A friend of mine recently asked “how much does it cost to run an online store using Shopify – what plan should I use?”
In terms of the Shopify cost, it basically boils down to what plan you are using. But there are other costs to consider when running an online store. Let’s break it down:
1. Shopify Hosting
The first cost to consider is the monthly hosting fee. Depending on which plan you choose (affiliate link), the cost to have Shopify host your store starts at $24/month at the time of writing. This covers the cost of hosting, upgrades to hardware and software, backups and other system administration tasks such as keeping hackers out, and provides unlimited bandwidth.
The plan you go with will primarily depend on how many SKUs (unique inventory items) you need, and how much revenue you expect. I have put together some scenarios at the bottom to help you choose.
2. Transaction Fees
Shopify takes a percentage cut of your total sale price. The rate starts at 2% for Basic, down to 0.5% for the Enterprise plan.
For example, if you are doing $3000/month in online sales you would be looking at $60/month if you were using the Basic plan.
3. 3rd Party Payment Processor
Paypal and Google Checkout are examples of what is known in the industry as “3rd Party Payment Processors”. They are convenient ways to get into the selling online because they are easy to setup. Fees vary depending on the monthly sales and where you are selling.
Paypal charges a percentage of total sale price, plus a transaction fee. For example, assuming $3000/month in sales and selling to the US domestically you would be looking at 2.9% + $0.30 per transaction. That equals $87 in fees and $18 in transaction costs (assuming each item costs $50, gives 60 transactions).
4. Merchant Account Fees
If you want to accept credit cards you are going to need to set up a merchant account, and will need a payment gateway. There are a bewildering array of choices here, but for the purposes of the scenarios below I am going to simplify things and assume a one time setup fee of $150 and an ongoing transaction fee of 3% of the total sale.
So without further ado, let’s sketch out some scenarios.
fixed monthly cost/transaction fee
50/50 split between paypal and credit card purchases
The Bottom Line
Once you hit $3600/month in sales the total cost of the Basic and Professional plans is the same ($96), so in terms of what Shopify plan is best it basically it boils down to this: If you have less than 100 SKUs and you sell less than $3600/month then go with the Basic Plan, otherwise consider the Professional Plan.