Shopify vs Magento

Costing out your eCommerce journey is a complex and confusing chore, but essential for ensuring profitability. The 4 types of costs that are directly related to your eCommerce platform:

1. Software licensing for the platform & transactional fees
2. Software licensing for 3rd party applications and integrations
3. Implementation costs to build the site, create custom features and integrate applications
4. Ongoing costs to support and enhance the site

COST #1 - Software Licensing & Transactional Fees

As you can see from the table above, there are a few different options to help you plan and budget for.

All versions have some monthly subscription fee, but one of the biggest things companies forget to consider are variables in per-transaction fees. It used to be that most every eCommerce platform provider let you integrate with an external payment gateway (e.g., Authorize.net, Paypal, or Stripe), and your rates are negotiated directly with the gateway, and the eCommerce software is negotiated directly with the platform provider. However, the model has recently changed with the top platform vendors moving to a cloud-based SaaS (Software as a Service) platform that focus on per-transaction fees so they can scale their services as you scale your business. In short, you could end up paying much more in monthly transaction fees than the monthly subscription fee.

As an example, Shopify has come out with its own credit card payment gateway called "Shopify Payments" that provides very favorable rates if you use them exclusively, and those rates get even better if you choose a higher tier product like Advanced Shopify. If you choose to use your own payment gateway, you will pay both the credit card transaction fee as well as an imposed Shopify transaction fee on a sliding scale based on your version.

Shopify Plus Costs

If you are ready for this, the base price is $2,000 per month, and after $800k per month in online sales, Shopify charges you 0.25% of total sales.

Credit card processing fees for Shopify Plus merchants are:

• 2.15% + 30 cents for domestic credit cards (as long as not AMEX) --> this is what the vast majority of your CC processing fees should be because most of your customers are domestic and paying Visa and Mastercard
• 3.15% + 30 cents for international and AMEX credit cards

Transaction fee -- If you choose to use an external gateway vs Shopify Payments, there is a small transaction fee of 0.15%.

Shopify Plus requires a 1 year minimum commitment to start. It is paid monthly. Your first bill will be 30 days after you sign with Plus.

In any scenario, understanding and negotiating fee rates up front with your payment gateway provider based on future sales is critical for long-term cost analysis when choosing Magento, or if you choose Shopify but do not use Shopify Payments (or use it for only some transactions).

Here is additional information about Shopify Payments vs. 3rd Party Payment Gateways by country: shopify.com/payment-gateways

COST #2 – Software Licensing for 3rd Party Applications

It's not the individual pieces that matter, but the sum of all their parts. The eCommerce platform is a big piece of the puzzle, but the 3rd party apps can add up quickly - shipping integrations, tax calculations, payment gateways, returns module, blogs, customer service, email and social integrations, A/B testing, tagging & analytics, reviews, product recommendations, etc.

As with anything, you need to prioritize what you need at launch, and beyond. You probably don't need all of this day one, but it's easy enough to gather cost estimates from 3rd party application providers and lay out a plan that ensures there are no surprises. Keep in mind the small print and that some of the critical 3rd party apps you would like to have might be bundled in the higher versions; Shopify Plus is a great example which includes Avalara's Avatax in the software license, but is not included in Shopify.

COST #3 – Implementation Costs to Build the Site, Create Custom Features and Integrate Applications

If you are small company with a small number of products, chances are you can launch your website mostly on your own without a lot of technical help or added cost. For larger companies, requirements expand, and so does the technical complexity required to go live.

The biggest factors here that determine if you need a partner and how much you will spend are related to requirements in design, product data & digital assets, integrations, and customizations.

In terms of DESIGN, some companies can pay for an existing theme on the marketplace and move on with relative ease. Other companies live and die by their brand and creative design, and are much less willing to compromise when it comes to a unique online presence. Both Shopify and Magento have ways of customizing to specific creative requirements, but will cost you in both cases, with a slight edge to Magento for developers to more easily customize the front-end to meet your unique look and feel. Shopify Plus has much more control than the standard Shopify versions. Just keep in mind that iterations on design can often be the longest part of the project; things can quickly spiral out of control if you don't have a partner that knows how to translate custom designs into a responsive mobile and desktop web experience. This is why at PIVOT, we have both creative designers and front-end developers in-house that work together to optimize the user experience early on so there are no surprises. There are endless examples where a tech team has to deliver the bad news that the beautiful designs you paid so much money for are not going to be possible. It is CRITICAL to ensure the behavior on each device is a factor in creative design.

PRODUCT DATA & DIGITAL ASSETS – At some point, all of your SKU's, product & lifestyle imagery and product metadata must converge into an amazing experience for the end user. The sheer number of products, categories and SKU's will add cycles to any project if the data is hard to gather or organize into something ready to be loaded into the platform database. Many graphics and design teams are also not prepared to produce so many high-resolution images in an organized way that can be consumed by a database; getting them integrated into the project early with clear goals is critical to manage asset production costs.

INTEGRATIONS – Both Magento and Shopify have marketplaces with many of the same out-of-the-box integrations with 3rd party applications, as well as an open API web service to communicate data like orders, shipments, returns and inventory with your ERP system. Effectively, they have the same options, and in some cases, depending on your back-end ERP system, one might have more capability than the other, and increase or decrease the amount of custom integrations required.

CUSTOMIZATIONS – Every company is different, even those in the same industry, and thus, custom development will be required to achieve certain goals that are not possible in the core commerce functionality. If Magento and Shopify cannot perform the task, you should investigate 3rd party applications and extensions. If those aren't available to meet the requirements, then you'll need custom development. Both Magento and Shopify have code and scripting languages available that provide developers options to enhance the experience that the platform provides out the box. And anything outside the box will inherently increase the scope and overall cost of the project to write something from scratch. Given Magento's nature as an open source platform, this platform continues to win out on overall flexibility with custom code and capability by modifying the core code base. More on this below.

Time is Money

Shopify

Shopify has a reputation for being faster and most projects taking 2-4 months to launch. From the beginning, Shopify has been a SaaS provider, and spends a lot of effort to make things fast and simple for developers and brand eCommerce leaders. Generally, this has proven true with their diverse offerings, hands-off infrastructure and proven integrations. Typically, if Shopify doesn't do it, you can find an app on their marketplace that does, or even build your own app if you have the resources.

Magento

Historically, Magento projects take anywhere from 4-8 months to execute from kick-off to go-live. Moreover, you would often need resources such as developers, architects, infrastructure system admins, deployment specialists, QA resources, etc. In short, both server setup and customizing the Magento software extend the go-live beyond the Shopify average. However, the company is pouring resources into their new, vendor-hosted, Magento-optimized infrastructure called Magento Commerce (Cloud). Hence, Magento customers that host with Magento may be able shorten the time to launch significantly, as well as simplify the costs to maintain the site. Also more on this below. In terms of the software, Magento 2 (M2) is the latest Magento version and was a complete rewrite from M1. M2 has stabilized over 2017, but it was a very bumpy road for brands as well as 3rd party integrators catching up to the new, bug-ridden code base. Time will tell as the company works to prove out Magento Commerce Cloud and ensure stability in the code base.

COST #4 – Ongoing Costs to support and enhance the site

Following launch, continuous improvement in the form of development expenses to maintain and enhance your website are the biggest hidden variable costs in any eCommerce program.

The usual suspects for any platform launch are "Phase 2", or the necessary features deferred until later so the site can go-live on time. Magento has a notoriously high overhead when it comes to the technical support of the entire infrastructure environment, and if configured incorrectly, can seriously jeopardize the site speed and hinder the overall user experience. It is not unusual to spend several months (and many thousands of dollars) after a Magento launch tuning caching, site code, extensions, and other components to optimize performance. Shopify, as a SaaS platform, does not have this problem and allows companies to move right into Phase 2 and beyond. This is not always the case for Magento, but is a well-known reality given the open environment, though may be less of a headache if Magento hosts your environment.

Post-Go-Live Support

First 30 days - Most implementation contracts cover a support or warranty period for a temporary period following your site "go-live", but then expire. At a minimum, we recommend 3-4 weeks of post-go-live support to ensure stability, tuning, and hands-on training for all business users with a new production website and order processing.

6 - 12 months - Following that, depending on your requirements for phase 2, 3, 4, and so on, a standard monthly retainer contract for a term of 6 or 12 months is common to provide ongoing technical support, development, and feature enhancements that build on your new foundation. The primary focus is on testing revenue-generating opportunities that increase traffic, AOV, and conversion rates over time. Examples include: introducing best sellers & product recommendations, site reviews, A/B testing, expanding into new markets and geographies, customized product bundles, returns, integrated customer service, or any number of other opportunities to please your customers and grow your business.

Expanding with Multiple Sites

Finally, after your first site launch, many companies will decide to open up one or more new targeted stores or international sites. If you have Magento, expanding multiple sites is a relatively straightforward process of creating multiple stores and store views under your existing Magento Admin instance. More on this below (See Global Perspective). For Shopify Plus users, you have 10 sites included in the cost of the SaaS license. For standard Shopify, every site is an additional license, so budget accordingly.

PIVOT works with customers on strategy, cost analysis, and prioritizing revenue opportunities after launch. We can help you budget, as well as implement the technical aspects when introducing new features over time on the eCommerce platform.

At some point, you are going to want to change either the "look-and-feel" of your site design, or modify the way your checkout behaves and introduce new functionality. But be warned... control of the application is seductive.

Before thinking custom, always consider your business requirements and look on the 3rd party application marketplaces. Both Shopify and Magento have a wide selection of custom themes and modules that integrate with both platforms. These can be a great, fast way to introduce new functionality without the need for custom development. The one word of caution is that once you use a 3rd party application, support for that application is with the 3rd party app developer and not the platform providers; do your research and read the reviews!

Ready to go custom?

Shopify

Shopify is strictly SaaS based, meaning you do not have access to the core code nor do you have to worry if it's running properly on Shopify's servers. They focus on templates and familiarity that prioritize speed-to-market over control. However, there are also options to customize the Shopify experience if you need to.

• Shopify makes a strong argument for a balanced amount of control: How Customizable Is Shopify?
• From a DESIGN standpoint, there are Shopify Themes, which is a large library of different mobile and desktop designs to choose from, by category or industry. If none of these work for your needs, then a custom theme can be coded and created to meet your specific branding needs. Often it is easier to create a new Theme from scratch than to purchase one and spend a lot of time trying to modify that theme to the unique needs of your business. For small companies, however, there are many out-of-the-box options that should suit you for some time until you are ready to go custom.
• From a FUNCTIONALITY standpoint, if it's not already available in the Shopify application or the Shopify Marketplace, Shopify has many ways to allow you to customize, but you will have more options with Shopify Plus, which has cart scripting, dedicated API's with better throughput, and checkout experience customization. However, if you have a more unique requirement that these tools cannot provide, you can partner with PIVOT or another technology agency to create a custom application that integrates directly with Shopify or Shopify Plus.

Magento

Magento has a long history of being a flexible, open-source software, very friendly for brands and software developers to tailor to their unique needs.

• In terms of DESIGN, if you can imagine it, you can build it into Magento as long as it follows common web standards. This is where Magento has a slight edge over Shopify Plus, and definitely over standard Shopify.
• Moreover, brands have been able to hire developers to customize Magento's core code base, allowing for any number of changes and iterations to both the functional processing affecting a user's experience from browsing products through to checkout. All of this flexibility is great for larger brands who have the money and patience to work through the trade-offs that come with modifying Magento's code base. In short, if you don't have a great development crew and QA (testing) regimen, then the risks of modifying the site design or core code will often outweigh the advantages.

In conclusion, the majority of customizations end up being oriented around front-end design, and both platforms offer comparable options in that respect. For more custom site functions, most of your needs should be met by the app marketplaces, or else custom-code can be created to get the desired results. If complete and total control over the entire stack is still a priority, then Magento is your best bet.

Related to control of the application is control over the server and network infrastructure that run the software and handle user traffic. Managing your own web and database servers, monitoring tools, caching servers, content and file stores, and ensuring 99.9% uptime is a major obstacle for any organization and most lack the ability and technical know-how to do this correctly. Moreover, technology is changing so fast, that even the most experienced IT system administrators struggle to adapt in the shifting digital world.

Shopify

Shopify is the clear winner here for a hands-off, SaaS model, that has built a reputation for a proven platform that is fast to setup, reliable, speedy, scalable and completely hands-off for its customers. Shopify does the dirty work of managing the technical back end, and ensures you remain open for business during the busiest of times. You can be certain that when holiday traffic spikes, your site just works, and you won't be up all night trying to troubleshoot problems with your web application or caching servers. Shopify gives high-growth, high-volume merchants the scalability, reliability, and flexibility they need, without all the hassles, long timelines, and expense of an on-premise solution. Most brands are not good at IT, and for those companies, a true SaaS offering is highly compelling.

Magento

Historically, you used to buy Magento and then it was up to you to figure out how to host and run the software. Today, there are more options as you can you host it yourself, use your own cloud-based services such as Amazon AWS or Microsoft Azure, or you can rely exclusively on Magento Commerce Cloud (Magento-hosted option) as the new and preferred vendor-hosted option. But, Magento is not a true SaaS offering like Shopify. The new Magento Commerce (Cloud) option simply means the servers are hosted by Magento, optimized for Magento Commerce, but you still have to manage the overall infrastructure unless you want to pay Magento or another technology partner for IT managed services. With Magento Commerce Pro version only, you also have the benefit of what they call "high availability infrastructure", and totally dedicated hardware that is not shared with any other company. It is worth mentioning that Magento Commerce Cloud is a new offering for the company, and is still being built out, although Magento is investing heavily here to reduce the overall IT burden. This may prove out to be a great offering, that also elevates service and customer support on par with Shopify.

Click here for more information on the Magento Cloud architecture.

In conclusion, for the smaller or growing brands, the Shopify options are the best bang for your buck when it comes to a hands-off IT infrastructure. Magento would not be recommended, as it would be a double-whammy of self-managed infrastructure and a high entry level price for Magento Commerce Starter. For a large and rapidly growing company, if you want the total control of the source code in Magento, you may want to upgrade to the Pro version for the high availability and dedicated servers. Definitely do your research about Magento Commerce Cloud, and the requirements to support the environment. But if you find that Shopify Plus meets all your business needs and feature requirements, this is probably the best option for you to avoid the burden of cost or worry in keeping servers running smooth all year long.

No system is a silo and your web site is no exception. eCommerce systems consolidate data from your own backend systems like your ERP, PLM, PIM, Digital Asset System, or other operational systems, into a unified experience. These are your primary business systems that are required to interface with in order to fully automate your online business.

3RD Party Applications & Extensions

A fully optimized eCommerce business is dependent on your ability to connect niche services such as returns, tax rates, exchange rates and fraud detection to compliment the overall online customer shopping experience. Both Shopify and Magento provide a vast and growing number of options on the open platform marketplaces. Always start with Shopify's App Store, and also the Magento Extensions Store to evaluate against your needs.

Also, there are many external parties like Google, Amazon, Facebook and others that you will install tracking pixels or scripts to publish your data to and provide access to real-time user data, browsing behavior, orders, shipments, product data, imagery, and other catalog information.

A word of caution...

Shopify

Shopify apps tend to work more often. Everyone is on the same Shopify version to make things easier for app developers, and all applications go through extensive testing and validation for inclusion into the App store. There are exceptions to this, but for tried and true apps like Signifyd, email marketing, customer service, etc., rarely is a developer required and most apps can be activated within minutes and without hassle.

Magento

Magento is an open-source code base, with many different versions, and thus the core code can be changed by any developer or a new code release can break a perfectly working part of your site. Hence, if you have customized the Magento core code by any measure, installing or activating a 3rd party extension or app may not be as easy as it seems (or even break your site!). Doing so often requires a developer and/or support from the 3rd party vendor and/or support from Magento to make it work as described. Before purchasing, make sure you inquire if the 3rd party application you are considering is validated to work with YOUR Magento version, and if they have any customers they could refer you to.

CUSTOM INTEGRATION

For backend integrations to your ERP, check with your ERP provider. Chances are, your ERP provider has integrated with both Magento and Shopify many times before, and likely has the expertise in-house to guide you on what is and is not possible. Some of these integrations are even marketed and sold by ERP companies as "eCommerce connectors", which you may also have to pay extra for. But in most cases, it's worth buying the connector if it is supported and you don't have to build your own.

For other business requirements that go beyond what is available in the marketplace and require custom integrations, Magento and Shopify are comparable in this respect. The Magento API Web Services and the Shopify API are both worth looking into to see if the items listed here meet your minimum requirements for receiving and transmitting a variety of data and data types.

For larger or growing companies looking to expand their international reach, both Shopify Plus and Magento Commerce have great options, with Magento having the best options for expanding your reach into different countries and currency views based on a single store.

Shopify

Shopify's standard versions have a slightly different approach to international, where you have a separate Shopify site for every unique market or region where you want to conduct business. The exception is Shopify Plus, where they include 10 separate sites with each license, as well as B2B. So if you are on regular Shopify and want to expand globally, you should run the numbers and see if Shopify Plus' 10 sites are a more economical choice in the long run than paying additional license fees for each separate site on standard Shopify.

Magento

Magento's "multi-site" hierarchy demonstrates you can have one website that has different "stores" and then different Store "views" underneath that.

Source: docs.magento.com/m1/ee/user_guide/store-operations/stores-multiple.html

In this case, if you have a US store, and Canada store, you can manage them all inside the same Magento Admin, share the same product data while tailoring navigation and the appearance locally, as well as unique store views for language variations.

The benefit with Magento is that you can manage everything in one place and at no additional cost. So with the right IT team, this can be a very cost effective solution for multiple sites, and provides an efficient way to share data and content between sites. The downside is that it creates an interdependence between multiple sites. In other words, if something goes wrong on your product loads or code deployments, for example, it could adversely affect all related stores and store views at the same time. For that reason, some companies with multiple regions or business units will forgo the benefit of shared resources and pay a premium to create physical separation of these web applications and databases. While it may multiply your IT and labor costs significantly, it ensures the needs and issues of one region or business entity can be isolated from disrupting the needs of other region or business entity.

In conclusion, both have comparable offerings and means to help you achieve your goals around global expansion. Ensure you do the cost/benefit analysis for predicted expansion over the foreseeable future.

Wholesale is an entirely different beast than direct-to-consumer and inherently more customized and complex of an overall online experience. The nuances of B2B include sales reps, sub-reps, territories, single retail speciality stores, retail chain stores, bulk-replenishment, customer-specific pricing and promotions, term-based payments, and many other variations that require something much different than the one-size-fits-all B2C offering.

If you are selling in the wholesale channel, and you want to sell to sales reps and retailers with special pricing behind a secure login, then you must have either Shopify Plus or Magento Commerce Pro.

Here's a link to Shopify Plus B2B information: How to Sell Wholesale
help.shopify.com/manual/sell-online/wholesale

Magento for B2B Commerce:
magento.com/business-needs/b2b-commerce

The key piece of advice here, is when you pick a platform, you need to pick one for both B2C and B2B. In no scenario would we recommend mixing vendors, or having Shopify for B2C and Magento for B2B. Pick one vendor, and leverage design, content, and assets easily between the consumer and wholesale sites within one provider. Moreover, if you have your own retail brick-and-mortar stores, Shopify also has a POS (point-of-sale) offering to compliment B2B and B2C online offerings.

PIVOT has extensive experience in the B2B Wholesale channel for consumer brands, and can help you in your omni-channel journey.

When choosing a platform, it's important that your business goals are aligned with that of your partner to ensure the highest levels of support possible. Every brand wants to boost traffic, improve conversion rates and scale online sales into the future. Platform vendors that have a licensing and revenue model closely tied to your sales growth sounds scary, but in reality it can be a great strategy. It may feel counterintuitive for a brand to link vendor payments to your transactions, but instead of thinking you are giving away margin points, consider the increased levels of support you would get if you grow together. Other vendors simply sell you software, and could only hope you grow so that you can keep paying maintenance invoices. Having incentives aligned can make for a long-term, mutually prosperous partnership that encourages innovation and sustained growth.

Shopify Support
All Shopify versions give you access to award-winning 24/7 support, which includes a massive support knowledge base, and a variety of ways to contact the vendor for help like phone, email and chat. Their accessibility and support offerings give the edge to Shopify over Magento.

Also, Shopify's revenue on payments is tied to each transaction. Their entire profitability is contingent on if their customers are successful at launch, and grow into the future. And for that reason, they stock their support organization with great resources that offer help with using the platform, as well as optimizing the content to focus on your growth.

Shopify Plus Support
For large and fast-growing companies on Shopify Plus, you are granted access to the "white glove" treatment via the following ongoing services:

• Merchant Success Program
• Automation to reduce your workload with Shopify Flow
• Tools specifically designed to bolster crucial KPIs

Merchant Success Program

All Shopify Plus merchants get enrolled into the Merchant Success Program.

There are 3 parts to the Merchant Success Program:

Shopify "FLOW" - Automation to Reduce your Workload

At some point, in order to scale, you need to invest in process automation to maintain a high level of customer support. Shopify Plus customers have access to Shopify Flow, a way to consolidate front and backend workflows with easy to create "trigger, condition, action" formulas. Move beyond the costly patchwork of apps, third-party add-ons and manual efforts with a single solution built directly into your commerce platform. From what we can see, this is a powerful rules-based engine that allows business users to set conditions and thresholds that flag customers or kick off other processes during the course of normal business, and without the need for developers to write code. More information found here: shopify.com/plus/solutions/ecommerce-automation

Automation case-study on Shopify Flow: shopify.com/enterprise/shelfies-ecommerce-automation-flow

Tools to Bolster Your Business KPI's

Shopify Plus has many other add-ons available to customize your online store via Shopify Scripts, access to advanced reporting, and many other tools to help you optimize your store experience.

Magento Support
If you choose Magento Commerce w/ Commerce Cloud, you have access to the following services.

Platform Support...

Access to People...

Magento also benefits from that growth with their platform pricing tiers based on your annual gross revenue, but tiers provide less of a direct correlation to sales and an incentive to help you grow. Moreover, their staffing resources are more in the form of a standard account manager role that is not necessarily incentivized to grow your business, but to offer you more software and capability. The one exception is with Magento Commerce Pro version, where you have a dedicated Launch Manager who will be a technical resource for your "initial launch period", or the start of your subscription until the go-live date of your store. Other than this, we see no real difference in the levels of support between Magento Commerce Starter or Magento Commerce Pro.

In conclusion, Shopify wins on the support front. They are more directly aligned to your business; they grow as you grow with every incremental increase in transactions and revenue. More research and feedback is needed to understand how effective this is in practice for all Shopify Plus customers, but logically it makes sense and we like how the role is articulated. For those who need the "white glove" service included in your package today, look no further than Shopify Plus, but keep a close watch on Magento as they continue to rapidly build out and evolve their services in 2018 and beyond.

Last but not least, talk to other companies. Seek out other Shopify, Shopify Plus and Magento Commerce customers. Understand the pros and cons, trade notes on all the costs and get the validation from eCommerce leaders who have already gone through the trials and tribulations of learning how to grow their online businesses on these platforms. To isolate companies to talk to, try some of the people and brands in your network and then use tools like Wappalyzer and BuiltWith to understand which brands are using these platforms. Once you build a short list, start to reach out, or ask the vendors to provide references to their existing customers, as a condition of signing up.

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Technology is hard, and ever-changing. Selecting the right vendor and system integrator is a long-term decision that can make or break your online business. If you are looking for help in this decision, or to provide implementation services, please drop us a line.