Shopify Business Model | How Does Shopify Make Money

Vibhavari Madki Vibhavari Madki
Jan 15, 2022 6 min read
Shopify Business Model | How Does Shopify Make Money

What could possibly come to your mind when you first witness the term "Shopify"? The only possible fraction 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 a digital platform, why not start with helping those who want to survive the market online.

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.

Let's understand the complete business model of Shopify and how it makes money.

What is Shopify?
Features of Shopify
How Does Shopify Work?
Shopify Business Model | How does Shopify Make Money
FAQ

What is Shopify?

Shopify was first founded in 2004. It is an e-commerce platform that helps sellers build a website and sell their products online. With all the ups and downs, by the course of a decade, the sales of Shopify skyrocketed. Shopify had about 12,000 merchants by then and earned a huge revenue of $105 million. It is especially known for its flexibility of payments. Its adaptability in business helped it to flourish.

Features of Shopify

The e-commerce platform is easy to operate, it is designed for the easy understanding and accessibility of the retailer. The retailer gets numerous features useful in selling products like reporting, email marketing, SEO, analytics, or branding.

Blogging

Shopify Website Builder
Shopify Website Builder

Shopify also provides the blogging feature that 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.

Dropshipping

Shopify Dropshipping
Shopify Dropshipping

For someone who is interested in Dropshipping, he/she can start with this platform. According to reports, Shopify has over 800,000 stores. The stores are built using this application. It is a comparatively safer platform. Apparently, Shopify and the online store are going to survive more than anyone can imagine as merchants are widely reliable.

Online Store

Shopify gives merchants their sole identity, they have their own digitally controlled store to brand and market. It even helps in the branding of products and accepts a wide range of payment methods from the customers of the merchants. Interested Retailers can build and create an online store with plans starting from $9/month. It also provides 14 days of free trial use. Β 

POS

Shopify POS
Shopify POS

The POS (point-of-service) options are out of the box. It helps the stores and itself to stand apart from its competitors.

Unforgettable customer service

Shopify Customer Service
Shopify Customer Service

Unlike other platforms, Shopify gives quite satisfying customer service 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 Shopify. Nothing limits the lists of products/services.

How Does Shopify Work?

Shopify, in simpler terms, helps one build their own website for their business. Shopify acts as a provider of online stores. It helps you to directly 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 at their convenience. It helps them to start a business journey, without requiring to have any knowledge about website building.

Now let's look at How one can start selling on Shopify. It is pretty simple to understand how to set up the business on Shopify.

  • First of all, you have to create an account on Shopify to enrol yourself as the seller on the platform.
  • Add products or services from the account, add and customize the 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 got its own payment gateway called β€˜Shopify Payments’, it's a free service. If the 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 the seller wants to charge the customers.
  • Users can add some apps from the Shopify App Store to market and sell the products on that 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 Business Model | How does Shopify Make Money

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

Shopify Subscription Plans
Shopify Subscription Plans

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

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

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

Shopify Plus
Shopify Plus 

Enterprise contracts are also way more promising as the enterprise clients usually sign an annual or multi-year 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!

Shopify Revenue
Shopify Revenue

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.

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.

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.

FAQ

What kind of business model is Shopify?

Shopify operates on a platform business model where third-party sellers sell their products.

How is Shopify making money?

Shopify generates revenue from subscriptions, transactions, payment, referral fees, commissions and advertising.

Who is Shopify's biggest competitor?

BigCommerce, an e-commerce platform based in the united states is one of the biggest competitors of Shopify.

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