How Does Shopify Work? Know More About Shopify's Business Model

Vibhavari Madki Vibhavari Madki
Mar 11, 2021 7 min read
How Does Shopify Work? Know More About Shopify's Business Model

What could possibly come to your mind when you first witness the term "Shopify"? The only possible faction of this term could be "Shop". Shopify is not present in the physical world and that's why, probably has more effect on the customers. Since every business has moved to digital platform, why not start with helping who want to survive the market online.

Shopify, in simpler terms, helps one build their own website of business. Shopify acts as a provider of online store. It helps you directly to create a professional trade website by registering and logging into your account. Setting up other simple things and then the users are ready to upload and sell the products with their convenience. It helps them to start a business journey, without requiring to have any knowledge about website construction.

Shopify was first founded in 2004. With all the ups and downs, by the course of a decade, the sales of Shopify skyrocketed. Shopify had about 12000 merchants by then and earned the huge revenue of $105 million. Shopify is specially known for its flexibility of the payments. It's adaptability in business helped it to flourish.

Introduction to Shopify themes and products
Introduction to Shopify themes and products

With other online platforms where retailers list their products to sell, it's more like swimming in a pool to win against the other competitors. But with Shopify, one has to just keep swimming in his own pool and survive the water.

All You Need To Know About Shopify
Let's Dive Into How Exactly Does Shopify Work?
Shopify's Business Model
FAQ's
Conclusion

All You Need To Know About Shopify

  • Shopify gives merchants their sole identity, they have their own digitally controlled store to brand and market.
  • Shopify, even helps in branding of products and accepts wide range of payment methods from the customers of the merchants.
  • Shopify is easy to operate, it is designed for the easy understanding and accessibility of the retailer.
  • The retailer will get numerous features useful in trading of products like reporting, email marketing, SEO, analytics or branding.
  • Shopify also provides the blogging feature allows developing the site; one can choose themes, write articles and initiate discussions.
  • Moreover, it provides hosting, which means that Shopify will handle all technical issues related to your shop.
  • For someone who is interested in Dropshipping, can start with this platform.
  • According to reports, Shopify have over 800,000 stores. The stores are built using this application.
  • It is a comparatively safer platform.
  • Apparently, Shopify and the online store is going to survive more than anyone can imagine. Merchants are widely reliable.
  • Interested Retailers can build and create an online store with plans starting from $9/month. It also provides with 14 days free trial use. Β 
  • The POS(point-of-service) options are out of the box. It helps the stores and itself to stand apart from its competitors.
  • Unlike other platforms, Shopify gives quite satisfying Customer services which is the primary reason why they love Shopify.
  • Shopify has a huge database of FAQs, email & chat support, most importantly with an informative and helping agent on the other side of the call.
  • You name the product and you can sell it on the Shopify. Nothing limits the lists of products/services.
How Dropshipping Works?Should you Start Dropshipping in 2020
Many of you must have heard the word β€œdropshipping”. Your friends must have beentelling you again and again. Many other people must be talking about it aroundyou. But you have no idea what they were talking about. So let’s face it. According to a report 27% of online retailers have adopted drops…

Let's Dive Into How Exactly Does Shopify Work?

It is pretty simple to understand how to set up the business on Shopify.

Explanation of Shopify in detail
  • First of all, you have to create an account on Shopify to enroll yourself as the seller on the platform.
  • Add products or services from the account, add and customize theme for the product and finally add a domain.
  • Add text as the description of the selling product and add a suitable image for it.
  • Enable payments from settings. It has the got its own payment gateway called β€˜Shopify Payments’, it's a free service. If retailer uses other gateways – such as PayPal, Amazon Pay or other methods, he will be charged.
  • Add the shipping settings. One can buy shipping labels and decide at what rate seller wants to charge the customers.
  • User can add some apps from the Shopify App Store to market and sell the products on those platform too.
  • Select a Price plan. The user has to upgrade after the free trial by selecting the β€˜Select a plan’ button at the end of every page to keep going.
  • When the process is done, the store can then be published.

Shopify's Business Model

Shopify makes majority of its revenue through monthly subscription plans and payment gateways for the usage of its services. It also makes revenue from it merchant solutions which can be technical support, marketing and customer services.

The business of the Shopify is truly based on subscription of the merchants. The subscription amount gives lucrative returns than merchant services. On the contrary, it the company made over 50% of its revenues from another stream called merchant solutions,

Plans Monthly Price
Basic $29
Shopify $79
Advance Shopify $299

Shopify’s gross volume comprises mainly from merchants paying for the Advanced Shopify and Plus Shopify plans.

List of eCommerce Business Ideas which anyone can easily start
eCommerce is a business trending at present due to its increased conveniencethat it provides to the customer. All the activities of commercial transactionswhich include transfers, Supply Chain Management, electronic marketing, EDI anddistribution of goods and services are integrated by an electro…

As a report by Shopify, it earns heavy from the highest-priced tier (Shopify Plus) is higher compared to the lowest tiers. Shopify Plus is a service for valued enterprise customers, with larger volumes.

Enterprise contracts are also way more promising as the enterprise clients usually sign an annual or multiyear contract. The huge Organizations are more stable comparatively. The plans are automatically renewed, unless there's an intimation of cancellation by the enterprise account. It has around 5,300 enterprise accounts as of 2018. Just Imagine the returns!

Revenue comprises services of Shopify POS, Payments, Capital which makes Shopify more reliable to provide a higher value to its subscribers. Thus making its subscription plans more genuine and reasonable.

Revenue of Shopify over the years
Revenue of Shopify over the years

Shopify defines its platform as a multi-tenant cloud-based system engineered for high scalability, reliability, and performance. Shopify merchant solutions primarily make money from payment processing fees from Shopify Payments,transaction fees, Shopify Shipping, Shopify Capital, referral fees from partners, and sales of point-of-sale (β€œPOS”) hardware.

FAQ's

What exactly does Shopify do?

Shopify is a commerce platform that allows anyone to set up an online store and sell their products. Shopify is now the leading commerce platform designed for businesses of all sizes. Whether you sell online, on social media, in-store, or out of the trunk of your car, Shopify has you covered.

Is Shopify illegal?

The short answer is no. Technically, you do not need a business license to start selling or drop shipping on Shopify. Getting started with a selling site like Shopify is easy. Just because you don't legally need a business license doesn't mean that it's a good idea to operate without one.

Is Shopify really worth?

Shopify is very powerful, but still user-friendly. It's easy to scale for small and big online stores. Shopify App Store is packed with useful (free and paid) add-ons for your store (e.g. email marketing integrations). On top of that, they have a large community of independent developers and experts ready to help you.

What is the business model of Shopify?

Shopify is a platform business model as it enables third-parties merchants to commercialize their products on its cloud-based e-commerce. The company's core business is a subscription-based service.

How expensive is Shopify?

  • Basic Shopify β€” $29 per month.
  • Shopify β€” $79 per month.
  • Advanced Shopify β€” $299 per month.
  • Shopify Plus β€” negotiable, but usually costing around $2000 per month.

Can you make money off Shopify?

If you're looking at earning additional money with Shopify, you can always do so by becoming a Shopify Affiliate. It's an easy program to sign up for and once you get your affiliate link you can earn up to $2000 per new merchant or online store and business referred to Shopify.

Conclusion

Starting an online business is the best option any person can do. Selling the products in the offline market is time-consuming and needs effort. But to do that you don't have to create your own website or hire a web developer. All these can be done with the help of Shopify. Create a seller account on Shopify and sell your products online. Happy Selling.

Must have tools for startups - Recommended by StartupTalky

Subscribe to StartupTalky

Get the latest insights delivered to you right in your inbox

Great! Next, complete checkout for full access to StartupTalky.
Welcome back! You've successfully signed in.
You've successfully subscribed to StartupTalky.
Success! Your account is fully activated, you now have access to all content.
Success! Your billing info has been updated.
Your billing was not updated.
Grow your Skills and advance your career with LinkedIn Learning ->