When was the last time you ordered something online? Chances are, it wasn’t too long ago. For millions of consumers, shopping on the internet has gone from an occasional convenience to an everyday habit. The shift has been accelerated by changing consumer preferences, technological advances, and in 2020, by the global pandemic that forced businesses and shoppers alike to rethink how they interact.
For entrepreneurs and small business owners, the move online is no longer optional. Yet building and managing an e-commerce store is not as straightforward as opening a physical shop. Creating a website, designing a digital storefront, managing payments, handling marketing, and coordinating shipping can be overwhelming for someone who just wants to focus on selling products.
This is where Shopify enters the picture. The Canadian company has become one of the leading platforms enabling entrepreneurs of all sizes to launch, manage, and scale online businesses. 5.
What is Shopify?
Shopify is a cloud-based e-commerce platform headquartered in Ottawa, Canada. It provides merchants with everything they need to set up an online store, from website templates and shopping cart software to integrated payment processing and shipping solutions.
The company traces its roots back to 2004, when Tobias Lütke, a computer programmer from Germany, tried to sell snowboarding equipment online. Frustrated by the lack of effective tools available at the time, Lütke used his coding skills to build his own e-commerce platform. That platform eventually evolved into Shopify.
Seventeen years later, Shopify has grown from a small startup into a multinational publicly traded company listed on both the New York Stock Exchange and the Toronto Stock Exchange. Its rise has been fueled by a growing demand for online commerce and a reputation for simplicity, scalability, and flexibility.
Industry analysts, including Merchant Maverick, often cite Shopify’s low barrier to entry and easy-to-use interface as key reasons behind its popularity. Whether you’re a first-time entrepreneur or a large retailer expanding into digital channels, Shopify provides a ready-made infrastructure to operate an online business.
How Shopify Makes Money
Shopify’s mission is to “make commerce better for everyone,” and its business model reflects that. The company generates revenue through two main channels: subscription solutions and merchant solutions.
Subscription Solutions
The first source of revenue comes from subscription fees. Businesses pay a monthly fee to use Shopify’s tools and services, with plans designed for different stages of growth. In 2021, the three standard subscription tiers included:
- Basic Shopify at $29 per month
- Shopify (standard plan) at $79 per month
- Advanced Shopify at $299 per month
For larger companies with higher volumes, there is Shopify Plus, an enterprise-level solution with custom pricing.
Each plan provides access to website hosting, customizable templates, sales channels, and other essential features. A free 14-day trial is offered to new customers, lowering the barrier for entrepreneurs who want to test the platform.
The affordability is a major draw. At just $29, merchants gain access to a bundled suite of tools that would cost considerably more if purchased individually. This subscription-driven revenue is predictable, recurring, and forms the backbone of Shopify’s business.
Merchant Solutions
The second and increasingly larger source of income is merchant solutions. This category includes transaction fees, payment processing through Shopify Payments, shipping fees, referral fees, Shopify Capital (which provides financing to merchants), and revenue from third-party apps and services sold through the Shopify App Store.
Interestingly, merchant solutions have become an even bigger driver of revenue than subscriptions. Every time a merchant sells through Shopify, the company takes a cut of the transaction. According to industry publication Ecomelites, Shopify typically charges between 2.9 percent and 2.4 percent per transaction, depending on the merchant’s plan. If a seller uses a third-party payment processor such as PayPal, Shopify also takes an additional fee.
This structure creates a powerful incentive. The more merchants succeed, the more Shopify earns. It aligns Shopify’s growth with the growth of the entrepreneurs it serves, which is why the company invests heavily in features that help merchants drive sales and retain customers.
Financial Performance in Q3 2020
Shopify’s financial results highlight the strength of its model. In the third quarter of 2020, the company reported total revenue of $767.4 million, nearly double the $390.6 million it posted in the same quarter of 2019.
Breaking that down:
- Subscription Solutions revenue rose 48 percent year over year, reaching $245.3 million.
- Merchant Solutions revenue surged 132 percent, hitting $522.1 million.
The surge in merchant solutions was driven by a combination of new customers joining the platform and an increase in Gross Merchandise Volume (GMV), which measures the total value of goods sold through Shopify stores.
This explosive growth in 2020 underscored how critical Shopify had become for entrepreneurs navigating a global crisis. With physical stores closed or limited, many turned to Shopify as their digital lifeline.
Why Shopify Matters
Beyond its revenue streams and financial performance, Shopify plays a broader role in the economy. It lowers barriers for small businesses, supports job creation, and gives entrepreneurs access to global markets that would otherwise be out of reach.
In 2017, the company expanded into physical retail with the introduction of a credit card reader, signaling its ambition to be a comprehensive commerce platform both online and offline. That move into point-of-sale technology gave merchants another way to integrate their operations, whether selling through a website, a mobile app, or a brick-and-mortar store.
By February 2021, Shopify had established itself as one of the most influential players in e-commerce, second only to giants like Amazon in shaping how goods are bought and sold online. Its combination of subscription-based stability and transaction-driven upside positioned it for continued relevance in the rapidly evolving digital economy.
For entrepreneurs, Shopify is more than software. It is an enabler of dreams, giving small and medium-sized businesses the tools to compete with larger players. For investors, it is a story of scale, alignment, and an expanding role in global commerce.
By early 2021, Shopify had proven it could deliver growth in one of the most challenging business environments in decades. Its ability to combine affordability, accessibility, and innovation made it a cornerstone of the modern e-commerce ecosystem.
