What is Shopify? How Does It Work? How Much Does It Cost?

Currently, more than 5 million online stores use the Shopify platform, making up 19% of ALL e-Commerce sites worldwide! With so many businesses choosing this solution, there must be something special about it. But what exactly? That’s what you’ll learn in this article.

What is Shopify?

Shopify is an e-Commerce platform that operates on a SaaS (Software-as-a-Service) model. This means your online store will remain active as long as you pay the monthly subscription fee. While there are plenty of SaaS solutions on the market, why have millions of stores across over 170 countries chosen this platform?

There are likely many reasons, but the main one is undoubtedly the simplicity of the tool. With Shopify, you can build your online store using a drag-and-drop method. You don’t need an army of developers. All you need to do is create an account on the platform, choose a template, configure your sales system, and you’re ready to go. If you’re creating a relatively simple store, you won’t even see a single line of code. You can customize everything directly through Shopify’s intuitive admin panel.

It’s not just the ease of use that attracts companies like BIZUU, Huel, Your Kaya, and Oakywood to build their e-Commerces on Shopify. The platform offers a wide range of features that allow you to create a truly excellent online store. And despite being a SaaS tool, thanks to numerous apps you can integrate with your store and the ability to tweak the frontend, you can build a highly advanced e-Commerce platform on Shopify.

Now that you know what Shopify is, let’s find out how this system works.

How Does Shopify Work?

Shopify is a cloud-based platform, meaning you can manage your store from anywhere in the world as long as you have access to the Internet. You don’t need to be connected to your company’s network or use only your work computer. With Shopify, you can manage your e-Commerce store from any device. It’s no wonder that many dropshippers use this solution to run their businesses from sunny beaches in the Maldives or tropical jungles in Bali.

The Shopify admin panel serves as the command center for your business. It provides everything important for your e-Commerce in one place. Through the admin panel, you can create a product catalog, manage orders and inventory, ship items, and process returns.

If you’re selling through multiple channels (such as your own online store, marketplaces, or social media), all sales data will be available in one dashboard—provided you use the extra features Shopify offers.

This is, of course, a basic scenario. In this version, you’ll create your store on a custom domain, use one of the free templates which you can customize to suit your needs, and take advantage of the pre-made one-click checkout. Such an e-Commerce setup will be a basic platform without bells and whistles or advanced features. However, that doesn’t mean you can’t build a top-notch sales system on Shopify — you can. You’ll just need to use more expensive plans, additional features, and plugins. You can also upgrade from the Basic plan to the Shopify plan to get access to a customizable checkout, or features like duties and tax calculations. You can also choose apps from the Shopify App Store, such as Loop Subscriptions, GLO Color Swatch, or Variant Image, to elevate your e-Commerce store even further.

The possibilities Shopify offers are vast. For a SaaS tool, it’s a very flexible solution. Of course, it has its limitations, but there’s a reason Shopify has been a leader in its class for years. It’s simply a fantastic e-Commerce platform.

What Features Does Shopify Offer?

There are many features you can use with Shopify, depending on the plan you choose. This platform allows for the creation of a relatively technologically advanced store that can effectively meet the business needs of small and medium-sized retail companies. Here are some of the key capabilities Shopify offers:

Building an Online Store with Drag-and-Drop

Shopify makes it incredibly easy to set up an e-Commerce store. All you need to do is create an account on the platform, configure the store, add products, and choose a template. If you need a very basic store and have no specific design requirements, you can complete the store creation process at this point. However, templates are often universal solutions that may not perfectly suit a particular industry or the specific needs of a company. That’s why Shopify allows customization of pre-designed templates in a special editor. By adding specific elements and dragging various boxes, you can easily personalize your store. Of course, you can go further and make more advanced changes through coding. However, Shopify’s drag-and-drop editor allows you to create your online store independently, saving you money (though at the expense of some advanced functionalities).

Headless E-Commerce Store Development

With Shopify, you can create a store using a headless e-Commerce architecture. This “headless” concept refers to separating the front-end (what customers see and interact with) from the back-end (the logic and data behind the scenes). Why do this? It gives greater flexibility in customizing the front-end experience for different devices (like laptops, smartphones, or smart TVs) while maintaining a consistent back-end logic. Typically, to build a headless platform, you would need to use an open-source engine or create a fully custom e-store. SaaS solutions usually don’t offer this option, but Shopify is an exception. It provides the Hydrogen framework, which allows you to build your headless store on this platform.

Integrating Online and Offline Sales

If you want to sell through multiple channels (omnichannel), Shopify could be a great solution for you. The platform offers the Shopify POS (Point of Sale) functionality, which enables you to register offline sales. It’s simply an iPad app that you install on your in-store device, connect to a cash register, barcode scanner, and payment terminal, and you’re good to go! You have a POS system. The best part is that the data processed through this system goes directly into your Shopify admin panel. This means that if you run both a physical store and an online e-Commerce shop, all your sales data from both sources will appear in one dashboard.

Customizing the Backend and Store Logic

Most SaaS platforms are quite limited in terms of customization. Typically, these tools offer a predefined and fixed store logic along with a set of functionalities, and that’s it. This lack of flexibility often makes businesses hesitant to adopt such solutions. Shopify, however, addresses these concerns by allowing customization of backend logic through Shopify Functions. With ready-to-use APIs, you can, for example, create a new type of promotion for a specific product or variant, modify how items are displayed in the cart, or set custom logic for how Shopify should handle and allocate orders. This means you can build a store that meets all, or at least most, of your business needs.

Subscription-Based Selling

On Shopify, you can sell your products and services using a subscription model. All you need to do is install one of the apps designed for this purpose, available in the Shopify App Store, configure the subscription rules (such as product information and shipping frequency), and you’re good to go! Your customers can then subscribe to recurring purchases from your store.

Regional (and Beyond) Store Personalization

Shopify includes an International feature, which helps manage user experiences for different countries. In the admin panel, each store dedicated to a specific region can have unique settings, including different currencies, languages, taxes, and payment methods. This allows you to tailor the front-end experience for each group of customers while managing everything from a single system. This is great news for businesses looking to expand internationally, as Shopify makes global expansion easier.

B2B e-Commerce Platform

What if you want to sell to business customers? No problem. By choosing the Shopify Plus plan, you can build your own B2B e-Commerce store. For instance, you can create product catalogs tailored to specific customers. This allows one partner to have base prices, while another might get a 10% discount on everything. You can also set different billing and tax rules, and consolidate multiple customer locations under one company profile. Most importantly, you can manage both B2B and B2C sales from a single admin panel, giving you a comprehensive view of your business. Shopify is one of the few SaaS platforms that allows for the creation of a fairly robust B2B store. While it may not be as advanced as what you could achieve on Magento or another open-source engine, Shopify B2B might be sufficient if you plan to sell online to business customers and don’t require highly complex solutions.

Selling through Social Media

An online store is not the only place where you can sell your products. Increasingly, consumers are using social media for this purpose as well. Shopify responds well to this trend by allowing you to integrate your sales platform with social media channels. In your admin panel, you can add sales channels such as Facebook and Instagram. You can also use the Buy Button feature, enabling your users to purchase directly from places like your blog.

What about TikTok, YouTube, and other social media channels? Don’t worry. In the Shopify App Store, you’ll find apps that let you connect your e-Commerce store with these platforms as well.

Shopify Inbox

With Shopify, you don’t need additional tools to communicate with your customers. This e-Commerce platform provides a built-in chat feature called Shopify Inbox, which allows you to communicate with users without installing third-party plugins or apps. Shopify Inbox lets you send messages to your customers, share links, discount codes, and even images. It’s a great alternative to popular tools like LiveChat. Best of all, this feature is available directly from your admin panel. You don’t need to log in to another system — everything is in one place. And since Shopify Inbox is integrated into your panel, you won’t have to pay for additional tools.

Automating Your Store

Shopify Flow is a feature that lets you automate certain actions and processes in your online store. However, to use it, you’ll need to install the app of the same name, easily found in the Shopify App Store.

How does Shopify Flow work? What exactly can you automate? Almost anything. You can manage your inventory by setting an alert to notify you when a product is low in stock. You can automate the assignment of points to customers for purchasing specific products or even create a flow that assesses the risk of individual orders.

This feature is available in all Shopify plans, but its range and features vary depending on whether you have the Basic, Shopify, Advanced, or Plus plan.

These are just a few functions that allow you to create a highly efficient online store on Shopify. Everything sounds great, but…

How Much Does a Shopify Store Cost?

This obviously depends on the package you choose. But before we dive into Shopify’s pricing plans, let’s take a look at the costs of implementing the store itself. There are generally two main options:

1. DIY (Do It Yourself)

In this case, you create your store yourself using a pre-built template and Shopify’s drag-and-drop editor. You don’t pay for implementation as such, but you do pay with your time because setting up a well-functioning, visually appealing store on your own can take a while.

2. Hiring an Expert  

If you prefer not to handle development of the store yourself because you have plans for more advanced features, you will need the help of professionals. You can either hire developers within your organization or use the services of an e-Commerce agency. For these services, you’ll need to pay either through employee salaries or by settling invoices from external partners.

So, What is the Cost of a Shopify Store?  

However, in some cases, the cost of setting up an e-Commerce store on Shopify can exceed 23,000 EUR. This usually happens due to numerous custom integrations that need to be developed from scratch. The more custom integrations, the more work developers have to do, which leads to a higher final cost of implementing Shopify.

Shopify Store – Pricing

Shopify is a SaaS (Software-as-a-Service) platform, meaning you need to pay a monthly subscription fee to use it. However, the Shopify pricing isn’t as simple as just paying a fixed monthly amount. The total cost of using Shopify is more complex.

First, you have two billing options—monthly or annually. Why is this important? While paying annually means a larger one-time payment, you save approximately 25% in the long run. So, you’ll need to decide whether you’d prefer paying a higher amount monthly or a lower amount once a year.

Now, let’s look at the Shopify pricing plans. There are four basic options to choose from, which vary in terms of available features, the number of user accounts, and supported sales regions. We won’t list all the details here—you can find a complete breakdown of each plan’s features on Shopify’s website.

What we want to highlight are the additional costs beyond the subscription, which also vary depending on the pricing plan you select. The most important of these is the Shopify transaction fee. For the Basic plan, it’s 2%, for Shopify it’s 1%, for Advanced it’s 0.6%, and for the Plus plan, it’s 0.2%. As you can see, the difference is significant. It’s a good idea to run a simulation to determine which plan is more beneficial for your business. And don’t forget that each payment gateway also charges a fee per transaction, so be sure to calculate how much operating the store will truly cost.

But that’s not all. When launching your e-Commerce store on Shopify, you also need to factor in the cost of additional features and apps. For example, if you integrate your store with marketplaces, the first 50 transactions are free, but Shopify will charge an additional 1% fee (up to $99/month) for every transaction after that. If you want to use Shopify POS, it will cost you an additional $79/month. Many apps in the Shopify App Store also come with a subscription fee.

All of these factors need to be considered when estimating the potential cost of running an online store on Shopify. And we emphasize “potential” because these calculations should be made before signing up for the platform. This advice applies to not just Shopify but any e-Commerce engine you’re considering.

Shopify Store – Pros and Cons

No e-Commerce platform is perfect, and there certainly isn’t one that fits every business model. Each solution has its own advantages and disadvantages, and Shopify is no exception. Here are the key pros and cons of this system.

Pros of Shopify

• It’s a simple tool: Creating a basic online store on Shopify is so straightforward that you can do it yourself in just a few hours. The system’s interface is also very intuitive, making it easy to navigate. You should have no trouble managing your e-Commerce store from Shopify’s admin panel.   
• Building a store on this platform is relatively cheap: If you build your store on your own, the cost will mostly come down to the time you spend, plus possibly paying for a template (if you choose a paid one). For a slightly more complex store, you’ll need to hire developers. The cost of having them build a basic store will be around 7,000 EUR. Compared to open-source engines or fully custom solutions, this is quite a low price.
• There are substantial customization options for your store: The available templates in Shopify allow you to create a pretty decent e-store. If the template you selected doesn’t fully meet your needs, you can easily modify it. Importantly, Shopify’s templates are fully responsive, so you don’t need to worry about the mobile experience for your users. If you require more complex modifications, you can always use the apps available in the Shopify App Store (of which there are many) or hire developers to implement custom changes (as long as they fit within the SaaS framework).
• Manage your entire business from one place: With this e-Commerce platform, you can sell your products not only through your own online store. Shopify allows integration with popular marketplaces and social media channels. It also supports subscription sales. In the most expensive plan, you can even build a B2B platform. This means you can manage all your sales from one place—your Shopify admin panel.
• It’s a high-performance system: Shopify is a Canadian tech company that employs over 8,000 people (as of 12/31/2023). This means they have a sizable team of experienced developers working to ensure the platform runs efficiently, so you don’t have to worry about performance.
• Hosting and security are handled by the provider: If you have a store on Shopify, hosting is included in your subscription. You don’t need to search for the right server resources; it’s all provided with your e-Commerce platform. The same goes for security—Shopify takes responsibility for securing the system (including your online store), while you only need to configure your store correctly.
• Advanced marketing and SEO features: For a SaaS tool, Shopify offers a considerable range of options. You can segment your customers and send them newsletters, automatically generate canonical tags, or set alt attributes. There are many such features, and it’s worth getting familiar with them on the Shopify website.
• 24/7 customer support: Shopify offers round-the-clock support in many languages. You don’t have to worry about technical support not understanding you or operating in a different time zone, causing delays in addressing your inquiries. Shopify guarantees 24/7 assistance to its users. 

Cons of Shopify

• Complex fee and commission system: Unfortunately, it’s not as simple as paying a fixed monthly subscription, as highlighted in the pricing chart. In addition to that fee, you’ll need to account for transaction commissions and charges for additional functionalities, such as a tax platform or the POS system. For lower-tier subscriptions, the commission on sales is relatively high. If you have the Basic plan and high sales volume, the amount you’ll end up paying in commissions can become quite substantial.
• Some templates and apps are paid: The prices vary. You pay for a template once, and that’s it. However, many apps available in the Shopify App Store require a monthly fee. For example, if you want to track the Lifetime Value of your customers, you might need the app Lifetimely LTV & Profit by AMP, which is free for up to 50 orders, but beyond that, it costs $49 for up to 1,000 orders, and the fee increases further for higher volumes. This means maintaining a more advanced store on Shopify might not be as cost-effective.
• Challenges in leaving the platform: Shopify doesn’t make it easy to leave its system. If at some point Shopify no longer meets your needs and you want to move your store to another engine, such as Magento 2 or a custom solution, it won’t be a simple process. Migrating your store from Shopify might result in some data loss. The only real option is to export the entire site in a CSV file, which is far from the most elegant solution.
• No email hosting: While this isn’t a huge disadvantage, it’s worth noting. We’ve mentioned that you can send emails to your customers via Shopify, which is a plus. However, if you want an email address using your own domain, you’ll need to create it elsewhere, such as with Google Workspace. Naturally, this will involve additional costs, which counts as a drawback.

Who is Shopify for?

There’s no universal e-Commerce platform that works perfectly for every business. There are plenty of options on the market, each offering different features and addressing varying needs. That’s why it’s essential to choose an e-Commerce engine that best suits your business.

Is it worth setting up your store on Shopify?

If you belong to one of the groups mentioned above, or if you have checked and know that Shopify fully meets your needs, then absolutely. There’s a reason Shopify is one of the most popular e-Commerce platforms—it truly is a fantastic tool for online sales.

Of course, as a SaaS system, it has its limitations, but for many businesses, it’s more than sufficient. When brands like Gymshark, Kylie Cosmetics, and MVMT Watches use it, you can be sure it’s a platform capable of handling large-scale sales while providing great user experiences.

However, before making your final decision, we encourage you to carefully calculate the costs of running your e-Commerce business on this platform. Don’t get caught off guard by high commissions and extra fees. With Shopify, sometimes it’s worth opting for a higher subscription plan to lower the transaction commission percentage.

That being said, Shopify works well and performs excellently. It’s definitely worth considering when choosing an e-Commerce platform for your business.