NMV & GMV: Ecommerce Valuation Terms to Know

GMV and NMV: eCommerce Acronyms You Need to Know

There’s more to running an ecommerce business than just designing, buying, reselling, or drop-shipping merchandise. Having a keen eye for products is essential. Having a variety of reliable suppliers and vendors is a must. Employing strong social media marketing techniques and SEO tactics are critical to driving traffic to your site. But there’s a lot more to it than that. 

In order to be truly successful, you’ll need to know how to properly calculate your earnings and know how to monitor your growth. And to do that, you’ll need to have an understanding of gross merchandise value and net merchandise value. GMV and NMV are essential components to monitoring the growth or decline of your business.

 

What is GMV?

Gross merchandise value is the total value of merchandise sold during a particular period of time. The value can be calculated monthly, quarterly, and annually and compared to the previous time period to determine loss or growth. Month over month, quarter over quarter, and year over year comparisons will let you monitor the growth for a specific current period compared to a specific period in the past.

To calculate your GMV, simply total all merchandise sales. For the most accurate figures, you’ll need to subtract any merchandise returns. If you don’t subtract returns, you’ll end up with a false and unreliable figure. For example:

In the first quarter you sold 100 units at $100 each, for a GMV of $10,000. In the second quarter you sold 200 units at $100 each, for a GMV of $20,000. But in the second quarter, 150 units were returned. By relying on the GMV without subtracting returns, you’ll think you doubled your business, when in reality you did $5,000 less in sales.

 

What is NMV?

Net merchandise value is just as easy to calculate. Total up all of your discounts, product costs, fees, gateway payments, and marketing expenses. Then deduct this number from your GMV. The GMV is the total of all sales, prior to expenses. The NMV is the actual net profit after all expenses have been deducted.

Like the GMV, the NMV can be compared year over year or quarter over quarter in order to determine growth or loss.

 

Why You Can’t Rely Solely On GMV

Do not rely on your GMV alone to determine the success of your business. Even though your GMV may increase, it doesn’t necessarily mean you’re making more profit. A comparison of the GMV alone won’t give any insight into your profit margins or operating costs. In order to see the bigger picture, you’ll need to calculate your NMV.

A simple calculation of your GMV is meaningless on its own. But it’s essential to calculating your NMV, which is a worthy measure of the growth (or decline) of your business.

Andrew @ EcomLoop
EcomLoop founder. I've worked in ecommerce since 2005, beginning with my own ebay store. I've run multiple independent ecommerce businesses on Magento, Joomla, and more recently, Shopify and WooCommerce. I believe marketplaces should be looked at as a sales channel and that all independent businesses should strive to build a direct connection with their audience for long-term success.

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