What Is Shopify & How Does It Work (2024 Guide) (2024)

In technical terms, Shopify is a subscription-based software-as-a-service (SaaS) sales platform. Shopify offers four standard store subscription plans with fees starting at $29 per month. All standard plans support a branded online store and a full array of in-person and online selling tools.

Shopify also offers a “Lite” plan for just $9 per month. It doesn’t include an online store but supports mobile POS sales and a Buy Button for selling on other websites, blogs and via email.

All plans deliver a full suite of business management tools. Essentials, such as product sourcing, sales and inventory tracking, payment processing, shipping, customer accounts, marketing and reporting, are built into every Shopify plan. Plus, you can expand your Shopify toolkit easily with hundreds of Shopify Apps. Learn more with our Shopify review.

Shopify works by centralizing your product data, customers and operational tasks in one system that connects to all of your sales channels seamlessly. Once the essentials are in place, Shopify makes it easy to explore and expand into new product lines and sales channels.

Here’s a step-by-step look at how Shopify works from initial set-up to managing sales.

1. Sign Up for Your Free Shopify Trial

You can test drive Shopify risk-free for three days, plus one month for $1.

2. Connect Your Sales Channels

The account setup wizard connects your initial sales channels, which you can change and expand at any time.

If you want to sell through your social media accounts, you can connect those in the setup wizard too.

3. Enter Your Product Data or Find Items to Sell

Enter item details, pricing and images for products that you make or source yourself or tap into Shopify’s Handshake wholesale network and dropship vendors to find items to sell.

Note that many sellers combine items they make or source themselves with related dropship products to offer a well-rounded collection. Learn more about how to start a dropshipping business.

4. Set Up Your Payments

You can activate Shopify Payments with one click to start accepting payments right away or connect your own payment processor to your dashboard. Shopify supports more than 100 external payment processors. For help choosing the right one, check out the best credit card processing companies.

5. Set Up Shipping and Taxes

Under the Settings tab, set up your shipping methods and fees and your applicable sales tax information.

You can start selling now while you build your Shopify online store. With Steps 1 through 5 in place, you’re all set to sell on various social media and marketplace channels, using the Buy Button tool and in-person with the POS card reader.

6. Set Up Your Shopify Online Store

If you want to sell through your own branded website, your next step is setting up your Shopify online store. Again, Shopify makes this easy with an assortment of plug-and-play themes that require just a bit of setup and added content to make it your own.

7. Process, Ship and Track Orders

As orders roll in, you’ll manage everything within your Shopify dashboard. Shopify’s built-in tools make it easy to set up efficient workflows for managing orders you ship yourself, dropship products and even virtual items like e-books and music downloads. Shopify emails order status and shipment tracking information automatically to your customers too.

Once your setup and workflow essentials are complete, you’re ready to explore Shopify’s sales-driving features like email marketing, abandoned cart remarketing and blogging.

Shopify pricing includes monthly fees based on your subscription plan, plus added fees for payment processing, shipping labels and advanced POS needs.

Shopify Subscription Costs

Each of Shopify’s five online store plans supports unlimited products, orders and customers and provides data security, Payment Card Industry (PCI) compliance, 24/7 support, plus a full range of sales and business management features.

Shopify also offers discounts if you pay in advance—save 10% if you pay annually and 20% if you pay biennially.

• Basic, Shopify and Advanced Plans ($29, $79 and $299 per month): Each of Shopify’s online store plans deliver omnichannel sell-anywhere features and a full suite of order, customer and business management essentials. As you move up the plan tiers, you get lower payment processing fees, larger shipping discounts and access to advanced marketing, management and reporting tools.
• Shopify Lite ($9 per month): This limited-feature Shopify plan supports in-person POS sales and an online Buy Button tool for non-Shopify websites, blogs and email sales. Lite doesn’t provide the online store, social media and seller marketplace channels of the other plans.
• Shopify Plus (from $2,000 per month): Offers enterprise-level features geared for high-volume, multilocation and multimillion-dollar sellers. Plan pricing, terms and features are negotiated based on sales volume and business needs at this level.

Looking for more insights on pricing? Check out our guide on Shopify pricing.

Shopify Payment Processing and Transaction Fees

You can connect your own payment processor to Shopify or use the built-in Shopify Payments option. If you use your own payment processor, Shopify adds a transaction fee ranging from 0.5% to 2% of the total charge to every online sale. This fee does not apply if you use Shopify Payments.

Shopify Payments offers flat-rate payment processing with rates based on your subscription plan, as shown in the table above. Shopify Payments also supports in-person sales using Shopify’s mobile POS app and retail store POS system.

Shopify Shipping Costs

If you ship orders, you can use Shopify’s built-in shipping label printing on any plan. You’ll enjoy competitive discounted rates on USPS, UPS, DHL and other carriers and your discounts increase on higher-tier plans.

Shipping fees tally each time you process an order and print a shipping label. These costs are charged to your card when charges reach a threshold level based on your average shipping volume. However, if you ship just a few orders each month, shipping charges are added to your monthly Shopify bill.

Additional Shopify Plans, Pricing and Costs

Shopify’s POS feature enables in-person sales for mobile pop-up shops, market selling, services and even multiple retail store locations. POS-based sales connect with online sales, inventory, customer data and business reporting seamlessly too.

You can use the free POS Lite that’s built into every Shopify plan or add full retail checkout functionality for a monthly fee:

Shopify POS Lite (Free on all plans)
This mobile POS in-person selling feature is built into all Shopify plans, including the $9 per month Shopify Lite plan. Shopify POS Lite allows merchants to record in-person sales via mobile app and process payments using manually keyed-in entry or a card reader connected to their mobile device. POS Lite requires using Shopify Payments as your payment processor and mobile card readers have a one-time purchase cost of $49 each.

Shopify POS Pro ($89 per month, per location)
This full retail checkout system delivers robust inventory tracking, staffing tools and analytics to any Shopify plan. Shopify POS Pro checkouts are iPad-based and you can purchase iPad checkout stands, cash drawers, card readers and other checkout accessories per your needs.

Premium Shopify Themes
Shopify gives merchants nine free store themes, but many sellers opt for premium Shopify themes with specialty designs, added features and more customization options. Shopify’s theme store has more than 75 premium themes starting at $180, and Theme Forest offers more than 1500 premium Shopify themes starting as low as $17.

Shopify supports sales for virtually all types of goods and services, including:

• Physical products that you ship yourself
• Digital products delivered via download, such as e-books, music files and digital gift cards
• Dropship items that ship to customers directly from your vendors
• Goods and services that are sold in a retail store
• Products and services sold in-person via mobile locations
• Services sold and managed through online booking
• Subscription boxes and memberships with automatic recurring payments
• Online courses, tutorials, workshops and webinars
• Tickets and passes for events, local tours and attractions
• Rentals sports equipment, formal wear, cameras and more
• Donations and fundraisers

Shopify does have a list of prohibited items that includes alcohol and cigarettes, firearms, explosives, fireworks, live animals and medical devices―to name a few. Shopify will remove these types of items from a subscriber’s product pages and can terminate accounts that don’t meet their seller terms of service.

Shopify’s omnichannel sales reach is extensive. Some sales channels, such as the online store, top social media sites and POS are built into the platform. Other sales channels, such as seller marketplaces, in-app sales and online courses connect via Shopify Apps.

Here’s a snapshot of the many sales channels you can tap into using Shopify:

• Shopify online store: Shopify’s ecommerce-ready store is the ideal platform to build your brand and reach customers online.
• Social media sites: Facebook, Instagram, Pinterest, WhatsApp and TikTok all integrate with Shopify for seamless sales through shoppable posts, pins and videos.
• Seller marketplaces: List products on Amazon, Walmart, eBay, Etsy and Lyst to reach huge marketplace audiences. Learn more about how to sell on Amazon.
• In-person mobile selling: Shopify POS mobile card readers are ideal for pop-up stores, food trucks, mobile services and local markets.
• Retail store sales: Shopify POS Pro supports a retail store checkout and store management workflows.
• Non-Shopify websites and blogs: Shopify’s Buy Button embed lets you add shop features to reviews, articles and posts on other websites and blogs.
• Branded mobile app: Shopify’s Shop App provides a branded in-app shopping experience with customized product recommendations and post-purchase offers.
• Email and chat: Shopify’s Buy Button embeds let you send shoppable emails, while the Shopify Inbox app turns chat sessions into sales opportunities.
• Wholesale buyers: Shopify’s Handshake marketplace helps artisans and small manufacturers reach retail buyers for wholesale deals.
• International marketplaces: Apps including Shopify Markets (worldwide), Rakuten Ichiba (Japan), JD Marketplace (China), IndiaMart (India), My Deal AU (Australia) integrate with Shopify to expand sales into international markets.

Shopify delivers a ton of sales options and business management features, but is it right for you? These pros and cons of using Shopify might help you decide.

Pros of Using Shopify

• Overall ease of use: Rank beginners can set up a beautiful Shopify store, multiple sales channels and order processing workflows in the morning and be selling by the afternoon.
• Competitive monthly fees: Low monthly fees for entry-level plans and competitive rates on higher plans.
• Secure technology: Shopify’s fully managed platform handles all of the technical details for you.
• Seamless in-person mobile and retail sales: Fully integrated mobile and retail store POS features let you sell in-person anywhere.
• Built-in product sourcing: Populate your store with little to no upfront investment using Shopify’s built-in dropship and wholesale networks.
• Built-in email marketing: Abandoned cart notifications and automated email marketing helps you boost sales with just a click.
• Unlimited growth potential: Shopify is home to some of the biggest brands online and is ready to support sudden and sustained growth.

Cons of Using Shopify

• Cost: You can find free and extremely low-cost Shopify alternatives if you’re operating on a shoestring budget.
• Transaction fees: If you don’t use Shopify Payments, you incur a transaction fee on every sale made via credit or debit card.
• Theme limitations: Shopify themes tend to be rather basic and adding advanced features and functionality requires specialized coding.
• Fewer search engine optimization (SEO) options: Shopify online stores have basic SEO features compared to platforms like WordPress.
• Simplistic blog tools: Shopify’s blogging features are quite limited compared to WordPress, Squarespace and Wix.