How much does Shopify really cost? Total Cost of Ownership Analysis

Pitfalls of custom development

Many merchants initially lean towards custom-built e-commerce solutions with a small to medium in-house development team, drawn by the allure of tailored features and the promise of competitive differentiation. In reality, custom development is not only expensive but also complex. This setup can lead to several pitfalls like slow feature rollout, high technical debt and lagging behind in technology. 

To mitigate some of these issues, merchants might turn to outsourcing, but the costs and the dependency on external development for new features, fixes, and updates could be an issue.

Shopify: jednoduchá a nákladově efektivní platforma

Shopify offers an alternative to the dilemmas posed by both in-house and outsourced development. Here are several ways in which Shopify manages to reduce the total cost of ownership while enhancing operational efficiency:

• Global SaaS platform: Shopify’s cloud-based infrastructure eliminates many of the overheads associated with managing physical servers and hosting.
• Shopify Partners: Shopify’s network of approved service providers offers reliable, high-quality support for both routine and complex needs.
• Rich ecosystem of apps and themes: Shopify App Store and Theme Store provide ready-made solutions that can be quickly integrated, significantly reducing the time and cost associated with developing these solutions from scratch.
• Scalability and reliability: Shopify platform is designed to handle spikes in traffic and sales without requiring manual intervention, ensuring that your e-commerce site remains stable and available during critical periods.

Initial Considerations

So how to calculate TCO for Shopify? Before diving into the numbers, it’s important to evaluate your company’s specific needs:

• Customization Needs: How much customization will your online store require to meet business needs and customer expectations?
• Scalability: Will the platform scale smoothly as your business grows?
• Integration Capabilities: How well does Shopify integrate with your existing systems such as ERP, CRM, and analytics tools?

Breaking Down the Costs

Understanding the various components that contribute to the TCO is essential. Here’s how to approach this:

1. Platform Subscription Fees

Shopify offers several plans, but for medium to large businesses, Shopify Advanced or Shopify Plus are usually the go-to options. Evaluate the features each plan offers and how they align with your business needs.

2. Setup and Integration Costs

Initial setup costs can vary widely depending on whether you use standard themes or opt for a fully customized design. Integrations with third-party systems also add to the upfront costs.

3. Development and Customization

Continuous customization is often necessary to meet specific business requirements. Factor in the costs for both in-house developers or outsourced development teams. Regular updates and feature additions also contribute to ongoing development costs.

4. Third-party Apps

While Shopify offers an extensive range of functionalities, specific needs might require additional third-party apps. Apps for inventory management, advanced analytics, customer loyalty programs, or marketing automation tools can add to the monthly expenses.

5. Support and Training

Continuous training for your team on how to use the Shopify platform effectively and customer support costs should also be included in the TCO.

6. Transaction Fees

Shopify charges transaction fees unless you use Shopify Payments. Calculating these costs based on your sales volume is crucial for an accurate TCO estimation.

Cost-Saving Strategies

To optimize your TCO, consider the following strategies:

• Evaluate and Streamline Apps: Regularly review the apps you are using and assess if they all are still necessary or if some can be replaced with more cost-effective alternatives.
• Capitalize on Shopify’s Features: Make full use of Shopify’s built-in features before purchasing additional apps or custom developments.

Long-Term Considerations

When assessing TCO, it’s also vital to consider the strategic value Shopify brings to your business:

• Market Adaptability: Shopify’s robust and flexible platform can help you adapt quickly to market changes and consumer trends, potentially saving costs related to pivoting or upgrading legacy systems.
• Ecosystem and Community: Leverage the extensive Shopify ecosystem — from developers to other e-commerce managers — to share insights and strategies that can reduce costs and enhance your store’s performance.

Example calculations

To generate a meaningful Total Cost of Ownership (TCO) calculation for using Shopify as your e-commerce platform, we’ll consider various financial aspects over a typical five-year period. This approach will you understand the longer-term financial impact beyond just upfront costs.The values in the examples are only hypothetical.

Company A – Eco Chic Apparel

Business Description:

Industry: Sustainable fashion
Products: Eco-friendly and ethically sourced clothing and accessories
Market: Environmentally conscious consumers, primarily millennials and Gen Z
Sales Model: Online-only, with strong social media presence and community engagement
Annual Revenue: $600,000

TCO Calculation

Shopify Plan: Shopify ($92/month)
Setup and Integration Costs: $5,000 (initial setup including basic customization and eco-friendly themes)
Development and Customization: $3,000/year (seasonal updates and feature enhancements)
Third-party Apps: $1,200/year (for eco-friendly product badges, carbon footprint calculator, and customer reviews)
Support and Training: $2,000/year (minimal due to a smaller team and less complex operations)
Transaction Fees: 1.8% + 6,50 CZK (approx. 28¢) online

Five-Year TCO:

Platform Subscription: $92/month x 60 months = $5,520
Setup and Integration Costs: $5,000 (one-time)
Development and Customization: $3,000/year x 5 years = $15,000
Third-party Apps: $1,200/year x 5 years = $6,000
Support and Training: $2,000/year x 5 years = $10,000
Transaction Fees: 1.8% of $600,000/year + 28¢ per transaction (assuming 500 transactions/month) x 5 years

• Transaction Fee Percentage = $10,800/year x 5 = $54,000
• Fixed Fee = 28¢ x 500 x 12 x 5 = $8 400
• Total Transaction Fees = $54,000 + $8,400 = $62,400

Total Five-Year TCO: $103,820
TCO to revenue ratio: 3.5%

Company B – Active Gear Direct

Business Description:

Industry: Sporting goods
Products: High-quality athletic apparel and equipment aimed at amateur and semi-professional athletes
Market: Fitness enthusiasts and athletes looking for durable, performance-enhancing sports gear
Sales Model: Primarily online, with targeted marketing campaigns to fitness communities and sports clubs
Annual Revenue: $5 million

TCO Calculation:

Shopify Plan: Shopify Advanced ($299/month)
Setup and Integration Costs: $15,000 (one-time investment for setting up a robust e-commerce platform with custom features such as advanced product filters, sports category-specific shopping experiences, and integration with fitness tracking apps)
Development and Customization: $10,000/year (continual updates to improve user experience and integrate new features like virtual try-on for gear and real-time inventory updates from suppliers)
Third-party Apps: $3,000/year (apps for enhanced customer engagement like live chat support, loyalty programs, and marketing automation tools)
Support and Training: $7,000/year (ongoing training for staff to use new e-commerce tools effectively and to provide excellent customer service)
Transaction Fees: 1,6% + 6,50 CZK (approx. 28 ¢) online

Five-Year TCO:

Platform Subscription: $299/month x 60 months = $17,940
Setup and Integration Costs: $15,000 (one-time)
Development and Customization: $10,000/year x 5 years = $50,000
Third-party Apps: $3,000/year x 5 years = $15,000
Support and Training: $7,000/year x 5 years = $35,000
Transaction Fees: 1.6% of $5,000,000/year + 28¢ per transaction (assuming 2,000 transactions/month) x 5 years

• Transaction Fee Percentage = $80,000/year x 5 = $400,000
• Fixed Fee = 28¢ x 2,000 x 12 x 5 = $33,600
• Total Transaction Fees = $400,000 + $33,600 = $433,600

Total Five-Year TCO: $566,540
TCO to revenue ratio: 2.3%

Company C – Luxury Home Furnishings

Business Description:

Industry: Luxury home decor
Products: Premium furniture, lighting, and decor crafted with exclusive materials and bespoke designs
Market: Affluent customers seeking unique and high-quality home styling options
Sales Model: Premium online store complemented by select showroom locations in major cities
Annual Revenue: $30 million

TCO Calculation:

Shopify Plan: Shopify Plus ($2,300-2,500/month or revenue share 0.18% for B2B, 0.35% for B2C)
Setup and Integration Costs: $50,000 (one-time for a highly customized store design that reflects luxury branding, integration with high-end inventory management systems, and VIP customer experience features)
Development and Customization: $25,000/year (for exclusive features like virtual showrooms, high-definition 3D product views, and customer design tools)
Third-party Apps: $10,000/year (apps for enhanced security features, advanced CRM integration, and luxury market-specific functionalities)
Support and Training: $15,000/year (dedicated support for high-value customers and ongoing training for handling premium products and clientele)
Transaction Fees: 1% on all transactions (negotiated rate due to high volume sales)

Five-Year TCO

Platform Subscription: $2,400/month x 60 months = $144,000
Setup and Integration Costs: $50,000 (one-time)
Development and Customization: $25,000/year x 5 years = $125,000
Third-party Apps: $10,000/year x 5 years = $50,000
Support and Training: $15,000/year x 5 years = $75,000
Transaction Fees: 1% on all transactions = 1% of $30,000,000/year x 5 years = $1,500,000

Total Five-Year TCO: $1,944,000
TCO to revenue ratio: 1.3%

Cost Category	Company A: Eco Chic Apparel	Company B: Active Gear Direct	CompanyC:  Luxury Home Furnishings
Annual Revenue	$600,000	$5,000,000	$30,000,000
Shopify Plan	Shopify ($92/month)	Shopify Advanced ($299/month)	Shopify Plus ($2,400/month)
Subscription	$5,520	$17,940	$144,000
Setup & Integration	$5,000	$15,000	$50,000
Development & Customization	$15,000	$50,000	$125,000
Third-party Apps	$6,000	$15,000	$50,000
Support & Training	$10,000	$35,000	$75,000
Transaction Fees	$62,400	$433,600	$1,500,000
Total TCO for 5 Years	$103,920	$566,540	$1,944,000
TCO to revenue ratio	3,5%	2,3%	1,3%

Kalkulačka TCO Shopify

Shopify created its own TCO calculator based on research among 250 enterprises from US and Canada of different sizes, industries, and revenue ranges.The calculator is designed to help businesses compare the total costs of maintaining their e-commerce platforms with Shopify.

According to Shopify’s research, conducted by an independent consulting firm, Shopify offers a 33% better TCO on average compared to other major commerce platforms. This includes 23% better platform costs and 19% better operation and maintenance costs. 

Shopify highlights that its TCO advantages stem from several key areas, including reduced licensing costs, more affordable and accessible developer resources, and quicker implementation times. For example, Shopify’s implementation for Decor Steals was three times faster and $300,000 cheaper than their previous Salesforce implementation. Businesses using Shopify have also reported significant savings in total cost of ownership, such as a 60-65% reduction after switching to Shopify Plus​.

How does Shopify compare to other platforms?

We created a comparative table outlining the estimated TCO for various e-commerce platforms incl. custom-built solution. The table compares relative costs based on typical usage scenarios for a medium-sized e-commerce business.

Platform	Subscription	Setup	Customization	Maintenance/ Upgrades	Support	Transaction fees	Hosting
Shopify	Moderate	Moderate	Moderate	Low	Moderate	Moderate	Included
Magento OS	Free	High	High	High	High	Low	High
Adobe Commerce	High	High	High	Moderate	High	Low	Included
Woocomerce	Free	Low	Moderate	High	Moderate	Low	Moderate
BigCommerce	Moderate	Moderate	Low	Low	Moderate	Moderate	Included
Custom-Built Solution	None	Very High	Very High	Very High	Very High	Variable	High

Conclusion

In sum, the total cost of ownership when using Shopify for e-commerce encompasses not only direct expenses related to development and maintenance but also the strategic advantage gained through agility, reduced risk, and access to a continuously evolving set of features and integrations. For e-commerce managers looking to maximize efficiency while keeping a lid on costs, Shopify presents a compelling platform that aligns well with both current needs and future growth.

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