For its part, Alibaba makes it clear they are focused on maximizing Gross Merchandise Volume (GMV) and buyers not take rate. by Robert Solomon | Aug 17, 2015 | CPG/Retail, Matchmaking.
For online marketplaces like what Amazon and eBay offer, the take rate refers to the fees and commissions that the companies collect on sales by third-party sellers. Marketplaces, particularly pre-IPO marketplaces, are typically valued off of a multiple of run-rate GMV (i.e. Still, Alibaba’s take rate is still interesting to watch as analysts are paying close attention to it. 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. As with online marketplaces, competitive pressures define how payment providers can optimize take rates. The "take rate" or what a B2B marketplace can charge their participants varies quite a bit depending on the services the marketplace offers. 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was commonly used in place of sales or revenue figures in the early days of e-commerce, has morphed into a somewhat outdated way that businesses measure the value of a company. 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). And Taobao did not charge transaction fees to start, just advertising fees for merchants. 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. I will not sell or share your information with anyone. 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. The pressure on most take rates in marketplaces is inexorably downward as they battle for dominance.
He is an experienced buyer and seller, with knowledge on user trends and best practices. 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. Let's conquer your financial goals together...faster. 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%. There are a few ways to calculate GMV.
The Downside of Using GMV 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.
In assessing the health of Amazon, eBay, and other marketplaces, it's valuable to look at gross merchandise volume and segment profitability. Subscribe to receive email notifications about Bob’s valuable new insights.
Finally, take rate has a different meaning for marketing activity, including that done through e-commerce. 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 the Fool's Director of Investment Planning, Dan oversees much of the personal-finance and investment-planning content published daily on Fool.com.
Were there special factors in a given quarter, such as the sale of a property, that had a one-time impact on the company's bottom line. 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. The credit card networks succeeded in that strategy for a while until the merchants and government started to get involved. Meanwhile, the take rate concept is similar for payment services providers like PayPal. It is commonly used in reference to two kinds of information. 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. 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.
Post was not sent - check your email addresses! Founded in 1993 by brothers Tom and David Gardner, The Motley Fool helps millions of people attain financial freedom through our website, podcasts, books, newspaper column, radio show, and premium investing services. The “take-rate” charged to brands is around 33% of GMV, plus an additional 8% fulfilment service costs.
In the context of eBay, GMV refers to the total volume of dollars of sales on eBay and eBay-branded trading websites in a given economic period.
existing month x 12). But most buyers seek to eliminate this variability. 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.
Take rate gets used in a variety of contexts, and it's important to know what each specific instance means. In other words, if you sell 10 widgets in your eBay store for $100 each, your GMV would amount to $1,000. Sorry, your blog cannot share posts by email. 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.
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