What Is Shopify and How Does It Work?

What is Shopify?

Shopify is a popular e-commerce website builder that small businesses can use to build online stores or sell products on third-party marketplaces or social media platforms. Shopify also sells point-of-sale, or POS, software that small businesses can use in their brick-and-mortar stores.

Shopify is a good choice for businesses that want an all-in-one e-commerce solution. The company provides payment processing, shipping discounts, inventory management, banking services and even loans to some sellers.

In general, many of Shopify’s features are included when you pay one monthly fee, plus transaction fees. Shopify plans range from just $5 per month to enterprise-level, quote-based pricing. Shopify’s third-party apps may charge additional fees.

How does Shopify work?

Shopify can help a small business start an online store fairly quickly. Then, you can use the platform to run your e-commerce business. Here's how:

1. Launch your Shopify store

You’ll need to do the following to get a Shopify store up an running:

• Build your store. Shopify has more than 70 store themes to choose from, and there are drag-and-drop capabilities to make things easier. You customize the colors, images and fonts. The site you build also automatically works on mobile. You can list an unlimited number of products.

• Set up your payments. You can accept credit cards using Shopify Payments, which is a separate service that allows you to take customer payments. You can also choose your own payment processor, though Shopify will charge you an additional fee for that.

• Add a Buy button to other websites. You can embed click-to-buy links for your products on social media platforms or other websites.

• Set up a point-of-sale system if you have a brick-and-mortar business. Here’s more information about Shopify POS.

2. Sell products with Shopify

Once your e-commerce website is live, you can use Shopify to::

• Ship orders. Shopify offers shipping label printing, discounted shipping rates and shipping insurance. You can track orders from your dashboard as they travel. 

• Manage your inventory. Shopify’s dashboard tracks stock levels, including details like incoming and committed stock, and allows you to move inventory among stores and warehouses. You can sort orders by fulfillment method or delivery location and make edits as you need to. 

• Sell through multiple sales channels. You don’t have to sell your products solely through your own website. You can use Shopify to list products on Google, eBay, Walmart, TikTok, Pinterest, Facebook, Instagram and other sites.

3. Run your business with Shopify

Shopify offers extra tools for understanding and growing your business. You can use the platform to:

• Track your orders. Shopify users can see all orders — whether they were placed on the seller's website, a third-party website or in person — on a dashboard that displays reports, analytics and other information. You can manage things from the Shopify Mobile app as well, including uploading product photos, setting prices, dealing with refunds, seeing sales and visitor traffic, getting order notifications, and communicating with your staff. 

• Communicate with your customers. You can use various Shopify programs to set up a chat app on your website, launch email campaigns and create ads on Facebook and Instagram.

• Borrow money. Shopify Capital is a merchant financing program that offers loans to some Shopify sellers. Be careful to understand the costs of these loans and have a plan for their use before taking one out.

• Bank. Shopify Balance is a business checking account available to Shopify sellers. It comes with discounts on Shopify services and faster payouts from Shopify Payments.

» MORE: How to make money on Shopify

Shopify provides 24/7 support via email, chat and phone to customers on the Basic, Shopify and Advanced plans. The company also maintains community forums that can be useful for asking questions, as well as a library of user guides and tutorials and a network of experts to consult.

How much does Shopify cost?

The price of Shopify ranges from $15 to $299 monthly, depending on which plan you choose. There is also a quote-based option. For each plan, you will need to pay fees on individual transactions, as well as an additional fee if you use a payment processor other than Shopify.

Here’s a breakdown:

Who uses Shopify?

Since most of its features are primarily relevant to online sales, Shopify is best suited for businesses that:

• Sell products, not services. Shopify’s inventory management tools can help you run a high-volume e-commerce business with relative ease — but appointment booking doesn’t come standard, so it’s not a great choice for service providers. If that’s you, consider Squarespace instead.

• Mostly ship those products to customers. Shopify Shipping offers a wide variety of features well suited to online sellers. You can provide in-store pickup using Shopify, but if brick-and-mortar is your top priority, Square Online may be a better choice for running your website since it’s free if you use Square to process payments.

• Would rather use Shopify’s built-in payment processor than choose their own. Shopify charges a transaction fee to users who choose a different payment processor — meaning those users essentially pay two parties, Shopify and their payments provider, for each sale. If you want to choose your own payment processor, consider building your website on Wix instead. 

Shopify also prohibits some types of businesses, such as the following in the U.S.:

• Investment, credit, money or legal services.

• Virtual currency services.

• Adult content.

• Gambling.

• Drug paraphernalia.

• Telemedicine or telehealth.

• Telemarketing.

• Extended warranties.

• Multilevel marketing companies.

• Products that make unverified health claims.

• Cannabis, tobacco, e-cigarettes and online pharmacies.

• Fireworks.

You also can’t use Shopify to sell certain firearms or firearm parts.