This article is a part of our series on how to set up your first online store and start selling as quickly as possible. It’s a just-the-basics-facts article because we don’t think Shopify is suited for the beginner merchant. Still, we often see people ask whether they should build their webstore with Shopify. So, we thought we’d summarize the major pluses and minuses of the Shopify website builder for our readers.
Don’t get us wrong—we do think Shopify is a great platform. But we think it might be too complex for a beginner merchant marketing a still unproven product.
Let’s start with what kind of business we think the Shopify website builder is best suited for.
Editor’s Note (2-1-2023): Shopify increased its pricing as of January 2023. We’ve updated this article to reflect the changes. But, basically, if you pre-pay for their services for the entire year, the pricing works out to be the same as their old pay-per-month pricing.
What Kind of Business is Shopify Best For?
The Shopify website builder is a full-fledged ecommerce platform. It’s suited for businesses that:
- Have a physical store and want to set up an online store
- Sell exclusively online
- Sell mostly online but also sell at trade shows, craft fairs, farmer’s markets, and similar.
When you set up a Shopify store, you’ll be given a myshopify.com subdomain on which you can build your store. However, you can also buy a domain name from Shopify or elsewhere and use that for your store.
We recommend you buy a domain name. You cannot go wrong with this move.
How Much Does the Shopify Website Builder Cost?
Shopify offers five different tiers of website builders. You can pay for them month-to-month or pre-pay for the entire year. We recommend you pay for the entire year so you can get a 25% discount.
In addition to Shopify’s tiered pricing, they charge extra for some of the services you’l need to operate an online store. We highlight some of these extra charges in this section.
Shopify Tiers and Pricing
Shopify’ service tiers, along with their monthly and yearly pricing are:
- Starter at $5/month
- Basic at $39/month ($29/month if paid yearly)
- Shopify at $105/month ($79/month if paid yearly)
- Advanced at $399/month ($299/month if paid yearly)
- Plus at $2,000/month
Web hosting fees are included in this cost. However, Shopify doesn’t host your business emails. (Many web hosting services will host your business emails for free.) So, if you want to have a you@yourdomain.com email, you’ll have to make other arrangements.
Each pricing tier comes with different features. You can upgrade, downgrade, or cancel your service at any time.
Note that the fees above are platform fees. You’ll pay an extra fee for credit and debit card processing every time a customer buys from you. Shipping also costs extra.
Shopify Payment Processing Fees
Your payment processing fees depend on your Shopify tier, the type of card you use (international charges and Amex cost more), and whether the card is presented online or in person.
Generally, Shopify’s processing fees range from:
- Online: 2.9% + $0.30 to 2.4% + $0.30 per transaction
- In Person: 2.7% + $0.0 to 2.4% + $0.0 per transaction
- Starter Plan: 5% per transaction
You can also connect your own payment processor to Shopify. But if you do so, Shopify charges a 0.5% – 2.0% fee per transaction on top of your payment processor’s fees. If you’re interested in using a non-Shopify processor, here’s our article that explains how payment processing fees work, with links to some processors we recommend.
Shopify Tax
Shopify will help you calculate sales and VAT taxes for the first $100,000 US online sales. After this, they charge a 0.35% fee per transaction, capped at $0.99 per order and $5,000 per year.
But Shopify won’t remit the taxes for you. You’ll either have to do this yourself or hire a sales tax service like TaxJar, Quaderno, or Avalara to manage this for you.
If you’re a small seller and don’t want to deal with the headaches of collecting and remitting sales taxes, we recommend you start your store at an online marketplace like Facebook Shops, eBay, or Etsy. By law, they’re required to collect and remit sales and VAT taxes for you.
What’s Included in a Shopify Store?
What’s included in your store built with the Shopify website builder depends on your tier of service. However, typical features include:
- A myshopify.com address to build your store (or you can use your own domain name)
- The Shopify website builder to build your store
- Shopping cart and tax calculations
- Web hosting services
- Ability to list an unlimited number of products in your store
- Ability to link up with various social media sites to market and sell your products
- Inventory management
- Discount codes and gift cards
- Sales reports
- Discounted shipping and label printing
- Payment processing (through Shopify Payments or third-party of your choice)
- Ability to connect hardware to take credit card payments
- Ability to sell internationally
- 24/7 tech support
Is the Shopify Website Builder Expensive?
Shopify is a powerful, full-service ecommerce platform. It’s flexible and can be adapted to the needs of many types of business. But if you have a simple, beginner business, you probably won’t need to use most of Shopify’s capabilities. (But you can look into their Starter Plan.)
Shopify’s Pricing Structure Makes Direct Comparisons Tricky
It’s a little bit difficult to compare Shopify’s platform fees because its pricing structure includes software, maintenance, and web hosting services. You can, of course, look at the pricing of very similar competitors like Square Online or Wix.
Shopify’s pricing is comparable to Square Online and Wix at the lower tiers but a tad more expensive at the higher tiers. But you can build an online store without using any of these platform providers.
Instead, you can build an online store using free, open-source software. In that case, instead of a monthly platform fee, you’ll have to pay for web hosting services. This service charge varies, and there are a lot of web hosting providers to pick from. Mostly, your monthly costs will depend on bandwidth and CPU use.
On these open-source platforms, functionalities like payment processing and shipping are charged separately. But Shopify charges these separately too. For example, we compared the free WooCommerce platform’s credit card processing charges to Shopify’s charges. We found them to be pretty close.
We Can Draw Some Conclusions Based on Web Hosting Costs
To compare Shopify’s hidden web hosting charges to typical website hosting costs, we looked at a web hosting service called Kinsta. Kinsta is a premium web hosting service known for great tech support and fast websites that run on the Google Cloud. Shopify also runs on the Google Cloud. Because they both use similar computing technology, we can make a meaningful comparison between the two.
If purchased yearly, Kinsta charges about $29/month for server space that can handle 25,000 visits per month. This pricing is comparable to Shopify’s Basic tier. Again, if purchased yearly, Kinsta charges $/month for server space that can handle 400,000 visits per month. The price is comparable to Shopify’s Advanced tier.
So, depending on how many visits per month you get, you may or may not be overpaying for Shopify. In other words, if your business gets a steady 5,000 visits per month, don’t pay for Shopify’s Advanced tier. Anything extra you’re paying goes towards how much you think the Shopify website builder software is worth.
The Shopify Website Builder Isn’t for Every Business
There is no doubt that Shopify is a great platform using great software and providing great service. In fact, one of its major selling points is that it’s easy for anyone to use to build a webstore. You also won’t have to worry about most tech issues if you run your online store on Shopify. However, a lot of people still end up hiring a developer to build their Shopify store. So, picking Shopify doesn’t necessarily save you startup costs.
Another downside to using Shopify is that your website would be built on their proprietary software. So, if you decide to move off Shopify—for example, to save money—you must recreate your entire website. This can get very expensive and very time consuming. It might take a while before you can recoup the cost of moving off Shopify.
We’re not urging you to stay away from Shopify. It can be a great platform for a business that already gets quite a few online visitors per month but doesn’t have time to deal with the behind-the-scenes technical side of running a website. But, if you’re just starting out and are selling only a few items online, then you might not be getting the best value for your money if you run your store on Shopify.
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