Content of the material
- By The Numbers: Key Performance Indicators
- 10. Sell Print-On-Demand Products
- 8. Monetize Your Social Media
- How does Shopify work?
- Layer 1: Shopify’s core product
- Layer 2: Shopify’s additional products and services
- Layer 3: Apps built by trusted partners
- How To Make Money By Using Shopify?
- A. Become a Shopify Affiliate to make money with Shopify:
- B. Start your own eCommerce business with Shopify:
- What makes Shopifys business model so unique for merchants?
- How does Shopify Generate Revenue? (Sources of revenue)
- Subscriptions for Shopify
- Fees for Transactions
- Merchant Services
- Marketing Tools
- Capital for Shopify (part of merchant solutions)
- Shopify Business Model
- Also, check out other insightful stories by the author
By The Numbers: Key Performance Indicators
Key performance indicators (KPI) are the metrics that matter to a particular business. Not all figures need to be looked at; only the essential ones matter to a company.
For a business such as Shopify, which is based on subscriptions, key indicators include the monthly recurring revenue (MRR) figure, because the business relies on having a recurring customer base.
For a hosting platform, the gross merchandise volume (GMV) figure is essential because this amount shows the dollar value of all products sold through the platform, including apps, themes, and other merchant services.
Since Shopify is a hybrid of these two, the company uses both the MRR and GMV as key performance indicators.
The GMV also needs to be examined in connection with the growth of the subscriber base, and if the numbers are reasonable enough.
Looking at the numbers above, we can see that both metrics grew from one year to the next. This indicates growth, profitability, and stability of the company.
10. Sell Print-On-Demand Products
We have mentioned how print-on-demand products are popular and profitable to sell and make money on Shopify. The most advantageous part of selling print-on-demand products is that you will eliminate the costs for inventory.
That means you won’t need to store all those excessive items and wait for someone to purchase them.
Shopify offers everything to make print-on-demand sales profitable and straightforward for you. You can integrate with third-party services that provide printing on demand. Besides that, there are many Shopify apps to increase your sales, such as upselling or cross-selling apps.
There are a variety of product types available for print-on-demand:
- Art prints
- Gift cards
Using popups to collect email leads or offer coupons and discounts is another effective method that many store owners adopt to get more sales.
Popupsmart is the best option out there to create a free popup with advanced targeting features. It is a no-code tool. So, you won’t need any coding skills to implement it in your store. Since it is not an app, your Shopify store will keep on loading fast.
8. Monetize Your Social Media
Monetizing social media is a great option when considering how to make money on Shopify. It is much like an affiliate program; basically, you turn your social media following into a revenue stream.
Shopify’s starting plan has a special focus on social selling, which allows you to add “buy now” links to Facebook and Instagram posts.
If you as an individual or your business are getting successful results from your social media marketing campaigns, it can be a big opportunity to turn it into extra income.
How does Shopify work?
Shopify works by unifying all of your commerce into a single central command center. If you’re a Shopify merchant with both an online and physical presence, your inventory and stock get synced so you can manage your store(s) from one account, on any device.
With Shopify, merchants can build and customize an online store and sell in multiple places, including web, mobile, social media, online marketplaces, brick-and-mortar locations, and pop-up shops. Shopify also has features to manage products, inventory, payments, and shipping.
Shopify is completely cloud-based and hosted, which means you can access it from any connected compatible device and we’ll handle software and server upgrades and maintenance for you. This gives you the flexibility to access and run your business from anywhere with an internet connection.
On any given day, a business owner needs to showcase products, engage with customers, get paid, ship a product, and manage their day-to-day finances and operations. Some businesses use different tools to manage each of those activities—and spend a lot of time and money stitching the disparate systems and data together.
Alternatively, a commerce platform groups those technologies together and becomes the base upon which other applications, processes, or technologies are developed. In other words, Shopify’s commerce platform offers all of the business tools you’ll need in one, familiar place. And then we ensure that you can easily access and integrate any other business tools you want or need to make Shopify work for your business.
Think of Shopify’s product as layers you can choose from to build the right stack for your business:
Layer 1: Shopify’s core product
This is what you get as soon as you buy any Shopify plan. It includes everything you need to turn your idea into a business and start selling: templates for the look and feel of your store, tools to sell in multiple places online and in-person, integrated payment processing, the best-converting checkout on the internet, SEO and marketing tools—these are all part of Shopify’s core product. This is the foundation upon which our other products and applications are built.
And for those who want to fine-tune their store and experience, you get access to Shopify APIs and development tools to customize your store’s capabilities even further.
Layer 2: Shopify’s additional products and services
Every independent business is unique. And as businesses grow, their needs evolve accordingly. That’s why we offer our customers powerful upgrades to help them grow their business on our platform. From easier access to capital to accelerated payments options, these products and services are exclusive to Shopify customers and are designed to help independent business owners have a leg up in the market.
Layer 3: Apps built by trusted partners
Shopify’s App Store has thousands of apps and features built by third-party developers to customize your store without ever once touching the code. Anything you can dream up, there’s an app that can help make it a reality. You’ll find the most cutting-edge tools to grow your business in the App Store, whether it’s the latest SMS app or the hottest new social media network’s ad tools.
There’s also a marketplace of Shopify Experts that you can hire to build custom solutions for your business. And if you want to dabble with the code yourself, you can do that, too!
How To Make Money By Using Shopify?
A. Become a Shopify Affiliate to make money with Shopify:
If you’re looking for ways to earn money with Shopify, you can always do it by becoming a Shopify Affiliate. Shopify has a well-established affiliate program through which many people create a passive income.
It’s an easy program to sign up for and once you get your affiliate link you can earn up to $2000 per new merchant referred to Shopify.
B. Start your own eCommerce business with Shopify:
Let’s clarify one issue here. Opening a basic online store with Shopify doesn’t mean that you will earn. Period. There are many things to do beforehand. Here they are:
- First of all, you need to create a business plan from the get-go.
- Validate your business idea before you invest.
- Define your audience and find your eCommerce niche.
- Create a communication strategy and a reason for shoppers to buy from you.
- Decide which digital channels will you promote your brand and products.
- Plan your content, blog post, and SEO tactics.
- Define your shipping, return, payment methods.
- Think about having an affiliate program. It works great for some businesses.
- Start your online store with a proper design and needed functionality.
What makes Shopifys business model so unique for merchants?
In an era where social media, cloud computing, mobile devices, augmented reality, and data analytics are creating new possibilities for commerce, Shopify provides differentiated value by offering merchants:
A multi-channel front end: Shopify’s software enables merchants to display easily, manage, market, and sell their products across over a dozen different sales channels, including web and mobile storefronts, physical retail locations, pop-up shops, social media storefronts, native mobile apps, buy buttons, and marketplaces.
Power of Data: Shopify’s software is delivered to merchants as a service and operates on a shared infrastructure. This cloud-based infrastructure relieves merchants from running and securing their hardware. It also consolidates data generated by the interactions between buyers and a merchant’s products, providing rich data to inform merchant decisions.
Brand Building Opportunity: Shopify is designed to help our merchants own their brand, develop a direct relationship with their buyers, and make their buying experience memorable and distinctive. Brands on Shopify can offer buyers an end-to-end, managed shopping experience that previously was only available to much larger businesses.
Rich Ecosystem: A rich ecosystem of app developers, theme designers, and other partners, such as digital and service professionals, marketers, photographers, and affiliates, has evolved around the Shopify platform. Such a rich ecosystem adds value to the merchants’ business.
Technology: Shopify hosts its platform on cloud-based servers. Maintaining security and integrity of technology infrastructure is highly critical to Shopify, and they further plan to invest in infrastructure to meet merchant’s needs and trust. The essential attributes of the Shopify platform are as follows:
- Security: Credit Card processing on the Shopify platform is performed by a dedicated, geographically redundant, highly scalable environment with specialized policies and procedures. The environment is highly secure and exceeds the requirements of PCI DSS.
- Scalability: The cloud-based architecture of the platform has been designed to support sudden traffic and order spikes from merchants. It uses a technology called ‘Containerization’ to efficiently scale computing resources across platforms. Shopify has benchmarked its platform to handle at least 2,50,000 requests per second and 15,000 orders per minute.
- Performance: Shopify has a dedicated team to profile and optimize the platform’s performance constantly. In 2020, online shops hosted on Shopify’s platform had sub-100 millisecond median response times. Shopify’s merchant’s shops averaged 386 million unique monthly visitors and 5.9 billion monthly browsing sessions.
As of December 31, 2021, Shopify had approximately 2,063,000 merchants. Shopify’s business model is driven by its ability to attract new merchants, retain revenue from existing merchants, and increase sales to new and existing merchants. Shopify believes that its future success depends on many factors, such as
- its ability to expand merchant base; localize features for specific geographies;
- retain merchants as they grow their businesses on Shopify’s platform and adopt more features;
- offer more sales channels that connect merchants with their particular target audience;
- develop new solutions to extend its platform’s functionality and catalyze merchants’ sales growth;
- enhance its ecosystem and partner programs;
- provide a high level of merchant support; hire, retain and motivate qualified personnel;
- and build with a focus on maximizing long-term value.
How does Shopify Generate Revenue? (Sources of revenue)
Now that we understand how Shopify works let’s examine its various revenue streams.
Essentially, Shopify earns money through the following five major revenue streams:
- Subscriptions for Shopify
- Fees for transactions
- Merchant Services
- Marketing Tools
- Capital for Shopify (part of merchant solutions)
We’ll examine these revenue streams in detail and better understand how Shopify earns money in general.
Subscriptions for Shopify
Shopify charges a monthly subscription fee, which begins at $29 for the Basic plan. The more expensive plans include a lower service charge, enhanced reporting capabilities, and a shipping rate calculator for third-party applications.
You can begin by registering for a trial and working on building your store. Shopify Subscriptions contributed a total of $55.6 million in Q1 2021, of which Shopify Plus contributed $23.1 million.
The remaining portion of the MRR was derived from subscriptions to Shopify’s standard plans and Retail POS Pro.
Fees for Transactions
Each subscription plan includes a pre-determined transaction fee. All payments made through Shopify Pay incur a 2% transaction fee on the basic plan. Fees decrease to 1% and 0.5 percent for the $79/month and $299/month plans, respectively.
Additionally, Shopify offers Retail Point of Sale machines, which charge transaction fees on each transaction and display cumulative sales on your Shopify store dashboard.
Additionally, all paid apps on the Shopify store must pay Shopify a commission of 20% of the sale value.
Thus, if a paid app costs $20 per month, the developer receives $16 per month, while Shopify receives $4 per month from all app users! That’s a substantial sum of money, especially when you consider the number of paid apps available on Shopify!
In just the first quarter of 2021, transaction fees and subscription solutions will total $320 million.
Shopify’s Merchant Solutions include Shopify Payments, Shopify Capital, and Shopify Shipping, in addition to the recently added Shopify Fulfillment Network and 6 River Systems. While the most recent additions
These solutions generated $668 million in revenue in the first quarter of 2021 and continue to grow.
However, the disadvantage of these solutions is that they are more expensive to maintain.
According to their financial report for Q1 2021, the cost of fulfilling orders and providing loans to customers is a whopping $371 million.
The majority of Shopify’s marketing tools are completely free. Email marketing, Google Ads, Facebook Ads, and Shopify Ping, among others, are all completely free, to begin with.
However, Shopify is an affiliate partner of these companies and receives a small commission when a new user joins one of these programs.
The partner companies offer the commission because once you begin operating your Shopify store at full capacity, you are much more likely to begin spending on Ads or email marketing setups.
Capital for Shopify (part of merchant solutions)
Shopify Capital is a new lending service for small business owners launched by Shopify. It provides loans to existing Shopify store owners to expand and market their stores and scaling their businesses through the addition of new employees.
Money is lent to business owners in the same way that banks lend money, and borrowers pay interest on the loan.
In the first quarter of 2021, merchants in the United States, the United Kingdom, and Canada received a total of $308.6 million in cash advances and loans from Shopify capital. This represents a 73 percent increase over the same period last year.
Shopify Business Model
Shopify makes the majority of its revenue through monthly subscription plans and payment gateways for the usage of its services. It also makes revenue from its merchant solutions which can be technical support, marketing, and customer services.
The business of Shopify is truly based on the subscription of the merchants. The subscription amount gives lucrative returns than merchant services. On the contrary, the company made over 50% of its revenues from another stream called merchant solutions.
Shopify’s gross volume comprises mainly from merchants paying for the Advanced Shopify and Shopify Plus plans.
As a report by Shopify, it earns heavy from the highest-priced tier (Shopify Plus) higher compared to the lowest tiers. Shopify Plus is a service for valued enterprise customers, with larger volumes.
Enterprise contracts are also way more promising as the enterprise clients usually sign an annual or multi-year contract. The huge organizations are more stable comparatively. The plans are automatically renewed unless there’s an intimation of cancellation by the enterprise account. It has around 5,300 enterprise accounts as of 2018. Just Imagine the returns!
Revenue comprises services of Shopify POS, Payments, Capital which makes Shopify more reliable to provide a higher value to its subscribers. Thus making its subscription plans more genuine and reasonable.
Shopify defines its platform as a multi-tenant, cloud-based system engineered for high scalability, reliability, and performance. Shopify merchant solutions primarily make money frompayment processing fees from Shopify Payments, Transaction fees, Shopify Shipping, Shopify Capital, Referral fees from partners, and sales of point-of-sale (“POS”) hardware.
The growth of Shopify’s business model is simply incredible. A clear case of an innovative solution to the problems founders usually face. Shopify is also doing an excellent job inspiring next-generation entrepreneurs by putting out content on its YouTube channel.
The merchants on Shopify can sell any product or service of their choice- from Physical products, services, consultations, classes, experiences, memberships, etc.
Shopify has wholly revolutionized the e-commerce business, which is evident from the fact that it’s the most searched e-commerce solution on Google Trends. Shopify has made e-commerce literally just a click away!!
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