Right from its launch, Shopify was hugely appreciated by many retailers. And if you are not new to Ecommerce you might know why. Shopify is a popular ecommerce platform that enables merchants to develop online stores & to sell products at a monthly subscription fee. Shopify’s business model is referred to as Software as a Service. In 2018, Shopify got over 50% of its profit from Merchant Solutions.
Their business model is something that made them stand out among the high competition. The major goal behind the business model is its mission, which is to develop commerce and help entrepreneurs to reach the finest potential in the business.
What is the Shopify Business Model?
From the early days, Shopify expanded beyond the major merchant software offering. Presently, Shopify gets money from software subscriptions and even from merchant solutions. Such as Shopay installments, Shopify Payments, Shopify balance, Shopify Capital, Shopify fulfillment network, Shopify Shipping, referral fees, POS hardware, Shopify App Store Advertising, and more.
Merchants Solutions produce better revenue than Shopify merchant software subscriptions. However, these solutions offer work after merchants subscribe to the main software subscription services. Whereas merchant solutions’ profit depends on retailer numbers which develop a sustainable business through Shopify. A Shopify agency lets brands understand more about business models and how they can benefit brands.
What makes Shopify’s business model so unique for merchants?
In the times where cloud computing, social media, augmented reality, mobile devices, and data analytics are ruling the market with new opportunities. Shopify offers determined value by providing merchants an ultimate power. And here we include a few of them:
8 things of Shopify’s business model for unique merchants
- Multi-channel front end: Shopify’s software lets retailers display, manage and sell products within unique sales channels. Can’t include mobile and web storefronts, pop-up shops, physical retail locations, native mobile apps, social media storefronts, marketplace, and buy buttons.
- Effective Data: Shopify’s software offered to retailers then functions on the shared infrastructure. This kind of cloud-based infrastructure eases retailers from securing to running hardware. It strengthens data produced by the engagements within products and buyers. That offers rich data to notify retailers of decisions.
- Build a brand: Shopify is made to assist merchants to own and developing relationships with buyers. And to make the buying experience distinctive. Brands over Shopify provide purchases managed and end-to-end shopping experience which is accessible to huge businesses.
- Powerful Ecosystem: A powerful ecosystem of theme designers, app developers, and more partners, like marketers, designers, service professionals, and affiliates, evolved within the Shopify platform. This kind of rich ecosystem includes value to the retailer’s business.
- Technology: Shopify hosts the platform over cloud-based servers. Maintaining technology infrastructure & security is critical to Shopify. They plan to empower the infrastructure that reaches the merchant’s trust.
- Security: payment processing over Shopify is done by a devoted, and scalable environment with expertise procedures and policies. The atmosphere is secure and surpasses the needs of the PCI DSS.
- Performing: Thanks to the dedicated team for optimizing & profile the platform’s performance endlessly. Stores in Shopify have 386 million monthly visitors at an average of 5.9 billion browsing trials.
- Scalable platform: Shopify offers cloud-based architecture that’s made to support traffic & to get spikes from retailers. It utilizes a technology called ‘Containerization’ to measure computing resources within platforms. This platform is already benchmark to manage 2,50,000 requests per second with 15k orders in one minute.
Increase Sales and Revenue from the Merchants
At the end of 2021, Shopify had 2,063,000 retailers. Its business model is driven by the skill to entice new retailers, and increase sales and revenue from the merchants. According to Shopify, they believe that success is based on several factors, that includes:
- Expanding merchant base
- Localize features for certain landscapes
- protecting retailers as they grow and adopting features
- Providing multiple sales channels to connect retailers with a potential audience
- Boosting partner programs & Ecosystem
- Developing new solutions to expand functionality & catalyze sales
- High level of merchant support
How does Shopify make money?
Want to know how Shopify makes money, here are the five popular ways for Shopify to get money.
1. Subscription plans
Medium-sized and small brands are the big audience for Shopify. For offering rich services, the Shopify platform offers 3 subscription plans:
- Basic Shopify
- Advanced Shopify
Along with the 14-day free trial. Basic Shopify charges $29 per month. It provides online stores with app sales, endless products, and 24/7 support. But it charges for payments through credit card and the shopping discount is less. Shopify is the intermediate subscription, where the main platform’s consumers are focus. It’s $79 per month that comes with 5 user accounts, fees that are better than the basic plan. However, it cost higher than the advanced plan.
Shopify’s High sales Come from the Retailers
Mostly, Shopify’s high sales come from the retailers who opted for the full plan, Shopify Advanced cluster around $299 per month. That comes with reasonable fees, 15 user accounts, options for pointsintssale, and much more. Rather than three regular plans, there is another plan which is Shopify Plus. It’s a service intended for corporate consumers, with higher volumes & responsible to drive sales.
Shopify Plus is never display over the basic subscription
Usually, Shopify Plus is never display over the basic subscription plans page. Because it’s made for brand customers, with a higher cost than the Shopify Advance plan. This quantity is defined through the team’s service, depending on a case-by-case analysis, that begins at $2,000 monthly.
Shopify plus bandwidth enables Shopify to manage several orders in a minute, without upkeep. Sales can be made internationally, in many languages, with over 70 payment ways. Shopify Plus has a high retention plan, and brands such as Unilever are the best example. Reach out to the Shopify plus agency to know what subscription plan is better for you.
2. Transactions charges
Every subscription to the Shopify subscription plan comes with a determined transaction fee. Each payment that’s made via Shopify pay includes a 2% transaction fee upon the basic plan. These charges could decrease from 1% to as 0.5% for Shopify and Shopify advanced plans. Moreover, Shopify provides retail POS machines that include transaction fees upon every transaction.
Paid apps on the Shopify store
Paid apps on the Shopify store should pay a commission fee of 20%. For example, if the app costs $10 then the developer gets $6, whereas Shopify gets $4 in a month from the users of the app. The subscription and transaction fees on Shopify totaled 320 dollars million in the first six months of 2021.
3. Capital for Shopify
Shopify capital is launch by Shopify which is a current and new lending service, especially for small businesses. This tool offers loans to the current owners to market and enlarge stores and to scale businesses with the addition of recent staff. In a similar way to banks lending money, here money is lent to owners, where the borrowers pay their interest.
4. Marketing Tools
The best thing about these marketing tools from Shopify is that they are 100% free. That includes Facebook ads, Google ads, and email marketing are free to start with. Being an affiliate partner of companies Shopify gets a commission if a new one joins the programs. Partner businesses provide commission. If you start operating stores at ultimate capacity you are likely to start spending over email or ad setups.
5. Merchant Services
Shopify merchant offerings come with Shopify shipping, capital, and Shopify payments. Additionally, Shopify’s fulfillment network along with six river systems are add to Shopify. These are both inexpensive. In the first six months of 2021, these services produced $668 million in revenue and it is known to grow more in 2022.
Shopify has agreements with many elements that utilize prominent brand names for promoting business. One best example can be its inclusion of Affirm as a choice for checking out. This maximizes Shopify’s profit based on the agreement terms. Many of them spend on the referral fee in the aspect of the percentage of total sales number.
7. Shopify Exchange
Shopify exchange was initiate in 2017 for helping retailers sell businesses. They could list stores and can add a description that implies the revenue you generated this month. Along with total profits, and order count. They put an asking rate, that’s suggest to be 10 x higher in revenue. Shopify charges a listing price of $10. It offers a cut from the exchange price, that’s based on your brand worth.
8. App Marketplace
Shopify’s app marketplace is truly a game-changer. It offers a win-win solution for everyone. Third parties can contribute to developing Shopify stores by improving plugins & get money. Shopify consumers add features, that make Shopify earn money in two ways.
First is a 20 % commission from app developers to sell their apps in the marketplace. The second way is by marketing apps so. Developers bid over keywords for marketing their apps. Shopify also charges theme markers 30%.
Shopify’s business model is extraordinary. These innovative solutions are inspiring the next generation with their unique and simple money-making ideas. With their revolutionize e-commerce techniques, no wonder why it’s declare the most searched e-commerce solution by Google Trends. Have more doubts or queries regarding Shopify business models? Reach out to expert Shopify agencies now.