores to provide additional selection when your inventory is low.
3. Invest In Marketing
Creating an effective digital marketing strategy is essential to increase your GMV on Shopify. Consider investing in SEO, paid ads, and social media campaigns to promote your store and drive more sales. Consider email marketing strategies to reach out to potential customers and reward loyal customers with promotions and discounts. Also, focus on creating content that resonates with your target audience and provides helpful information.
4. Improve Your Product Listings
Having detailed product descriptions and high-quality images can make a big difference in how customers perceive your products and how likely they are to purchase them. Try to make your listings as appealing and informative as possible to encourage customers to buy more from your store. Also, consider including customer reviews and ratings to build trust in your store.
5. Cross-Sell And Upsell
For customers who are already browsing your store and considering a purchase, offer related products they may be interested in. Cross-selling is an effective way to increase each order’s value, while upselling encourages customers to upgrade their purchases.
You can add product recommendation widgets to your store or create dynamic discounts that can only be applied when customers add additional items from the same collection. Also, don’t forget to use helpful visuals like side-by-side product comparisons and “featured products” sections. By encouraging customers to purchase additional items, you can quickly increase your GMV.
6. Offer Bundle Deals
Make sure that customers get the most value from their purchases by offering bundle deals or package discounts. This allows customers to purchase multiple products simultaneously while saving money. You can even use the bundle pricing feature on Shopify to make creating bundle deals a breeze. It’s a great way to increase the average order value of each customer, which can lead to a significant boost in GMV.
7. Free Shipping
Most customers expect free shipping when shopping, so consider offering it as an incentive to increase sales. Free shipping can help you stand out from competitors and encourage customers to add more items to their carts. You can also offer a flat-rate or tiered-rate option which allows customers to get discounts on shipping costs if they reach a certain total order value.
8. Leverage Social Media
Social media is a powerful tool for driving more sales to your store. Consider creating content that educates customers on the value of your products and connects with them emotionally. Focus on building relationships and engaging with customers rather than just pushing out promotional content. You can also use social media to run contests and giveaways to encourage more followers and build your brand.
Following these strategies can easily increase your gross merchandise value on Shopify. With the right approach and enough dedication, you’ll be able to drive more sales to your store and reach new heights of success.
When Should You Not Rely On GMV?
Several important factors can influence how much value a product brings to your store, and GMV doesn’t reflect these. It would be best if you did not rely on GMV to measure the success of your store while:
1. Profitability Analysis
If you’re looking at a profit and loss statement, GMV won’t reflect the true profitability of your store. That’s because it doesn’t factor in overhead costs, such as labor or materials. Also, it doesn’t consider unit costs, such as taxes or shipping fees. Your store’s net income is a much more reliable measure of profitability.
2. All Factors Not Included
GMV doesn’t account for all factors influencing the total value of goods sold in your store. For example, it doesn’t consider the type or quality of goods you sell or any discounts you may have offered. Also, it doesn’t include any services you may have provided, such as installation or setup.
3. The Whole Picture
GMV is only a single metric that tells part of the story about the success of your store. It doesn’t give insight into customer satisfaction or how well products perform on the market. For example, the gross revenue from repeat customers can be much more valuable than one-off purchases. Also, tracking customer reviews and feedback can be key to understanding the impact of your products. When assessing your store’s success, you should take the time to look at the big picture.
4. True Value Of Goods
GMV doesn’t necessarily express the value of goods in creating meaningful customer product experiences. For example, high-quality craftsmanship and design are often more important factors when purchasing price points. Offering items with unique features or value-adding services can greatly enhance the customer experience and generate more GMV in the long term.
1. Is GMV The Same As Revenue?
Gross revenue and GMV are both measures of a company’s sales. However, GMV is the total amount of goods sold, while revenue is the total amount of money earned from those sales. The slight difference between them is that GMV doesn’t consider taxes, delivery costs, and other expenses that may influence the overall revenue.
2. Does GMV Include Return?
No, GMV does not take into account the return of goods. This is because GMV measures the total amount of goods sold, regardless of whether they are returned. It does not factor in any customer returns that a business may have.
3. Is GMV Important To Shopify?
Yes, GMV is an important metric for any online store. It measures the total amount of goods sold, which helps determine a store’s success and track overall performance. By tracking GMV, Shopify can help identify trends and areas that need improvement to increase revenue and generate more sales.
Spark Your GMV Growth With Blue Owl
Being a Shopify-partnered agency, we at Blue Owl understand the needs and challenges of eCommerce stores. We help you increase your GMV with our specialized strategies so your store can reach its maximum potential.
Whether you are just starting with Shopify or have been running a store for some time, optimizing your sales is the top priority. With our services, from creating special campaigns to optimizing your store design and product pages, we will help you grow quickly. Our team has extensive experience in boosting sales for Shopify stores, so you can count on us if you want to see quick improvements in your store.
Get in touch with us today, and let us help you maximize your sales and revenue growth. We look forward to hearing from you!