How Does Shopify Work?

May 15, 2023 | Merchants | Dustin

Shopify is a well-known eCommerce solution for independent business owners everywhere. It’s available in 175 countries with over 1,000,000 businesses using the all-inclusive online selling platform. Their model charges a monthly fee to give sellers access to the platform, and they have recently created Shopify Payments as a way to accept payments online. If you’re new to the eCommerce world, here’s what you should know.

What is Shopify?

Shopify operates as a cloud-based, SaaS online selling platform.  There are 1.75 million sellers on Shopify. Users pay Shopify fees on a monthly basis to get started. Shopify is popular in the eCommerce world because it’s flexible, easy to use, has stellar customer support, and has a low startup cost. In fact, you can run an online store on the platform for as low as $29/month in Shopify fees. While it’s not perfect, it’s simple and eliminates many of the hassles you may face when entering store data, adding products, and processing orders.

How do Shopify Payments work?

Previously, Shopify utilized third parties for credit card processing. This ended up being an expensive option because Shopify charged an additional fee. It also required a second dashboard, which was often confusing and complicated for users. However, since developing Shopify Payments (their own payment solution), the whole process has become much more streamlined. It entirely cuts out the middleman.

Shopify Payments is a fully integrated payment system and the simplest way to accept payments online. It removes the need to set up a merchant account with a third-party payment provider and then enter your account credentials into Shopify. Shopify Payments was created by Shopify and is thus integrated entirely into your store. You can view payment history in the admin section.

Pros of Shopify Payments

• No additional transaction fees
• Still have access to other payment providers and gateways like PayPal
• Seamless integration

Cons of Shopify Payments

• Not available in all 175 countries
• Must comply with product terms conditions
• Chargeback fees apply
• Funds can be frozen suddenly

What Shopify fees should I know about?

There are a handful of Shopify fees you should know about when utilizing the platform. The first is the startup cost. You can find that pricing here. The second fees to be aware of are those related to Shopify Payments. Because it cuts out the middleman, Shopify Payments removes the commission that Shopify previously took on top of gateway fees from third parties. These were 2% (Basic Shopify), 1% (Shopify), and 0.5% (Advanced Shopify).

It’s worth noting that you still get the benefit of no commission even if your customers end up selecting PayPal at checkout. All you have to do is activate Shopify Payments for free to get the benefit. However, you will still have to pay for every transaction, so depending on your plan or payment method it may be more or less advantageous.

Is Shopify A Good Choice For My Ecommerce Store?

Shopify is a great model that works well for its merchants. It has a reasonable pricing model now supported by Shopify Payments and moderate fees depending on the package you select. While there are pros and cons to each platform, you can test out Shopify on a free trial basis to see if it works for you.