Shopify earns most of their money by charging a percentage of sales that go through their system via their Shopify Payments, levying a surcharge on top of Paypal and other payment gateways.
And even you cannot negotiate with Shopify for charging low processing fees. There are still some ways to reduce your Shopify transaction fees. But you need to optimize your plan choices, avoid some common pitfalls and understand the alternatives.
Transaction Fee that Shopify charges on every sale depends on the type of shop subscription you made. The current rates are:
- Basic Shopify Plan ($29 per month): Are you trying to set up an online store? if your store is small and you just need basic e-commerce functionality, then this plan suits you. But if your products are costly that pricey $29 per month + 2% transaction fee will add up fast.
- Shopify Plan ($79 per month): If your small business is on the growing stage. You will need a robust website, and then this plan is for you. More granular reporting data and a number of other features such as abandoned cart recovery and gift cards are there. If the return of your site is around $5000 in monthly revenue then you can go through this plan.
- Advanced Shopify Plan ($299 per month): This plan is for medium to large online businesses. These businesses can always grow more and this plan comes with rock-bottom transaction fees and more advanced reporting. This plan is designed for companies with or exceeds $10,000 monthly revenue.
Few points that you should consider before picking a plan:
- Transaction Fees: it decreases significantly for higher plans
- Abandoned Cart Recovery – it is a very useful tool to help you earn extra profits automatically.
Most of the customers likely want to go with the Shopify plan, where the monthly fee is $79 and a 1% Shopify transaction fee. It includes the Abandoned Cart Recovery function and Gift Cards that are not allowed in the Basic Shopify plan.
It means you will pay £10 for every £1000 you generate in your sales. As compared to Amazon and eBay where they charge 10%+ on every sale, Shopify really not that bad.
But the question is why do I pay a transaction fee when I am already paying a monthly subscription? But Shopify just uses it as a simple method to earn extra revenue for them.
We can also look at it from a different perspective, 1% Shopify transaction fee on each sale means Shopify is interested in doing whatever they can do for your online store to succeed. Maybe it charges this fee for improving our business because if you sell more, it will earn more too.
Other e-commerce websites also do this in different manners. For example, BigCommerce has no transaction fees, but when you check its plans in detail you will find that it implement turnover limitations on the place of transaction fees.
Big Commerce PLUS plan costs $79 per month similar to Shopify’s medium plan. Big Commerce PLUS plan is good only when your turnover is up to $150k a year and if your turnover will go beyond then you have to switch to its next expensive plan that costs you $250 per month with the same features.
That means you need to pay $171 extra per month just because your turnover went over the limit ($150k a year). And that is not a big turnover if you deal with costly items.
So, in Shopify, you need not be switch to a big plan as your revenue increases. However, Big Commerce does not charge transaction fees but it will ask you to move its expensive plan when your turnover goes beyond certain limits.
But you can reduce Shopify transaction fees if not completely eliminated. There is no secrete, Shopify advertises itself on its website that it will not charge any transaction fee from its customers if they use Shopify Payments in your shop. And I think there is no particular reason for not using it. You normally accept credit cards on your shop so why not use Shopify payments where you can eliminate Shopify transaction fee.
Everything is built into the Shopify system. You need not be bothered with complicated third party integration procedures. shopify Payment is now available in the United States, Ireland and Australia, United Kingdom, Puerto Rico, and Canada.
So, if you are using Shopify platform for your online store, use Shopify Payments to eliminate Shopify transaction fees on card transactions.
But what if you use other payment methods? Will you have to pay Shopify transaction fee on those sales?
Yes of course! If you are using other payment methods too such as PayPal, you still have to pay 1% fee on PayPal transactions and the same applies to other gateway systems supported by Shopify such as:
- First Data
- Amazon Payments
- Stripe, and many more
Depending on the type of the products you sell on Shopify, you could probably expect 50% to be payments via cards and another half via PayPal. It means that Shopify transaction fees on each sale work out at 0.5%. Shopify fee of 0.5% is really nothing and you think about its features as well as support that you will get in return. On eBay, we pay 10%+ but not get desired support on complex situations even then. Sure, we pay Amazon and eBay for the traffic, not for support and service.