The gross merchandise value is the total value of the merchandise sold in a given period of time through a customer-to-customer exchange site. It is a measure of the growth of the business or the use of the site to sell the merchandise of others.
Gross merchandise value is an element of an e-commerce site’s performance, as business revenue will be a function of gross merchandise sold and fees charged, and is most useful as a comparative measure over time, such as the current quarter value versus prior quarter value.
How is calculated the Gross Merchandise Value?
The gross merchandise value is calculated before any fees or expenses are deducted. Provides information that a retail business can use to measure growth, often month over month or year over year. Generally, a retail business can calculate the gross value of all completed sales, although it may be necessary to remove merchandise returns from this number to provide an accurate calculation.
Since retailers may or may not be producers of the goods they sell, measuring the gross value of all sales provides information on the company’s performance. This is especially true in the customer-to-customer market, where the retailer acts as a third-party mechanism to connect buyers and sellers without actually participating.
It can also provide value to retailers in the consignment industry, as they never officially buy your inventory. Although the items are often located within a company’s retail location, the business functions as the authorized reseller, often for a fee, of the merchandise or property of another person or entity. In general, they are never the true owners of the items, since the person or entity that placed them on consignment can return them and claim them if they wish.
Customer-to-customer retailers provide a framework, or system, for sellers to list the items they have in stock and for buyers to find items of interest. The retailer functions as an intermediary, facilitating the transaction, commonly for a fee, without actually being a buyer or seller at any point in the transaction.
In many of these customer-to-customer sales, the retailer facilitating the transaction never comes into contact with any of the physical merchandise. Instead, the seller will ship the item directly to the buyer once the financial portion of the sale is complete. This model can differ dramatically from other retail models in which the retailer purchases merchandise from producers, manufacturers, or distributors and then essentially functions as an authorized reseller of the goods the company has purchased.
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