Gross Merchandise Value (GMV): Definition, Formula & How to Track It for E-Commerce Growth

For every online seller, profitability is the benchmark for success. But to become profitable, you need to look for ways to improve your business’s health. 

Gross merchandise value (GMV) can help you with that. It’s a clean way to track momentum and spot trends, even when you’re selling through multiple marketplaces. 

This becomes a valuable metric for planning inventory, sizing marketing budgets, and setting targets your team can rally around.

But GMV alone won’t tell you if growth is profitable. It doesn’t reflect returns, refunds, discounts, payment processor fees, or your cost of goods. 

So, you must measure GMV consistently and pair it with unit economics (AOV, conversion rate, CAC, return rate, and contribution margin) to turn raw volume into real business insight.

And if you want a done-for-you setup, doola’s bookkeeping and Analytics can help you measure what matters and keep clean books so the top line you share with investors aligns with sustainable revenue.

Let’s examine the definition and formula, break down how GMV differs from revenue, and ways to track it by product, channel, and cohort. 

What Is Gross Merchandise Value (GMV)?

​​GMV is calculated as item price × quantity sold. It captures the value of the goods that shoppers decided to buy. 

It measures the amount of product value that moves through your carts over a time window (day, week, month, quarter). Due to its simplicity, it’s perfect for:

• Comparing momentum across channels, countries, or campaigns.

• Spotting seasonality and promo lift.

• Sizing operational needs like inventory and fulfillment capacity.

However, GMV does not tell you anything about profitability or cash you keep since it excludes:

❌ Discounts/coupons and promotions

❌ Returns, refunds, chargebacks, and cancellations

❌ Shipping charges and delivery fees

❌ Payment processor and marketplace fees

❌ Sales tax/VAT (which you collect but pass through)

❌ Costs (COGS, packaging, fulfillment, marketing, overhead)

Because these are excluded, GMV can rise while margins shrink, which is why you should always pair it with unit economics. 

Some sellers confuse GMV with other metrics, but they serve different purposes.

GMV vs. Total Sales vs. Net Revenue

These terms often get mixed up.

👉🏼 GMV is a volume metric that calculates merchandise value before deductions. If you sell 1,000 items at $50 each, your GMV is = $50,000.

👉🏼 Total Sales or Net Sales is the sum of all sales actually recorded by your business, usually after discounts but before expenses. So, if you gave $5,000 in discounts, Total Sales = $45,000.

👉🏼 Net revenue is what you actually earn from customers after subtracting discounts, returns, and allowances, and excluding sales tax you remit. 

From $45,000 in Total Sales, if $2,000 in returns and $3,000 in transaction fees are deducted, your Net Revenue is = $40,000.

This is the number that flows into your P&L and underpins margin analysis.

🔖 Related Read: SG&A in E-Commerce: A Complete Guide to Selling, General, & Administrative Expenses

How to Calculate Gross Merchandise Value (GMV)

The formula is simple:

GMV = Sales Price × Number of Items Sold

You apply that at the SKU or order-line level and then add everything for the period you’re tracking. 

Because the math is straightforward, GMV is quick to compute across channels and easy to compare week over week or campaign to campaign.

Suppose you sell 3 products and want to calculate GMV for April.

In April, you sold 200 T-shirts at $25, 80 hoodies at $60, and 120 caps at $18. 

Let’s use the same formula for each SKU and add them together for the total GMV.

• For T-shirts (25 × 200) = $5,000

• For hoodies (60 × 80) = $4,800

• For caps (18 × 120) = $2,160 

Your April GMV is $11,960. It reflects merchandise value only and ignores discounts, returns, shipping, taxes, and fees.

However, sellers often use other variations of GMV to make different decisions.

GMV Variations

The most common baseline is Standard (pre-discount) GMV, which is the cleanest measure of demand we used above. 

A second, marketing-friendly view is GMV net of discounts or Total Sales, which subtracts coupons or discounts but still excludes returns, fees, shipping, and tax. 

Operations and finance may also track Realized GMV, which removes orders that were canceled or returned within the reporting window, but it still excludes shipping, taxes, and fees. 

For example, Jack’s total sales across Shopify and Amazon in Q2 are:

• Bottle (Shopify): 800 units sold at $22

• Bottle (Amazon): 600 units sold at $24 (different price due to marketplace fees)

• Lid (both channels combined): 1,500 units sold at $6

• Amazon coupons redeemed on Bottles: $1 per unit on 200 of the 600 units

• 50 Bottle returns (combined), 30 Lid returns

Let’s calculate each GMV variation, starting with Standard GMV:

• Sales of Bottles on Shopify: 22 × 800 = $17,600

• Sales of Bottles on Amazon (list price): 24 × 600 = $14,400

• Combined sales of Lid on both channels: 6 × 1,500 = $9,000

So, the Standard GMV (pre-discount, pre-return)  is $41,000 (17,600 + 14,400 + 9,000).

GMV net of discounts would be $40,800 after subtracting the Amazon coupon impact (200 × $1 = $200)

And the realized GMV would be $39,470  after subtracting returns $1,150 (50 × avg bottle price of $23) + $180 (30 ×  avg lid price of $6).

Gross Merchandise Value (GMV) vs Revenue: What’s the Difference?

GMV is a volume metric while revenue is an accounting figure tied to performance and reporting standards.

Revenue (often shown as “net sales” on your P&L) is what you actually earn after subtracting discounts and returns/allowances and excluding pass-through taxes like sales tax/VAT.

So, if you rely on GMV alone, especially in discounted categories or with high return rates, you can overestimate your business’s health and underestimate the fundamental economics.

For example, if you sell 1,000 units at $50 each this month, your GMV would be $50,000. 

However, you also gave a 20% discount on each sale, and 8% of units were returned within the period. 

So, your average realized selling price is $40, and sales after discounts are $40,000.

Next, reduce for returns: 80 units × $40 = $3,200 in returns. 

Therefore, your net revenue for the goods is $36,800. However, that doesn’t mean that one metric is more important than the other.

You must track GMV to understand demand and traction, as well as track revenue to understand what you truly earned. 

When you put both on the same dashboard, you can get top-line momentum without losing sight of the dollars that actually hit your books.

Benefits of Tracking Gross Merchandise Value in E-Commerce

GMV helps you make faster decisions. It reflects real product demand, supports credible growth narratives for investors and partners, and helps you turn scattered order data into trends you can act on.

Measure Marketplace Traction and Product Demand

GMV gives a clean read on what shoppers actually buy, without worrying about fees and accounting noise. 

For example, suppose GMV for a new product jumps on Amazon but stays flat on Shopify. 

In that case, you should reallocate ad spend, shift inventory, and mirror the winning merchandising on slower channels. 

Over a few cycles, GMV by SKU becomes your guide for supplier negotiations and purchase-order planning, not guesswork.

Benchmark for Growth and Fundraising Discussions

A consistent GMV series, by month and by channel, lets you show scale, velocity, and mix without caveats. You can point to launch curves and channel expansion beyond paid traffic. 

Pair GMV with net revenue and contribution margin, and you move the conversation from “big number” to “durable growth,” demonstrating that volume translates into healthy economics.

Helps in Trend Analysis Over Time

GMV is ideal for spotting patterns early. For example, when GMV trends up while returns stay stable, you can focus on expanding merchandising and variants. 

However, if GMV rises only during discount windows, you must focus on marketing and rethink pricing or creative. 

You can also spot patterns early, such as identifying products with repeat orders, focusing on channels with increasing return rates, or running campaigns that produce sustained demand. 

Limitations of Gross Merchandise Value & How to Overcome Them

GMV is excellent for reading demand, but it’s deliberately blind to many realities of running an e-commerce business.

Here’s how GMV falls short, and the fixes that make it genuinely useful.

❌ It Doesn’t Account for Discounts, Returns, Refunds, or COGS

Heavy promotions can swell GMV even as the average selling price drops.

However, returns, refunds, and chargebacks can unwind a chunk of that volume in the following weeks. 

None of this shows up in GMV, and neither does the cost of producing or sourcing your goods. 

That’s why you need to pair GMV with other metrics on the same dashboard, such as net revenue (after discounts/returns, excluding tax), COGS, and contribution margin. 

When you see them side by side, you see both the top-line movement and the economics that follow.

🔖 Related Read: A Complete Guide to DIY Bookkeeping for Small Business Owners in 2025

❌ It Paints A Misleading Picture of Profitability

Imagine running a campaign offering 30% off, which doubled GMV, but return rates jumped from 6% to 14%. 

Once you factor in lower selling prices, higher refunds, marketplace/payment fees, and fulfillment costs, the profit and loss impact may be flat or negative. 

To prevent this, set guardrails before you launch, like a post-campaign review that reconciles ordered vs. realized GMV and checks whether gross profit per order cleared your threshold. 

Over time, maintain a simple “margin waterfall” that moves from GMV to net revenue to gross profit; it keeps everyone honest about what growth costs.

❌ GMV Alone Couldn’t Define Business Health

You can move a lot of units, but if cash is tied up in stock, customer acquisition is expensive, or marketplaces take a hefty cut, the business’s health may still be fragile. 

A balanced view anchors GMV to the fundamentals that keep you alive: gross profit dollars, LTV/CAC, inventory turns, and operating cash flow. 

When GMV rises while contribution margin, cash, or repeat rates stall, you need to rethink and adjust your business strategy.

How to Use GMV Alongside Other Key E-Commerce Metrics

GMV is your clean read on demand, but it’s only the starting point. To make confident decisions about pricing, promos, acquisition, and inventory, you must pair it with other metrics.

1. GMV + Net Revenue

Net revenue backs out discounts and returns and excludes pass-through taxes. Viewed next to GMV, it shows how much headline demand survives contact with reality. 

So, if GMV rises while net revenue lags, your discount rate or returns are eating value.

Track a simple “GMV-to-Revenue conversion” (Net Revenue ÷ GMV). 

When this ratio slips, review promo depth, creative that may be attracting high-return buyers, and product quality signals.

2. GMV + AOV (Average Order Value)

AOV is net revenue divided by the number of orders. With GMV trending up, AOV tells you how you’re getting there, like more orders at the same size or bigger orders from the same shoppers. 

If GMV grows but AOV is flat, test combos, set thresholds for free shipping, and post-add-to-cart cross-sells. 

If AOV rises while orders fall, check whether price or aggressive thresholds are choking conversion.

3. GMV + CAC (Customer Acquisition Cost)

CAC is acquisition spend divided by the number of new customers. GMV shows what buyers wanted; CAC shows the price you paid to bring them in. 

If first-order gross profit is below CAC, you’re fine if your retention engine is strong, risky if not.

So, you must work on increasing repeat purchases to make the math work.

Use channel-level views. If Paid Social’s GMV looks great but CAC is climbing faster than first-order profit, tighten targeting or shift budget.

4. GMV + CLV (Customer Lifetime Value)

CLV estimates the gross profit you expect from a customer over time by Average Order Value (AOV) x Average Purchase Frequency (APF) x Average Customer Lifespan (ACL).

Suppose GMV is booming, but CLV and the CAC ratio sit near 1:1. 

In that case, you must improve retention (email/SMS flows, loyalty, faster replacements), increase contribution per order (upsells, pricing), or reduce CAC before scaling spend.

🔖 Related Read: LLC Performance Metrics: Tracking Your Business’s Success

Strategies to Increase Your Gross Merchandise Value

Growing GMV isn’t about one big lever. It’s a series of small, compounding improvements over time.

Optimize Product Listings and SEO

Search drives high-intent traffic, and high-intent traffic drives sales.

On marketplaces, your search rank directly impacts click-through rate (CTR), conversion rate, and fulfillment.

Start by mapping keywords to buyer intent and build product titles and descriptions that answer real questions. 

Use relevant imagery (multiple angles, scale reference, short demo video), size guides, and social proof (ratings) to lift click-through and conversion. 

Add structured data so search engines can display price, availability, and review snippets. Keep variants consolidated on one canonical URL to concentrate ranking signals. 

Enhance The Customer Experience

Friction kills buyer intent. Make sure your online store loads fast, has a mobile-friendly design, offers smooth checkout, and clearly provides delivery estimates. 

Your product pages should show the total cost (including taxes and shipping costs) and set a transparent returns policy, which will reduce cart abandonment and cancellations. 

Offer multiple payment options and save details securely for repeat buyers since a seamless purchase flow turns first-time buyers into repeat customers.

Use Upselling and Cross-Selling Techniques

You can increase the average order size by recommending products that complement the original order and higher-value alternatives on the product page, in the cart, and after checkout. 

If someone buys a camera, suggest a memory card, case, and cleaning kit. If they pick a starter serum, offer a duo with moisturizer at a clear bundle value. 

Post-purchase offers (one-click add-ons before the thank-you page) convert exceptionally well because the buyer is already in a purchasing mindset.

Expand Your Product Catalog Deliberately

New SKUs can unlock fresh demand, but expanding without a clear strategy can bury cash in slow movers. 

You can also use GMV by SKU to identify where to add new sizes, colors, bundles, and where to add adjacent categories that share audience and logistics. 

Test with low-commitment approaches (small batches) before putting large purchase orders. Bundle high-in-demand items with new products so inventory doesn’t tie down capital.

Formation & Compliance for E-Commerce Growth With doola

GMV is only as useful as the system behind it, and doola helps you set up a done-for-you system from Day 1.

It’ll help you establish the ideal legal entity, obtain an EIN, open a business bank account, and build a bookkeeping framework that streamlines back-office operations. 

Orders, discounts, returns, and fees are recorded consistently across all channels. That means your GMV rolls up neatly and matches what appears in your financials.

Compliance is where growth either compounds or gets interrupted. That’s why you need a partner doola to ensure fewer surprises, fewer account holds, and less admin time.

With doola Bookkeeping, your numbers tell a more accurate story. You can map GMV to net revenue, COGS, and contribution margin, then get simple monthly reports you can trust. 

You’ll know not just how big the top line is, but also how much of it turns into money you keep. 

The result is simple: GMV growth that you can trust, budget against, and defend in fundraising conversations.

Ready to crunch your numbers the right way? 

Sign up today and start your e-commerce business the right way with doola’s formation and compliance services.

FAQs

What does Gross Merchandise Value (GMV) mean in e-commerce?

GMV in e-commerce is channel-agnostic, which means whether sales come from Shopify, Amazon, Etsy, or your own site, GMV counts the merchandise value only.

It’ll help you decode demand and sales volume; use net revenue and profit to understand what you actually keep.

How is GMV different from revenue and profit?

GMV is a volume metric. Revenue (net sales) is what you actually earn after discounts and returns, excluding pass-through taxes. 

Profit goes further by subtracting COGS and operating costs to show what you keep.

Why do investors and marketplaces use GMV as a metric?

It’s a quick, comparable read on scale and traction. That’s why investors use GMV growth to gauge product-market fit and channel momentum, then look at margins to confirmthe  quality of growth.

Should small businesses track GMV or focus on net revenue?

As a small business, you must track both. Use GMV to monitor demand by product and channel, and use net revenue (and gross profit) to judge business health. 

How can GMV be misleading if used alone?

GMV ignores discounts, returns, cancellations, fees, and COGS. You can see rising GMV while average selling price falls and returns spike, leaving revenue and profit flat or negative.

What is a good GMV growth rate for an e-commerce startup?

GMV varies by category and channel mix, but early-stage businesses should have a 10–20% spike in month-over-month, and later, a 5–10% MoM is healthy if margins and return rates hold. 

How can I track and report GMV accurately for my online store?

Start tracking GMV by SKU and channel, normalize currencies, and reconcile monthly to net revenue so differences (discounts, returns across periods) are documented. 

You can also use financial tools like doola Bookkeeping to standardize these rules and create one clean report for GMV, revenue, AOV, and returns.