Gross merchandises value (GMV)

Advantages- Since retailers may or may not be the producers of the goods they sell, measuring the gross value of all sales provides insight into the company’s performance. This is especially true in the customer-to-customer market, where the retailer serves as a third-party mechanism for connecting buyers and sellers without actually participating as either. It may also provide value to retailers in the consignment sector, as they never officially purchase their inventory. Even though the items are often housed within a company’s retail location, the business functions as the authorized reseller, often for a fee, of another person’s or entity’s merchandise or property. Generally, they are never the true owner of the items, as the person or entity that placed the item on consignment may return and claim the item if they so choose.

Disadvantages- Although GMV represents the total value of goods sold on a C2C exchange, it doesn’t truly reflect the profitability of a company; primarily the true revenue that a company earns from fees. For example, if a company’s GMV was $500 for the month, that entire $500 does not go to the company; the majority of it will go to the individual who sold the goods. The company’s true revenue would be the fee that it charges for the use of its site. If the fee was 2%, the company’s true revenue would then be $500 x 2% = $10.

Depending on the type of e-commerce site, GMV can have other disadvantages. For example, if a company were an online retailer that produced and sold its own goods, GMV would indicate its revenues, but it would only be one metric, providing a limited view. It would not tell you the number of customers visiting the site or how much revenue is from repeat customers, which are important indicators in terms of customer satisfaction and thus the long-term health of the company.

Customer-to-customer (C2C) retailers provide a framework, or system, for sellers to list items they have in inventory 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 within the transaction.

In many of these customer-to-customer sales, the retailer facilitating the transaction never comes in contact with any of the physical merchandise. Instead, the seller will send the item directly to the buyer once the financial portion of the sale is complete.This model may differ drastically from other retail models in which the retailer purchases merchandise from producers, manufacturers, or distributors and then essentially functions as an authorized reseller of goods the company has purchased.