What Is Shopify and How Does It Work?

An ecommerce solution that could be right for your business

Managing an Ecommerce Business
••• Julia Nichols / E+ / Getty Images

Shopify is an ecommerce platform so simple to set up that you can open an online shop today. Pick a theme, customize information, add products, specify payment options, and go live.

For people who want to break into the online retail space, but don’t have a great deal of experience, Shopify can be ideal. The cost to get started is negligible—you can try it free before paying a monthly fee. It’s a cloud-based SaaS (Software-as-a-Service) solution that offers hosting, templates, marketing tools, and integration with payment gateways. You can even buy your URL through Shopify if you don’t already have one.

The platform provides customer support, which is available 24/7 via phone and email. Shopify also offers an extensive knowledge base to find answers on your own. 

The real selling point of Shopify is its ease of use. If you’re a novice, don’t hesitate to try and create a professional store. It’s easier than you think and will take no time at all 

How Much Does Shopify Cost?

You can test out Shopify for a select period of time for free—you won’t even need to enter your credit card information. Build a store, customize it, load products, and try some test sales using its Bogus Gateway test payment provider. 

Monthly Charges

If Shopify is right for your business, a Basic Shopify account starts at just $29 per month. As your business grows, you can add services and lower transaction costs by increasing your service plan to a Shopify account at $79 per month or an Advanced Shopify account at $299 per month.

If one of these monthly plans isn’t right for your business, whether you run a larger business or want to sell via social media, there are other plans available: ShopifyPlus and Shopify Lite.

Transaction Fees

In addition to the monthly cost, you’ll incur varying credit card fees per transaction. For example, with a basic $29 per month account, your online credit card fee per transaction is 2.9% + 30 cents. 

Shopify charges an additional fee if you do not use Shopify Payments. The additional charges are:  

  • 2.0% for Basic Shopify 
  • 1.0% for Shopify
  • 0.50% for Advanced Shopify

If you do use Shopify Payments, they do not charge this additional fee.

When pricing your products, take the time to understand all of the charges and incorporate them into the prices you charge.

Shopify Features

The reasons to use Shopify go far beyond a point-and-click interface. Shopify offers a variety of tools to help you customize your online store, connect with customers, market, and analyze data. 

After you’ve set up and customized your store using its website builder, it’s time to dig in and get to work. 

Secure Payments

You can accept payments in several ways, using Shopify’s proprietary gateway, Shopify Payments, or any of 100 third-party payment gateways for an additional fee. Payments are secure with a free SSL certificate (the same technology your bank uses).

Automatic Order Features 

Your shopping cart automatically calculates taxes and shipping rates, and you have the option of ordering flat-rate or free shipping at the price point you choose.

Marketing 

  • Access customer analytics: Identify your ideal customer and use Shopify tools to group them by category for targeted marketing campaigns.
  • Abandoned checkout recovery: When a customer moves away from your site before checkout, you can send a reminder email to entice them back to the items they almost purchased. According to research by Moosend, 69% of all shopping carts are abandoned, but the conversion (purchase) rate on a follow-up email is 10.7%.
  • Automated email templates: Customize automated store emails to verify orders, let customers know when they are on the way, announce sales, or introduce new products. Segment your lists and send special offers to targeted groups.
  • Social media integration: Add social media buttons to your store or sell directly from Instagram, Facebook, and more.
  • Blogging: Content marketing is an effective strategy and can set your store apart from competitors. Shopify has a built-in blog feature you can use to attract business.

Products

You can purchase and store your own inventory if that’s your thing, but storing, packaging, and shipping products is costly and time consuming. There are easier ways to deliver goods. Shopify offers a couple of really interesting options.

  • Dropshipping: Shopify integrates with Oberlo, an online marketplace where you can find products to sell from all over the world. In effect, you’re a curator. You display and sell products, and the dropshipper takes care of delivery.
  • Shopify fulfillment services: Take advantage of existing fulfillment agreements, using services like Amazon, eBay, or Rakuten. You make arrangements to have your inventory delivered to their fulfillment centers, and they will store your stuff and ship it with your labeling. 

Potential Cons of Shopify

Shopify has a lot more pros than cons, but there are a few things to consider before signing up.

Add-Ons Can Get Pricey

While Shopify has nearly everything a small business could ask for in an online store, you may find that you need to add services or third-party apps that add to the cost. Each of them will be reasonable costs, but a lot of “extras” together can add up.

Lack of Control

You can customize your store in plenty of ways, but depending on the plan you sign up for, there may be limitations in areas such as checkout and SEO. 

Commitment

Migrating a store from one platform to another is a complex operation. Make sure you’re comfortable with using Shopify for the long term before committing.

The Bottom Line

Shopify is a popular ecommerce solution, and for small businesses, it just might be the easiest to set up and use. As with most hosting solutions, it does have some worrisome proprietary issues, but overall, it can be an invaluable turnkey product if you’re looking to set up an online shop and enter the retail space.

Article Sources

  1. Shopify Help Center. "Placing a test order." Accessed March 25, 2020. 

  2. Shopify. "Set up your store, pick a plan later." Accessed March 25, 2020. 

  3. Moosend. "INFOG[RAPHIC] Cart Abandonment Rate & Reasons." Accessed March 25, 2020.