Shopify Business Model Analyzed And Explained

Editorial Team

Shopify Business Model Analyzed And Explained

Shopify is one of the largest e-commerce companies globally. It is headquartered in Ottawa, Ontario, Canada, and was founded in 2006 by Tobias Lutke and Scott Lake, who intended to start a snowboarding equipment online store known as Snowdevil, but launched it as Shopify after two months of development. The company improved its platform gradually and, in 2009, launched an application programming interface and app store that allowed developers to create and sell applications on its App store.

It then launched a free mobile application on the Apple app store in April 2010, allowing store owners to use iOS devices to view and manage their stores. With this brief history, let’s cover the entity’s business model in detail.

Shopify Mission And Vision

Shopify aims to improve commerce by reducing barriers to business ownership and offering establishments and entrepreneurs the independence to start, run, and grow a business. The business is committed to sustainability and, as seen from its home page, intends to build a 100-years company. It also talks of its sustainability fund and social impact initiatives aimed at creating products and programs capable of supporting its teams and merchants to realize a sustainable and equitable future, choosing renewable energy, and offsetting carbon emissions.

Shopify Customers

Shopify services individual and commercial customers who are usually categorized as independent and commercial retailers. Independent retailers are individuals such as online sellers, artists, designers, and small retail businesses that use the platform to push their products. Commercial retailers are the large retail businesses that use Shopify as their online sales channel.

This platform allows customers to set up accounts and design online stores. It also offers ongoing assistance through a dedicated and professional customer support team operating 24/7 and can be reached via phone, email, or an online chat service. For more information, Shopify has several online resources such as podcasts, FAQs, user guides, and videos.

The platform has an online community forum where users interact, find solutions to common problems, work on projects, and present ideas. Additionally, the company uses social media, i.e., Twitter, YouTube, Facebook, Instagram, Snapchat, Pinterest, and Google+, to interact with customers and publish updates.

Notable commercial partners include Tesla, Google, World Vision, and Mozilla. It is also worth mentioning that even though Shopify enjoys a global customer base, its single largest market is the United States of America, closely followed by Australia and the UK.

Shopify Key Partners And Value Propositions

We will better understand Shopify’s business model if we know some of the people/ entities that make it exist. Here are the categories:

  • Affiliate/ Marketing Partners– These companies and online entities help Shopify widen its reach. They earn commissions every time they generate a new business for the company.
  • Development/ Integration Partners- This category comprises system integrators and software/ application developers responsible for increasing Shopify’s functionality through integrations and app development. Some of the company’s biggest app developers include Vantage.
  • Suppliers and vendors – This broad category consist of equipment, services, tools, and technology suppliers contributing towards the development and enhancement of the platform.
  • Strategic/ Alliance Partners – These are industry leaders that work with Shopify for branding, joint marketing, and superior project execution.

Here are its value propositions for businesses;

  • Brand identity and reputation- Shopify is a renowned e-commerce solutions provider that enjoys a solid reputation in different regions of the world, a fact that its users enjoy.
  • Cost-effectiveness– Shopify has different reasonably priced plans for small and medium-scale businesses. They can enjoy unlimited product listings from as low as $29
  • Technology and Innovation– Shopify promises customers access to proprietary technology used to develop the platform. It is quite clear from their ‘about us page that this e-commerce platform is committed to developing new and innovative technologies that can make it sustainable.
  • Easy-to-use e-commerce platform- Shopify is a simple-to-use e-commerce platform with an excellent user interface. Customers can easily set up and manage online stores without technical expertise.
  • Extensive functionality– Shopify has several tools and functionality available to its customers for an excellent e-commerce experience. They can run Facebook stores, handle international payments, and optimize the content through SEO tools.

Features Of Shopify

The Shopify platform was built with the average retailer in mind. It is easy to operate, understand, and access. Here are some of its main features:

1. SEO

Online businesses heavily rely on search engine optimization (SEO) to improve their website rankings. Shopify has several SEO tools that brands and retailers can use to boost their online presence, which can also be achieved through integrations with third-party applications such as Smart SEO. Most of these apps are found in the Shopify App store and have features such as automated data input

2. Shopify POS

Shopify has a point-of-sale system that allows retailers and businesses to open physical pop-up stores for the offline selling of products. Payments are accepted using a card reader directly linked to the company’ Shopify inventory so that every sale transaction is recorded.

This operation is supported by an online application that allows businesses to view customer purchase history, customize orders, and include discount offers. This feature can also be used to organize and initiate personalized marketing campaigns for in-store clients.

3. Dropshipping

Drop shipping saves business owners from the need for warehousing. They can obtain products from a third party and deliver them directly to customers on demand, thus incurring zero storage charges. Shopify has applications that support this business model by connecting businesses to suppliers and producers. One of the most common is Oberto, which allows companies to import goods directly from AliExpress to fulfill orders.

4. Online Store

Customers who aren’t interested in POS and drop shipping can open their online stores. Shopify lets them enjoy their sole identity and even helps in product branding while customers can pay using different methods. Plans start from as low as $9 a month.

5. Analytics

One of the reasons Shopify is more popular than other platforms is its analytics support. This platform allows users to assess their store’s performance using several analytics tools. Some insights obtained include customer activities, sales, and marketing, which are all important as they aid proper decision-making and support sales increase.

Users can also get visitor demography, product analytics, and comprehensive purchase information from the application’s dashboard. Alternatively, one can integrate their account with Google Analytics for added capabilities. Additional offers include order, sales, inventory, marketing, custom, and acquisition reports.

How Does Shopify Work?

Shopify is an e-commerce platform that allows users to create online stores and sell their goods to customers. Its links sellers to consumers by offering them all the tools needed to build well-performing e-commerce stores and market their products. By registering with the platform, they get a professional trade website and a chance to own an online business without any web development know-how.

All they have to do to use Shopify’s services is create an account and enroll as a seller. The next steps include customizing their accounts by adding the right themes and domains and enabling payments from the settings page (Luckily, this platform has its own payment option known as Shopify Payments. Alternatively, they can use other payment getaways like PayPal or Amazon Pay).

They will be good to go once they add additional settings and obtain the right apps from the Shopify App Store to market and sell their products. It is also important to select a price plan, which all have a 14-day free trial.

How Does Shopify Make Money?

This platform makes money through two main ways, i.e., subscriptions and merchant solutions. Let’s discuss these further.

1. Subscription Fees

Shopify allows businesses and enterprises to create and operate online stores and, in return, charge subscription fees. It mainly targets small and medium-sized businesses, which explains why it has three plans. The cheapest is Basic Shopify, which costs $24 monthly. It offers unlimited product listing, 24/7 customer support, and app sales. The downsides are low shipping discounts, higher fees for credit card payments, and only two user accounts.

The intermediate and most common subscription is Shopify, which costs $69 monthly. It has more features than Basic Shopify, and users get five accounts and better fees and discounts. It also supports up to 5 inventory locations with additional features such as 24/7 support, manual order creation, multiple sales channels, unlimited products, a free SSL certificate, abandoned cart recovery, e-commerce automation, and unlimited contacts.

Shopify Advanced is the last and most expensive plan, which costs $299 monthly. It has the best features and often serves medium-sized enterprises. Customers get 15 user accounts, better fees, and point-of-sale options. Businesses under this plan also enjoy advanced reports, up to 8 inventory locations, and third-party calculated shipping charges. Generally, all the 3 plans support the creation of online stores and product promotion and sales using different sales channels. Users also enjoy Shopify POS, which offers staff management, inventory tracking, and other useful features.

Shopify also makes money through Shopify Plus, a premium plan for big enterprises. It serves corporate customers that often sell large volumes. Being a custom plan, it costs way higher than Shopify Advanced, with different websites and reports estimating that the cheapest plan starts at $2,000 monthly. This is definitely a big source of revenue for Shopify.

Shopify Plus subscribers enjoy a huge bandwidth to respond to thousands of orders per minute. The subscription plan also supports international sales in different languages and 70+ means of payment. It is mostly reserved for brands such as Kylie Cosmetics and Sephora.

2. Merchant Solutions

Simply put, merchant solutions are the additional services Shopify offers to enhance user experiences. They allow store owners to sell their products and receive payments easily. Shopify Payments is the most common payment processing service that accepts and processes online and offline credit card payments. It brings in the highest revenue of all merchant solutions through payment processing fees.

Shopify shipping also earns the platform money. The platform offers merchants a range of shipping options, which they have to pay for. Once the shipping fee is paid, it becomes easier to print shipping labels, track orders, and make regular returns.

Shopify also offers Shopify Capital, a service that provides working capital to enterprises to help them grow. It is more of a lending service whereby Shopify either gives a loan or buys future receivables and then takes a fixed percentage of the merchant’s daily sales until the amount is recovered.

The last merchant solution is Shopify POS, a point-of-sales system that lets merchants make physical sales. All these solutions improve customer base retention rate, which Shopify needs to continue operating at a profit. They are just as important as subscription plans.

Shopify Competitors

Despite enjoying a significant market share, Shopify still has to look out for the following competitors:

1. Salesforce

Salesforce is one of the most revered customer relationship management platforms in the market. It comprises several tools for task segregation, ticket movement, and goal tracking. Users love it because of its service and support, ease of integration and deployment, and better evaluation and contracting.

2. Kibo

Kibo enjoys a long, fruitful relationship with its customers. It is a unified commerce solution with several tools. Users love it for its product capabilities, service and support, and overall integration with third-party apps.

3. BigCommerce

This platform was founded in Australia in 2009. It allows businesses to easily manage their online and mobile stores and accept payments through its advanced software products. Users love it because of its wide range of templates and customizability.

4. commercetools

This is a cloud-based platform founded in Munich, Germany. It works with APIs to allow businesses to manage their eCommerce sales. It operates worldwide with major offices in Australia, Europe, and South Asia. Users love it because of its excellent documentation, cloud-native platform, and scalable microservice architecture.

5. eComchain

eComchain is a unique cloud-based company that uses the B2B2C business model, i.e., it allows companies to handle their eCommerce transactions excellently by offering Salas and an interactive dashboard. Users love it because of its impressive eCommerce implementation experience and support.

6. Shopware

Shopware is packed with lots of limitless, independent, and excellent tools for eCommerce solutions. It allows businesses to achieve outstanding customer experience and grow. It also supports rapid innovation and offers maximum flexibility. Users love its capabilities, ease of use, and professional appearance.

7. Intershop

Intershop has many B2B features that support medium and large enterprises. It is cheaper, more efficient, and more time-saving. Users love it because of its organizational model, product data management feature, and rules engine that supports the creation of common discounts and promotions rules for campaigns.

8. Volusion

Volusion enjoys a good rating. It is an electronic commerce platform used to promote products online. It has a custom design feature that many users enjoy. Other pros include exceptional tech support and software accessibility.

Shopify Challenges And Controversies

Shopify has had its fair share of challenges and Controversies over the years, which are common for such a huge enterprise. Some of the most common are:

1. Calls for Boycott

2017 wasn’t a rosy year for Shopify following the #DeleteShopify campaign, which advocated boycotting the SaaS platform following their decision to get into business with Breitbart News, a far-right commentary website by Andrew Breitbart, an American conservative journalist. In the same year, Andrew Left, a Citron Researcher, termed the platform a get-rich-quick scheme in a detailed report, causing a stock plunge of 11%

2. Law Suits

Shopify has also been sued over the years. According to The Verge, Macmillan Learning, McGraw Hill, Pearson Education Inc., Elsevier Inc., and Cengage Learning, Inc. took the e-commerce platform to court in December 2021 for supporting stores selling pirated versions of their learning materials and books.

3. Data Breach

Despite being a secure platform, Shopify has been on the spot for data breaches. The platform confirmed a Data Breach in September 2020 that it said affected less than 200 accounts, a figure that turned out to be false. The matter was handed over to the Federal Bureau of Investigations, and the responsible employees were fired.

Shopify’s Future

Shopify enjoys a wide audience because it is easy to use, offers exceptional customer service, and has securely integrated tools for data encryption, among other reasons. According to the company’s website, they are committed to stability, meaning it is here to stay. If anything, its popularity is increasing by the day. One of the things this platform will have to do to continue securing its place in the market is to increase its integration options, especially with new and trending applications.


Shopify remains a force to reckon with in the e-commerce industry. The platform enjoys a global presence and is packed with useful features that support sales of goods and services. It has managed to beat most of its competitors and stay ahead owing to its commitment to innovation and stability and the value it offers to its customers. Let’s wait and see what the future holds for Shopify, especially now that more and more people are turning to e-commerce.