Shopify Business Model – How does Shopify make money?

Are you dreaming of running an online business? Don’t have enough knowledge of building a website? Looking for assistance to grow your online business?

No more worries!!! 

Switching to an e-commerce solution is the right option for you. The million-dollar question is what is the best e-commerce solution available in the marketplace? Because choosing the right platform can be difficult for beginners. Since there are many things to consider designing a website, processing payments, SEO, shipping and a lot more.

For sure, Shopify is expertise in most of the areas.

What is Shopify?

Shopify is the leading e-commerce website around the world. Anyone can set up their online store without hassles and sell their products or services locally and globally. Merchants can sell their products or services in person through Shopify POS. Many people are unaware of Shopify POS, it’s an application that will allow merchants to sell their products or services offline. It means merchants can sell at physical stores or trade shows via Shopify POS. Also, Shopify is offering excellent features for all its users from newbie to experts.

Shopify is a popular platform that is designed for all-size businesses. No matter whether you’re running a start-up or large business, Shopify is a good option for you. The best part of Shopify is merchants can sell their products or services online or on social media platforms, in-store or out of your car – Shopify has got you covered. Sounds amazing right!!!

Many merchants are using the 14-day free trial to test Shopify on their website. During the free-trial merchants can build their website and make their sales effectively. Then merchants will switch to the premium plan to make their earnings double.

History of Shopify

Currently, Shopify is a well-known e-commerce platform in the market. Earlier, Shopify has begun as e-commerce itself. It was founded in 2004 as the initial name was Snowdevil. Shopify was founded by Travis Hutke. The entrepreneur got frustrated by looking at the e-commerce platform features and options. Therefore he decided to create a software that is flexible and easy for anyone to build and manage an online business. Finally, he launched the software in the year 2006.

Shopify has become one of the best and leading tools. The company has earned $470 million in Q2 2020, a 47% increase in growth when compared to 2019. Shopify powers more than 1 million businesses in over 175 countries. The platform is trusted by popular brands like Allbirds, PepsiCo, Gymshark, and Staples.

Shopify mission

In their words “Shopify wants to make e-commerce better for all the people around the world”. They believe that their company will help merchants of all sizes, right from small business to large enterprises.

The company concentrates mainly on small and medium enterprises by offering multiple subscription services. The most popular subscription plan is $50 per month. However, enterprise accounts are also generating good income to Shopify.

Shopify business model – Explained

Shopify investors have seen good growth. They have received immense growth in their stock in 2017. Double growth in 2017 and triple growth in 2020. Sounds amazing right!!! Shopify is offering its services to its customers at the lowest price i.e $29 per month, then how does Shopify is making money? Let’s discuss in detail

How does Shopify make money?

Shopify is a leading e-commerce destination enabling merchants to build websites and sell their products or services through a subscription fee, and additional features or services that are offered by the platform.

More than 1,000,000 businesses in over 175 countries across the globe have made more than $200 billion USD in sales through Shopify.

Shopify is offering excellent services for a portion of the cost when compared to receiving these services from third parties. Let’s consider, Shopify is offering hosting services in your subscription. Also, your website can have a payment gateway, blog, free domain name and other features are included.

Subscription sales

There are three subscription plans are available on Shopify.

  • Advanced Shopify – $299 per month
  • Shopify – $79 per month
  • Basic Shopify – $29 per month

These plans are often the core of Shopify revenue. These plans are offering a 14-days free-trial program. Many merchants prefer Basic and Shopify subscription plan.

As mentioned eariler Shopify has over 1,000,000 business in 2020. Let’s consider that every subscriber will pay $29 per month. It means $29 X 10,00,000 = $290,00,000 of net profit every month. Shopify is earning $3,48,00,000 per year.

Merchant solutions

Shopify is offering merchant solutions and generating good income year over year. Did you know, merchant solutions mainly earning money from payment processing charges, financing from Shopify Capital, referral charges from partner, sales, POS hardware, Shopify fulfilment network and many more.

Did you know Shopify has its dedicated payment processing gateway? Yes!!! This could be the primary source of income for Shopify. There are three subscription plans are introduced in Shopify Payments, let’s discuss them

  • Basic Shopify – 2.9% + 30 cents
  • Shopify – 2.6% + 30 cents
  • Advanced Shopify – 2.4% + 30 cents

These charges are applicable on every transaction processed through Shopify Payments.

According to the financial statement “Shopify Payments” is offering fully-integrated payment gateway to its merchants. It means merchants can accept and process payments online and offline. This feature is driving higher retention rate to Shopify. Also, the revenue is generated from other services such as referral fees, translation charges and more. As per research, Shopify has earned $522.10 million in 2020 through merchant solutions.

Payment gateway fees

Shopify is earning good revenue through subscription charges. On the other hand, Shopify is making income through the payment gateway. As mentioned above, the platform is offering its own payment gateway that is safe and secure. Let’s discuss how payment gateway is charging on every transaction through Shopify payment gateway

  • Basic Shopify – 2.0% 
  • Shopify – 1.0%
  • Advanced Shopify – 0.5%

Point of sale service

Shopify is offering an excellent point of sale software service. The software is the best way to track the sales and payments that have taken place at local stores or in-stores. The POS service is offering features according to their subscription plan, let’s discuss them

  • Basic Shopify – The plan includes Shopify POS app and third-party POS apps.
  • Shopify – The plan is offering Shopify POS app, Register shifts, Staff POS PINs, Third-party POS apps, Store locations (1-5).
  • Advanced Shopify – The service include all the features of Shopify. The store locations are upto 8.

Miscellaneous

Shopify is earning a good income from other sources. There are hundreds of themes available for free. On the other hand, Shopify is offering thousands of premium themes available on its theme store. These are used to customize the website effectively. Most of their themes are available for $180. The company is generating good income by add-ons and integrations

A technology platform

Though there are many SaaS companies are available in the market. Shopify stands out from the competition. But how? Since Shopify is offering e-commerce services and technologies to its customers. Also, enabling merchants to build their online stores with attractive catalogue, shopping cart and more. Shopify represents its platform as the “multi-talent cloud-based” service. The platform is hosted mainly on effective cloud-based servier. As per the organization, the key attributes are security, reliability, scalability, performance and deployment.

Conclusion

Shopify allows newbies to build an online website without technical knowledge. The merchant doesn’t need to worry about coding, installing software or hosting services. The company is running profits year by year. Shopify is making a good income from various segments. It includes subscription fees, merchant solutions, payment gateway, point of sale and more. Currently, there are more than 1,000,000 businesses are building and handling their sales through Shopify. It is offering excellent services, features and add-ons to the merchants in over 175 countries. The merchants have earned more than $200 billion USD in sales through Shopify. On the other hand, Shopify has generated $470 billion in revenue.

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