In other words, if you sell 10 widgets in your eBay store for $100 each, your GMV would amount to $1,000. For example, "eBay's GMV is slightly down year-over-year, but I'm seeing much worse numbers in my own business, where the GMV has fallen 20% this month, as compared to last month at this time.". The "take rate" or what a B2B marketplace can charge their participants varies quite a bit depending on the services the marketplace offers.

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The most simple formula for a retailer is to take the sales price charged to the customer and multiply it by the number of items sold. Depending on the context, a seller may be talking about either one or both. (This is, in part, because the take rate is falling!). existing month x 12). It is commonly used in reference to two kinds of information. In terms of economics, GMV is a raw figure that doesn't offer much insight into the value of the items sold because it doesn't factor in any costs accrued by the retailer. This figure, which was commonly used in place of sales or revenue figures in the early days of e-commerce, has morphed into a somewhat outdated way that businesses measure the value of a company. Take rate reflects the fact that a great deal of internet marketing happens in multiple stages, where the first goal is to get a customer to click on an ad, and the next is to convince that customer to buy a product. As with online marketplaces, competitive pressures define how payment providers can optimize take rates. PayPal actually takes that into account with certain transactions, charging no fee on personal payments funded with existing PayPal balances or from a bank account, but charging 2.9% plus a $0.30 transaction fee if the payment is funded through a debit or credit card. There are a few ways to calculate GMV. The Ascent is The Motley Fool's new personal finance brand devoted to helping you live a richer life.

Of course, Alibaba has a B2B marketplace (that is how they started), but the take rate they report is not based on the Alibaba B2B marketplace, it is based on Tmall which is B2C (like Amazon) and Taobao which is C2C (like eBay). You will know when there is a winner when the rates starting going up!! By contrast, a lower take rate can be better if it doesn't hurt conversions, because it will cost less to drive the same amount of final sales. I do not sell or share your information with anyone else. Their hope is that once they gain dominance and drive others out of the market, they can perhaps wield that market power to raise rates. Still, Alibaba’s take rate is still interesting to watch as analysts are paying close attention to it. See you at the top! And Taobao did not charge transaction fees to start, just advertising fees for merchants. How much an e-commerce company is able to charge as a take rate depends on the strength of its underlying network of users and the degree of competition within the industry. In general, a high take rate is good, but it's essential that conversion rates be strong as well. For its part, Alibaba makes it clear they are focused on maximizing Gross Merchandise Volume (GMV) and buyers not take rate. But here is the WSJ’s chart of Alibaba’s take rate over time and by user type. The “take-rate” charged to brands is around 33% of GMV, plus an additional 8% fulfilment service costs. The take rate in this case refers to the percentage of customers who click on the ad, in contrast to the conversion rate, or percentage of customers who not only took the ad but actually bought the product. Often, marketing costs are based on the number of people clicking through, and it's then up to the company to convince those people to buy a product. It's not even a good predictor of net sales, which is a more accurate representation of a company's overall financial health. by Robert Solomon | Aug 17, 2015 | CPG/Retail, Matchmaking. Payment services providers typically take a percentage of every transaction in exchange for facilitating the movement of funds from the buyer to the seller. The key issue with take rate in online marketplaces is the tug-of-war between maximizing profit and keeping customers within the network. Additionally, GMV doesn't include discounts or returns, or the cost of keeping and storing inventory before it's sold. For marketers, a high take rate and a low conversion rate can be the worst of all worlds in e-commerce.

The Downside of Using GMV As Amazon, eBay, and PayPal have found, building up an internal ecosystem to keep users within reach can be a key driver in keeping take rates up and boosting profits as much as possible. Strategy & Solutions for B2B Cloud Providers, B2B Marketplaces and the Problem of Supplier Variability, 2020 Gartner Magic Quadrant for Procure-to-Pay Suites, Sedex: A “Rule of 70” Non-Profit Supplier Information Exchange, ‘Deep’ B2B Platforms and How to Build Them, $500 Million for Marketplace Infrastructure Providers: Mirakl and AppDirect, Mercell: A Public Public Tenders Marketplace with Aspirations, The Forrester Wave™: Supplier Risk And Performance Management Platforms, Q3 2020, Vertex Vs. Avalara: Old School Vs. New School, depend on the services that the marketplaces offer, marketplaces that connect buyers and suppliers who were previously unknown to each other can “take” 1-10%–the low-end of the range being for goods and the high-end for unique services. Dan Caplinger has been a contract writer for the Motley Fool since 2006. In assessing the health of Amazon, eBay, and other marketplaces, it's valuable to look at gross merchandise volume and segment profitability. What Is the Return on Equity Ratio or ROE?

The Balance Small Business is part of the.

However, for purchase payments, the seller pays 2.9% plus $0.30 per transaction regardless of the funding source -- meaning that PayPal gets to keep extra profit if buyers use a bank account rather than a card. Gross merchandise volume (GMV) is another way for you to calculate your gross revenue that refers to the total volume in dollars of sales over a given time period on e-commerce sites such as eBay. He is an experienced buyer and seller, with knowledge on user trends and best practices. With a background as an estate-planning attorney and independent financial consultant, Dan's articles are based on more than 20 years of experience from all angles of the financial world. The first is the total volume of goods sold on eBay as a whole, across the entire website, as a measure of eBay's performance and status as a marketplace. Post was not sent - check your email addresses! Amazon’s take rate is around 10-15% depending on the category. The pressure on most take rates in marketplaces is inexorably downward as they battle for dominance. Sorry, your blog cannot share posts by email. B2B Marketplaces can only survive if their market values supplier variability. Long before e-commerce began, intermediaries have charged money to link buyers and sellers of goods and services. Is this quarter's figure higher or lower than last year's figure for the same quarter? eBay has traditionally sought to move its take rate higher, boosting final value fees and taking a bigger piece of its sellers' sales. This would work out to a take rate of 3%.

A Look at the Top 15 Retail Math Formulas and Equations.
For eBay, those fees typically take the form of initial listing fees for offering goods and services on its marketplace in the first place, as well as final value fees that the e-commerce specialist collects after a successful sale.

What are Business Earnings and How are They Calculated? Volume growth is important to ensure that the network is healthy, but the ratio of profits to volume is directly proportional to the take rate, and growth in profits is necessary to show that the company is finding the optimal take rate to balance income and revenue. Marketplaces, particularly pre-IPO marketplaces, are typically valued off of a multiple of run-rate GMV (i.e. For instance, if a buyer spends $100 on a product, a payment services company might pay the seller $97, keeping the remaining $3 as a fee.

Returns as of 11/03/2020. Meanwhile, the take rate concept is similar for payment services providers like PayPal. If you're examining the earnings of a publicly-traded company, their quarterly ​SEC filings will tell you more about the company when you put them in context. The week before last, I blogged about the “take rates” associated with various B2B Commerce Platforms. In general, though, the best e-commerce companies are those that sustain high take rates while keeping competitors at bay. The two key points were that take rates: depend on the services that the marketplaces offer; marketplaces that connect buyers and suppliers who were previously unknown to each other can “take” 1-10%–the low-end of the range being for goods and the high-end for unique services; Alibaba’s Take Rate Even for e-commerce sites like Amazon, the site’s revenue is not calculated based solely on the dollar value of items sold. By comparison, the take-rate for food delivery is around 15% (without delivery) to 30% (with delivery), while Booking.com’s take-rate is roughly 20-30%. I will not sell or share your information with anyone.
There are several questions worth asking that can provide more insight: Using GMV as a way to calculate a company's health just isn't a smart move, especially when there are other options.


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