E-commerce Jargons Explained: GMV, NMV, Valuation
It’s never easy trying to decode what eCommerce professionals mean. Most of us face this problem as the words, terms, and jargon they use are typically not what we are used to. So, we’re often left running for a dictionary.
Since eCommerce is still a relatively a new and evolving industry, average users are bound to face some confusion when trying to comprehend what industry professionals mean. They either come up with short abbreviations of pre-existing definitions or invent something entirely new.
Similarly, they often use fancy words to describe functionalities or basic business strategies. Not surprisingly, our heads start spinning, and we beg for an easy way to understand it all. The best way to achieve this is to learn some of the more popular eCommerce jargon and become more acquainted with the industry.
Here we Explain Some of the More Common Terms
GMV: GMV stands for Gross Merchandise Value. It’s the total value of merchandise sold over a period of time through an eCommerce site. This term denotes the growth of the business, or more precisely, it indicates how useful the site is in selling merchandise.
NMV: NMV stands for Net Merchandise Value. This value is calculated after deducting all the expenses and fees from the GMV over a period of time. So, your total value of merchandise sold over a specified time (say, quarterly, half-yearly or annually) minus all expenses, including discounts, gateway payment, and marketing costs, etc.
Valuation: This term denotes the total value of your eCommerce venture. It includes every aspect of your business, including products, services and the stock on hand, etc. to assess its total financial worth.
CLV / LTV: While CLV stands for Customer Lifetime Value (CLV), LTV denotes Lifetime Value of a Customer (LTV). Both the terms are used interchangeably. Both indicate the prediction of future revenue, net profit and value a merchant will derive from a customer during their entire relationship.
Conversion Rate (CR): This term is a direct indicator of the health of your eCommerce business. To calculate the CR, you need to divide ‘total actions by total visits’ of a particular page or process.
CRO: CRO stands for Conversion Rate Optimization. It’s about improving your eCommerce website or store to boost its conversion rates. You can optimize anything, from the layout and content to the overall design.
Cross-selling: It denotes a marketing tactic where sellers offer some additional products to complement the main product they sell. A good example of cross-selling is offering a selfie stick with a mobile phone.
Upselling: Upselling is a sales techniques where sellers offer customers an opportunity to buy either upgrades or a more expensive version of the product. This is done to maximize the value of a purchase, and it could involve promoting better features, better specs, etc.
You can see how eCommerce jargon may look complicated at first, but they are actually not. So, begin to understand them and make rapid strides into the domain.