Understanding the True Cost of Hosted Store Platforms for Small Sellers

As a small business owner, choosing the right e-commerce platform for your online store can be a daunting task. Hosted store platforms like Shopify offer a convenient and user-friendly way to set up an online store, but it's essential to understand the various fees associated with these platforms to ensure you're making an informed decision. In this post, we'll break down the different types of fees you can expect to pay on Shopify and provide a clear way to compute your true all-in annual cost.

Subscription Fees

Shopify offers several pricing plans, ranging from $29 to $299 per month. The basic plan includes features like online store design, order management, and payment processing. However, as your business grows, you may need to upgrade to a higher plan to access more advanced features.

Payment Processing Fees

In addition to the subscription fee, you'll also need to pay payment processing fees on each transaction. These fees are typically paid to a payment processor like Stripe or PayPal, and they're usually a percentage of the transaction amount plus a small fixed fee. For example, Shopify's payment processing fees range from 2.4% + 30¢ to 2.9% + 30¢ per transaction, depending on the plan you choose.

Per-Transaction Cuts

Shopify also takes a small percentage of each transaction as a platform fee. This fee ranges from 0.5% to 2.0% of the transaction amount, depending on the plan you choose. This fee is in addition to the payment processing fee and can add up quickly.

Paid Apps

Many Shopify users also pay for third-party apps to extend the functionality of their store. These apps can range from social media integration to inventory management, and they often come with a monthly or annual subscription fee. While these apps can be valuable, they can also increase your overall cost.

Computing Your True All-In Annual Cost

To compute your true all-in annual cost on Shopify, you'll need to consider all of the fees mentioned above. Here's a step-by-step guide to help you calculate your costs:

1. Determine your subscription fee: Choose the Shopify plan that best fits your business needs and calculate your monthly subscription fee.
2. Estimate your payment processing fees: Calculate your average monthly transaction volume and multiply it by the payment processing fee percentage (e.g., 2.9% + 30¢ per transaction).
3. Estimate your per-transaction cuts: Calculate your average monthly transaction volume and multiply it by the platform fee percentage (e.g., 0.5% to 2.0% of the transaction amount).
4. Add up your paid app subscriptions: Calculate the total annual cost of any third-party apps you use.
5. Add up all of your fees: Add up your subscription fee, payment processing fees, per-transaction cuts, and paid app subscriptions to get your total annual cost.

For example, let's say you choose the Shopify Basic plan ($29 per month) and process an average of $10,000 in sales per month. You also use two third-party apps that cost $10 and $20 per month, respectively. Your payment processing fee is 2.9% + 30¢ per transaction, and your platform fee is 0.5% of the transaction amount. Here's how you might calculate your true all-in annual cost:

• Subscription fee: $29 per month x 12 months = $348 per year
• Payment processing fees: $10,000 per month x 2.9% + 30¢ per transaction = $290 per month x 12 months = $3,480 per year (note: this is a cost you would pay to a payment processor either way)
• Platform fee: $10,000 per month x 0.5% = $50 per month x 12 months = $600 per year (this is the markup charged by Shopify)
• Paid app subscriptions: $10 per month x 12 months = $120 per year, plus $20 per month x 12 months = $240 per year
• Total annual cost: $348 (subscription) + $3,480 (payment processing) + $600 (platform fee) + $120 (paid app) + $240 (paid app) = $4,788 per year

As you can see, the true all-in annual cost of using Shopify can be significant. While Shopify offers many benefits, including ease of use and a wide range of integrations, it's essential to understand the fees associated with the platform to ensure you're making an informed decision.

Why Choose a Custom Web Design?

If you're looking for a more affordable and flexible solution, consider choosing a custom web design for your online store. With a custom web design, you can avoid the per-transaction cuts and platform fees associated with hosted store platforms like Shopify. You'll also have more control over the design and functionality of your site, which can help you build a stronger brand and improve your customer experience.

To learn more about the benefits of custom web design, check out our how Google works page, which provides an overview of how search engines rank websites and how a custom web design can help you improve your search rankings.

If you're ready to build a custom website for your small business, check out our get started page, which provides more information on our web design services and how to get started with your project.

For answers to common questions about web design, visit our FAQ page, which provides more information on our services and how we can help you build a professional website.

By choosing a custom web design, you can avoid the fees associated with hosted store platforms and build a website that truly reflects your brand and meets your business needs. At NetNest Design LLC, we specialize in building custom websites for small businesses, campaigns, and causes. Contact us today to learn more about our web design services, and we'll get back to you within 24 hours. NetNest Design LLC builds custom websites for small businesses, campaigns, and causes.