A Definitive Guide: How does Shopify Work?


A Definitive Guide: How does Shopify Work?Our life nowadays is immensely dependent on technology and it has changed the way we purchase products, the way we communicate, the way we live, the way we learn, the way we travel and a lot more changes that have been brought by this continuous evolution in technological enhancement. This technology transferred the world, a number of online businesses have augmented across the world. In order to start a business, one does not need to set up a brick and mortar store, the internet lets you sell your product anywhere on this globe with the right tool, application, software or platform. If you are looking into online business software or shopping cart software, you are most likely to run into Shopify. If you are wondering what Shopify actually is, how does Shopify work, Shopify business model and how does Shopify make money, you surely need to read ahead to find out what you must know.

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Shopify – An accomplished eCommerce platform that assists you to commence, grow and handle business. It can be said as “all in one” e-commerce platform where you can build an online store with pleasant user experience. Shopify enables you to create and develop an online enterprise. It lets you sell goods wherever you want; whether it is on social media, web, online marketplace, or mobile phone. Basically, this cloud-based SaaS – Software as a Service shopping cart solution allows you to customize and manage your business from wherever you are on this earth.

How does Shopify Work?

One of the things you will be curious to know is – how does Shopify work? Shopify allows forthcoming merchants to set up an online store where the sellers are able to set an online shopping cart, determine shipping rates, provide online payment methods and a lot more. Besides that, Shopify provides web hosting services, enhance website for quick search engine results and a need for business analytics.

In addition, they provide a facility to choose an affluent selection of free and for purchase design templates. These themes are unfurnished and modern. They also furnish a variety of editing tools which can be customized according to your requirements. What’s more, here you don’t need to worry about crashing of the site due to traffic or hackers hijacking your transaction.

Shopify is protected by powerful stronghold due to its huge switching costs i.e once you set up e-commerce operations on Shopify, it would be nasty to switch.

How does Shopify work for Exchange Marketplace?

You might be thinking how Shopify has such a huge number of online stores. Interested to know how does Shopify work for exchange marketplace?

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The Exchange Marketplace which can also be known as Exchange that allows you to buy or sell Shopify stores hassle free. This platform has thousands of catalogues of ready-made business which has spanned across a wide range of markets. An Exchange allows the entrepreneurs to take the first step to build a business or carry forward your existing store to another entrepreneur in exchange for cash(that can be invested in a new venture)

The idea behind Exchange Marketplace is to help people buy a Shopify store in relative confidence. Just because on Exchange Marketplace, a set of data being directly pulled from Shopify accordance to the performance of the store. Additionally, Shopify examines the sellers who are listing their stores on Exchange Marketplace to ensure the high-quality listing. This transparency and examination minimize the negative effects on Exchange.

Shopify Business Model

When it comes to the Shopify business model, there is a number of things you will need to know in order to understand it. Making it simpler for you to understand by dividing it into parts.

Customer Segmentation: Shopify offers its unique eCommerce solutions to a range of individuals to commercial consumers. However, the customers of the company can be divided into two fundamental divisions:

Commercial Retailers: It includes large retail businesses in several sectors with no personal online sales channels.

Independent Retailers: It includes individual designers, online sellers or resellers as well as independent artists and tiny retail businesses. Nevertheless, Shopify caters it services to some of the high-profile business organizations such as Mozilla, Tesla, Google, and World Vision. It covers a significant amount of market of the United States, Australia, and the United Kingdom. Some other effective approaches the company makes are given below.

Innovative Technologies: The company utilizes exclusively created own technology to enhance its online platform. It also promises to provide essential resources to develop new and innovative technology for the business.

Easy Accessibility: It is really an appreciable thing that Shopify operates simple and easy to use online platform. Thus, you can create and manage a business independently without any help from Shopify staff or technical experts.

Cost-effectiveness: A crucial part of any enterprise is getting reasonably priced business solutions and Shopify justifies the requirements in comparison to its competitors.

Shopify Price Structure: Shopify acquires costs in a way that aids their development of IT and communication, maintenance related to technologies and various platforms, managing partnerships, managing and improving their services, and implementing marketing and advertisement campaigns. Nonetheless, Shopify offers flexible price plans that can be advantageous for small or large businesses.

Key Collaborations: Shopify has a network of partner companies it works with which helps them to assure the usability and reliability of the platform. The types of partner organizations can be segmented into below given categories:

  • Supplier and seller partners
  • Development and amalgamation partners
  • Associated and affiliated partners
  • Strategic and marketing partners

Here, it is crucial to note that the company has maintained its partnership with Stripe Inc. in order to support the company’s payment system. Shopify is also in partnership with numerous app developers that help the company’s IT department.

How does Shopify Make Money?

After understanding the answer of how does Shopify work? and Shopify business model – The next most frequent question coming to your mind would be How does Shopify make money? Well, the answer to this question is: Shopify make money in two ways.

Subscription Solution

Shopify offers three separate plans in which the first is its Basic plan, which costs $29 per month, that contains a pack of handful facilities like selling unlimited products, a discount code engine, a card reader, some fraud analysis tool and 24/7 support.

The other two plans are called Professional plans, which costs you around $29 a month and an unlimited plan, which costs $179 a month. These plans come with an enchanting pack like real-time carrier shipping, an advanced report builder, A cart recovery, selling gift cards which are added to the above-mentioned pack.

The company also offers Shopify Plus, a plan for merchants with a huge volume of sales and other additional functionalities required. It has almost 70 payment gateways with a scalable SaaS platform.

And finally, these additional subscription plans make up a bulk of Shopify’s revenue. In 2017, the fourth quarter made total revenue of $222.8 million which shows 71% increase than 2016. And in the latest 2018, there was a 58% increase in total revenue i.e $270.1 million.

Merchant Solutions

There is a further difference between this subscription and this plan that leads to a new way where Shopify makes money. Through merchant’s solution, the company acquired revenues from different payment processing fees that come from Shopify Payments, transaction fees, referral fees from partners. If a merchant uses another payment gateway except for Shopify Payment they will be charged 0.5% to 2% transaction fees.

Going through some figures of 2017 where Merchant Solutions added to the Shopify revenue by $128.9 million and according to the recent reports of 2018, this revenue was driven by $149.5 million.

Shopify Plus

The Shopify came as an out-of-box e-commerce solution which began to attract retailers with its power, flexibility, and ease of use. After knowing how does Shopify work? Let’s have a brief about the most trending service of the Shopify.

Shopify Plus provides an enormous fit to the rookie and established stores. Shopify Plus added to the functionalities at a cost-effective price. This platform offers limitless scalability and extensive API ’s making it a good investment for merchants. Shopify Plus provided with drag and drop editor allows building on-brand remarkably customized sites without coding know how. Even it has own online payment tool for all its customers providing with immense security.

According to a trustworthy report, Shopify powers more than 500,000 online stores in around 175 countries. The Shopify business model is easy to understand yet offers an effective solution for any online business. Although it has grown from its core business since its inception, it has provided outstanding services to a huge number of businesses spread across the world.

Share Your Thoughts With Us

So it was a complete foresight for – How does Shopify work? Well, who does not like to run a successful online business? If you are planning to create something as similar as Shopify, it surely is possible. Let us know what you think about such astonishing startups in the comment box below.

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A content writer with a technical background, simplifying the ins and outs that comes with a package of the software industry.

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