GMV Cohort Retention
Growth
Usage
Industry:
Marketplaces
Short Definition
GMV Cohort Retention measures the percentage of Gross Merchandise Value (GMV) that a specific group of customers (a cohort, usually grouped by their first purchase month or year) continues to spend on the platform over subsequent periods. Unlike user retention, which tracks if a customer returned, GMV retention tracks how much value they contributed, capturing both their frequency of return and their spending growth (expansion).
Short Definition
GMV Cohort Retention measures the percentage of Gross Merchandise Value (GMV) that a specific group of customers (a cohort, usually grouped by their first purchase month or year) continues to spend on the platform over subsequent periods. Unlike user retention, which tracks if a customer returned, GMV retention tracks how much value they contributed, capturing both their frequency of return and their spending growth (expansion).
Short Definition
GMV Cohort Retention measures the percentage of Gross Merchandise Value (GMV) that a specific group of customers (a cohort, usually grouped by their first purchase month or year) continues to spend on the platform over subsequent periods. Unlike user retention, which tracks if a customer returned, GMV retention tracks how much value they contributed, capturing both their frequency of return and their spending growth (expansion).
Why it matters for Investors
Expansion Potential (The "Smile" Curve): High-performing marketplaces often see GMV retention exceed 100% in later months. This happens when retained users increase their spending enough to offset the loss of users who churned, signaling deep "stickiness."
LTV Accuracy: It provides a more accurate basis for calculating Customer Lifetime Value (LTV) than simple user retention, as it accounts for increasing wallet share over time.
Quality of Growth: It distinguishes between "leaky bucket" growth (fueled purely by new user acquisition) and "compounding" growth (where old cohorts provide a stable, growing foundation).
Why it matters for Investors
Expansion Potential (The "Smile" Curve): High-performing marketplaces often see GMV retention exceed 100% in later months. This happens when retained users increase their spending enough to offset the loss of users who churned, signaling deep "stickiness."
LTV Accuracy: It provides a more accurate basis for calculating Customer Lifetime Value (LTV) than simple user retention, as it accounts for increasing wallet share over time.
Quality of Growth: It distinguishes between "leaky bucket" growth (fueled purely by new user acquisition) and "compounding" growth (where old cohorts provide a stable, growing foundation).
Why it matters for Investors
Expansion Potential (The "Smile" Curve): High-performing marketplaces often see GMV retention exceed 100% in later months. This happens when retained users increase their spending enough to offset the loss of users who churned, signaling deep "stickiness."
LTV Accuracy: It provides a more accurate basis for calculating Customer Lifetime Value (LTV) than simple user retention, as it accounts for increasing wallet share over time.
Quality of Growth: It distinguishes between "leaky bucket" growth (fueled purely by new user acquisition) and "compounding" growth (where old cohorts provide a stable, growing foundation).
Formula
For eCommerce and marketplaces, "Month 0" is typically the month the cohort made their first transaction, not just when they signed up.
Practical considerations:
Net vs. Gross: Always clarify if you are using Gross GMV or Net GMV (after returns/cancellations). Investors prefer Net GMV Retention as it reflects actual realized economic value.
Incentive Stripping: Ensure GMV from retained cohorts isn't being artificially propped up by heavy re-engagement subsidies or "buy-one-get-one" vouchers.
Cohort Granularity: While monthly cohorts are standard, high-frequency businesses (e.g., food delivery) may look at weekly cohorts, while high-ticket/low-frequency (e.g., furniture) may look at quarterly.
The "Base" Month: Some analysts prefer using the first 30-day spend as the denominator to smooth out one-day spikes from "first-purchase" discounts.
Formula
For eCommerce and marketplaces, "Month 0" is typically the month the cohort made their first transaction, not just when they signed up.
Practical considerations:
Net vs. Gross: Always clarify if you are using Gross GMV or Net GMV (after returns/cancellations). Investors prefer Net GMV Retention as it reflects actual realized economic value.
Incentive Stripping: Ensure GMV from retained cohorts isn't being artificially propped up by heavy re-engagement subsidies or "buy-one-get-one" vouchers.
Cohort Granularity: While monthly cohorts are standard, high-frequency businesses (e.g., food delivery) may look at weekly cohorts, while high-ticket/low-frequency (e.g., furniture) may look at quarterly.
The "Base" Month: Some analysts prefer using the first 30-day spend as the denominator to smooth out one-day spikes from "first-purchase" discounts.
Formula
For eCommerce and marketplaces, "Month 0" is typically the month the cohort made their first transaction, not just when they signed up.
Practical considerations:
Net vs. Gross: Always clarify if you are using Gross GMV or Net GMV (after returns/cancellations). Investors prefer Net GMV Retention as it reflects actual realized economic value.
Incentive Stripping: Ensure GMV from retained cohorts isn't being artificially propped up by heavy re-engagement subsidies or "buy-one-get-one" vouchers.
Cohort Granularity: While monthly cohorts are standard, high-frequency businesses (e.g., food delivery) may look at weekly cohorts, while high-ticket/low-frequency (e.g., furniture) may look at quarterly.
The "Base" Month: Some analysts prefer using the first 30-day spend as the denominator to smooth out one-day spikes from "first-purchase" discounts.
Worked Example
Period | Users Active | GMV Produced | GMV Retention % |
|---|---|---|---|
Month 0 (Jan) | 1,000 | $50,000 | 100% (Baseline) |
Month 1 (Feb) | 600 | $35,000 | 70% |
Month 2 (Mar) | 500 | $30,000 | 60% |
Month 6 (July) | 450 | $32,000 | 64% (Spending expanded) |
Notes:
Monetary vs. Behavioral: A cohort can have 50% User Retention but 80% GMV Retention. This indicates that the users who stayed are spending significantly more than they did in their first month.
The "Smile" Effect: In the example above, GMV grew from $30k to $32k between Month 2 and Month 6 despite a drop in active users. This "uptick" is the "smile" that investors prize—it shows the platform is capturing more wallet share from survivors.
Stabilization Point: Investors want to see where the curve "plateaus." A plateau at 20% is okay; a plateau at 50% is world-class. A curve that never plateaus and hits 0% indicates a business that will eventually run out of customers to acquire.
Worked Example
Period | Users Active | GMV Produced | GMV Retention % |
|---|---|---|---|
Month 0 (Jan) | 1,000 | $50,000 | 100% (Baseline) |
Month 1 (Feb) | 600 | $35,000 | 70% |
Month 2 (Mar) | 500 | $30,000 | 60% |
Month 6 (July) | 450 | $32,000 | 64% (Spending expanded) |
Notes:
Monetary vs. Behavioral: A cohort can have 50% User Retention but 80% GMV Retention. This indicates that the users who stayed are spending significantly more than they did in their first month.
The "Smile" Effect: In the example above, GMV grew from $30k to $32k between Month 2 and Month 6 despite a drop in active users. This "uptick" is the "smile" that investors prize—it shows the platform is capturing more wallet share from survivors.
Stabilization Point: Investors want to see where the curve "plateaus." A plateau at 20% is okay; a plateau at 50% is world-class. A curve that never plateaus and hits 0% indicates a business that will eventually run out of customers to acquire.
Worked Example
Period | Users Active | GMV Produced | GMV Retention % |
|---|---|---|---|
Month 0 (Jan) | 1,000 | $50,000 | 100% (Baseline) |
Month 1 (Feb) | 600 | $35,000 | 70% |
Month 2 (Mar) | 500 | $30,000 | 60% |
Month 6 (July) | 450 | $32,000 | 64% (Spending expanded) |
Notes:
Monetary vs. Behavioral: A cohort can have 50% User Retention but 80% GMV Retention. This indicates that the users who stayed are spending significantly more than they did in their first month.
The "Smile" Effect: In the example above, GMV grew from $30k to $32k between Month 2 and Month 6 despite a drop in active users. This "uptick" is the "smile" that investors prize—it shows the platform is capturing more wallet share from survivors.
Stabilization Point: Investors want to see where the curve "plateaus." A plateau at 20% is okay; a plateau at 50% is world-class. A curve that never plateaus and hits 0% indicates a business that will eventually run out of customers to acquire.
Best Practices
Visualize with Heatmaps: Use a "triangle" heatmap to show multiple cohorts simultaneously. This allows investors to see if newer cohorts are performing better than older ones (indicating product improvement).
Layer Cake Charts: Use a stacked area chart (often called a "Layer Cake") to show how total GMV is composed of different aging cohorts.
Segment by Source: Track GMV retention by acquisition channel (e.g., Paid vs. Organic). Often, organic users have much higher GMV retention than those acquired via discounts.
Benchmark Against Peers: In consumer marketplaces, Month 12 GMV retention of ~30% is average; >60% is top-tier.
Best Practices
Visualize with Heatmaps: Use a "triangle" heatmap to show multiple cohorts simultaneously. This allows investors to see if newer cohorts are performing better than older ones (indicating product improvement).
Layer Cake Charts: Use a stacked area chart (often called a "Layer Cake") to show how total GMV is composed of different aging cohorts.
Segment by Source: Track GMV retention by acquisition channel (e.g., Paid vs. Organic). Often, organic users have much higher GMV retention than those acquired via discounts.
Benchmark Against Peers: In consumer marketplaces, Month 12 GMV retention of ~30% is average; >60% is top-tier.
Best Practices
Visualize with Heatmaps: Use a "triangle" heatmap to show multiple cohorts simultaneously. This allows investors to see if newer cohorts are performing better than older ones (indicating product improvement).
Layer Cake Charts: Use a stacked area chart (often called a "Layer Cake") to show how total GMV is composed of different aging cohorts.
Segment by Source: Track GMV retention by acquisition channel (e.g., Paid vs. Organic). Often, organic users have much higher GMV retention than those acquired via discounts.
Benchmark Against Peers: In consumer marketplaces, Month 12 GMV retention of ~30% is average; >60% is top-tier.
FAQs
Can GMV retention be over 100%?
Yes. This is called Net Expansion. It happens when the increased spending of remaining customers outweighs the lost spending of those who churned.Is GMV retention the same as Net Revenue Retention (NRR)?
They are related but different. GMV retention tracks total transaction value; NRR tracks the revenue (commission/fees) the company keeps. If your take-rate changes, NRR and GMV retention may diverge.Why is Month 1 retention usually the biggest drop?
This is the "activation gap." Many users try a service once due to a promotion and never return. Investors focus on how the curve behaves after this initial drop.
FAQs
Can GMV retention be over 100%?
Yes. This is called Net Expansion. It happens when the increased spending of remaining customers outweighs the lost spending of those who churned.Is GMV retention the same as Net Revenue Retention (NRR)?
They are related but different. GMV retention tracks total transaction value; NRR tracks the revenue (commission/fees) the company keeps. If your take-rate changes, NRR and GMV retention may diverge.Why is Month 1 retention usually the biggest drop?
This is the "activation gap." Many users try a service once due to a promotion and never return. Investors focus on how the curve behaves after this initial drop.
FAQs
Can GMV retention be over 100%?
Yes. This is called Net Expansion. It happens when the increased spending of remaining customers outweighs the lost spending of those who churned.Is GMV retention the same as Net Revenue Retention (NRR)?
They are related but different. GMV retention tracks total transaction value; NRR tracks the revenue (commission/fees) the company keeps. If your take-rate changes, NRR and GMV retention may diverge.Why is Month 1 retention usually the biggest drop?
This is the "activation gap." Many users try a service once due to a promotion and never return. Investors focus on how the curve behaves after this initial drop.
Related Metrics
Commonly mistaken for:
Net Revenue Retention (NRR) (The revenue version of this metric)
LTV/CAC (Uses GMV retention data to estimate the total value a customer will bring vs. the cost to get them)
Related Metrics
Commonly mistaken for:
Net Revenue Retention (NRR) (The revenue version of this metric)
LTV/CAC (Uses GMV retention data to estimate the total value a customer will bring vs. the cost to get them)
Related Metrics
Commonly mistaken for:
Net Revenue Retention (NRR) (The revenue version of this metric)
LTV/CAC (Uses GMV retention data to estimate the total value a customer will bring vs. the cost to get them)
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Index