- Shopify is one of the leading online shopping networks allowing anyone to set up a digital storefront.
- Shopify is Canada's largest and most valuable company.
- Shopify makes money by charging for premium subscriptions, transaction and referral fees, hardware sales, commissions, and more.
Tobias Lütke, Daniel Weinand, and Scott Lake founded Shopify in 2006, with headquarters in Ottawa, Canada. It's Canada's most valuable company, operating in more than 175 countries worldwide.
The company earned a $185 billion valuation on its IPO in May 2015 under the ticker $SHOP on the NYSE and Toronto Stock Exchanges.
Shopify is an eCommerce platform allowing users to set up digital storefronts to sell products. It offers a user-friendly design experience, and you don't have to be a coding expert to set up a store on the site.
This is a detailed look inside the company's business model and how they generate revenue.
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What does Shopify do?
Shopify is a SaaS cloud solution offering a digital marketplace for goods and services. Users can set up a store in a matter of hours using the site's design tools to create a unique storefront and upload product descriptions.
It's a complete eCommerce solution, offering hosting and SEO tools to help marketers promote their stores. Merchants also can implement Shopify's point-of-sale (POS) solutions to capture in-store payments from customers.
Shopify users can compete in several markets, including digital and physical products, memberships, courses, rentals, and more.
How does Shopify work?
The Shopify model operates a digital marketplace that's an alternative to competing on sites like Amazon. The company gives users all the tools they need to set up a store and sell online. As a result, users don't have to spend thousands of dollars developing an eCommerce site, and they can manage it themselves using Shopify's suite of developer and SEO tools.
Shopify created an app store centered around improving the user experience for its merchants. Users have access to more than 7,000 apps in the store to enhance their online business. The company generates revenue through a diverse business model.
How Shopify makes money
Shopify makes money by charging merchants a subscription fee for access to its platform, card transaction fees, referral and payment fees, commissions, hardware sales, and advertising in its app marketplace.
It charges commissions on custom themes and domains and services like email marketing and logistics, and it makes money through investments in the eCommerce space.
Subscriptions
Shopify offers subscription plans to its users. Plans range from $9 to $299 per month for smaller users. Large businesses and brands can choose the Shopify Plus plan, starting at $2,000 per month.
Transaction fees
Depending on the subscription plan, Shopify charges a transaction fee of 2.9% to 0.5% on all transactions made through its platform. It also charges a fixed $0.30 transaction fee on all sales.
Referral fees
Shopify earns referral fees from BNPL partners like Affirm.
Hardware sales
Shopify earns money through the sale of POS systems to its users.
App marketplace
Shopify takes a 20% commission on all app sales through its app store.
Theme store
Shopify users can purchase custom themes from its store. Shopify pockets 30% of the sale.
Shopify exchange
Shopify charges a listing fee of $10, and it takes a percentage of the sales on its platform, dependent on the sales price of the order.
Shopify offers a free email marketing service for up to 2,500 emails every month. It charges a fee for larger email campaigns.
Domain sales
Shopify makes a commission for selling custom domains for its user's stores.
Shopify capital
This segment of the business provides loans. Shopify merchants can loan up to $1 million to grow their business, provided they meet the qualifying criteria for the loan.
Logistics
In 2019, Shopify acquired 6 River Systems for $450 million. This move enabled Shopify to launch the fulfillment side of its business. It charges its users for the warehousing and delivery of their products.
Future growth engine
Shopify believes the company's future growth lies in creating value for its sellers while improving the buying experience. It also plans to continue its international expansion into other countries.
The company continues to develop its app store, providing its users with all the tools they need to build a successful eCommerce business online.
Tremendous opportunity lies ahead for Shopify in the NFT space and commerce in the unfolding metaverse.
Competitors
Shopify competes with other eCommerce sites and SaaS applications for market share. Some of its top competitors include the following.
