Gross Merchandise Volume and Frequency of transaction in a marketplace.
Gross Merchandise volume is the total of dollar amount a marketplace handle per period it depends on the value attached to each transaction multiplied by the total number of transactions. If you take the average value of a transaction you will get the average GMV. You may see given the definition of GMV that the frequency of transaction plays an important role in increasing the GMV conjointly with the average value of the transaction. A marketplace with a high frequency of transaction and high average transaction value is defined as a very liquid marketplace. When your revenue model is a fee model based on the percentage of the transaction value this type of marketplace is a graal. But know that the frequency of transaction tends to decrease when the value of transaction increase. People buy coke more often than they buy cars. You see that it has something to do with the price of the product or service exchanged into the marketplace. With a digital marketplace, the frequency of transaction is a function of the number of participants involved in the marketplace when it is an eCommerce or service marketplace the number of services or products offered will also become variables of this function. A mathematical model can help visualize and optimize better the frequency of transaction function and let the marketplace manager focus on the variables which have more impact on this frequency of transaction. I will maybe provide a simple use case of such a mathematical model with a simple linear optimization function. I hope I will do it to show you that science is a good lever for managing marketplaces.
When it comes to gross merchandise volume it is almost always a function of the price of the service or product and the frequency of transaction. Again simple linear optimization can also help increase this factor for more revenues.
I just provided two important factors of a marketplace. I will go deeper into these factors in the coming articles.
