Episode 24 - Pick a Shopify Plan

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Transcript

Hello.  Scott Austin here.

In this episode, I'm going to give the information that you need to decide which Shopify plan is the best one for your business today.  There are a number of factors to consider when picking a plan.  I'll boil them down for you and give you a tool for analyzing the costs for each of the plans.  So let's begin.

At the top level, there are really only two different factors to consider when picking a Shopify plan.  The first factor is financial.  As you determine the cost of the Shopify plan you'll want to look at both the plan's monthly base cost and the payment processing fees that you will incur.  The second factor is features.  Certain features are only available at higher-level plans.  So if your business needs those features, that can help drive your decision on which Shopify plan to use.

At the simplest level, here's how I think about which Shopify plan you should be on.  Start with the lowest level plan and move upwards as the financials make the next level plan actually cheaper per month than the lower-level plan.  This financial decision is usually a no-brainer with the exception being business with extreme seasonality.  Or move up to the next level plan if there is a must-have feature for you in the higher-level plan. 

So let's talk about the Shopify fees first as they drive the financial decision.  The fees fall into three buckets:

1. The first bucket is the monthly fee you pay to Shopify for your store regardless of if you make no sales or 1,000 sales a day.
2. The second bucket is Shopify Payments fees.  If you have Shopify payments set up, each of your transactions will incur a couple of costs.  The first cost is a percentage of the transaction.  That percentage starts at 2.9% of the transaction for lower-level plans and goes down to 2.15% for the highest level plan.  And then there is also a 30 cent per transaction fee regardless of the transaction size. 
1. Let me illustrate this with some math.  Let's look at two checkouts.  One will be for $10 and the other one $1000.  And let's that your Shopify plan has a 2.6% rate.  For the $10 transaction, the 2.6% is 26 cents.  Add to that the 30 cents per transaction fee for a total processing fee of 56 cents.  The resulting cost is 5.6% of the $10 transaction.
2. Now let's do the math for the $1000 transaction.  2.6% of 1,000 is $26.  Add to that the 30 cents per transaction fee for a total processing fee of $26.30.  The resulting cost is 2.63% of the $1000 transaction.
3. Now most transactions are probably in the $60 to $120 range.  But by showing the extremes and especially the fees for the $10 transaction, you can see how that little 30 cent charge can take a bite out of businesses with a small average order value. 
4. Now not every store is eligible for Shopify payments. 
1. First Shopify payments is only available in 15 countries.  The countries are Australia, Canada, Denmark, Germany, Hong Kong, Ireland, Italy, Japan, Netherlands, New Zealand, Singapore, Spain, Sweden, UK and the US.  So there's a very heavy Western and English language bias in the supported countries.  All stores in Africa and South America and most stores in Asia don't have the option of Shopify payments.
2. Second, each supported country has a list of business types that aren't supported.  That can include things like gambling, adult content, illegal drugs, firearms, counterfeit products and more.
3. Still, most Shopify stores are able to get Shopify payments.
3. And the third bucket of fees to consider is the fees that you'll pay if your store uses a third-party credit card processor.  Now you may use a third party because Shopify payments isn't available in your country or doesn't support your business type.  If you use a 3rd party, Shopify will still charge you a % fee, albeit a smaller one, and the 30 cents per transaction.  And then you'll also need to pay the 3rd party their credit card processing fee.  And here's the thing, it's easier to find a better credit card processing rate from a third party then you can get from Shopify, but the total cost when using a 3rd party is rarely cheaper than Shopify payments.  In fact, my advice when Shopify payments is an option is to only consider a third party processor when on the Shopify Plus plan.  I'll explain what the Shopify Plus plan is in a bit.  But for now let's stay on our math and calculate some costs for our example transactions.
1. Let's assume that our 3rd party rate is 2.2%.  With Shopify, the % of transaction fee will go down from 2.6% to 1.0%.  The result is that the total fee for the $10 transaction would be 62 cents.  And that's higher than the 56 cents for the Shopify payments option.
2. And the total fee for the $1,000 transaction would be $32.30 and that is also higher than the Shopify payments fee of $26.30.

In summary, the first thing to consider when picking a Shopify plan is the total fees that you'll pay to Shopify and 3rd party credit card processors.

Now, let's shift gears and talk about how features can impact which Shopify plan you should choose.  Shopify has a long list of features and details out what is and is not available.  But I don't think too many features are that important to drive your Shopify plan decision.  So here are the features that I think are important enough to factor into your decision:

1. Staff Accounts.  Staff accounts allow each person on your team to login to the Shopify admin with their own id.  Now your consultants and developers from agencies don't use staff accounts; they use collaborator accounts.  So staff accounts just get used by your internal team.  If you have a big team, you may not want the lowest Shopify plan which only allows 2 staff accounts.  Of course, a common workaround is to use a generic email address like info@yourcompany.com and have multiple people share the password.
2. POS Locations.  If you are using POS, different Shopify plans have different allocations of locations.
3. Gift Cards.  Gift Cards are available in some plans and not in others.  So if your store needs gift cards that will drive which plan you pick.
4. And the fourth one isn't a single feature.  It's the whole suite of features that comes with Shopify's flagship Plus plan.  Those features include:
1. Multiple stores.  A Plus account can have up to 10 stores within the same monthly fee.  That can be useful in some situations like country-specific stores.
2. Cart scripts.  Cart scripts are awesome tools that allow the store to adjust the price for quantity discounts, BOGO, or other reasons easily in the checkout process.  It also allows for price, payment methods or shipping methods to change based on the customer.  Cart scripts are powerful tools that replace many commonly used apps.  That said, implementing will require some technical knowledge and most stores will need to hire an independent Shopify Plus developer.
3. Wholesale channel.  A Shopify Plus store can have a separate wholesale channel.  But that channel is not that flexible.  I've built Plus stores that use the Wholesale channel and Plus stores that solve wholesale in a different way.
4. Shopify makes some Plus-only apps that are pretty useful including:
1. Flow.  This app allows a store to create if-this-then-that type automations.  For example, a rule could say that if an order comes in that includes an express handling upgrade then send a notification to the fulfillment team on Slack notifying them of the order.
2. Launchpad.  This app lets you to schedule many aspects of your marketing campaigns.  With it, you can schedule price changes, discounts, which theme is live and more.  It can make daily promotions during the holiday much more manageable.
3. Bulk Invites.  This app can send reminders to customers to create an account for future use in your store.

There's a couple of features that get a lot of copy space when talking about Shopify plans that I don't think about when making a decision about which plan to use.

1. The first is reporting.  Shopify gives more reporting capabilities to higher-level plans.  But Google Analytics is my go-to for store reporting, so that feature doesn't move the needle for me.  Now it does take some work and knowledge to properly set up Google Analytics for a Shopify store.  So the Shopify reporting may be more important to you.
2. The second is Calculated Shipping Rates.  But Calculated Shipping Rates can be added to any Shopify plan ala cart.  You need to call Shopify support to get it in place.  And the ala cart fee is less than the cost to upgrade to the plan that supports it.  So if you need Calculated Shipping Rates and you are on a plan without that feature, don't upgrade your plan.  Just call Shopify and have them add it to your current plan.

So let me summarize the currently available Shopify plans starting with smallest plan, in terms of base monthly fee and features and moving on up to the largest plan.

1. Shopify Lite – Shopify Lite is truly a lite eCommerce plan.  In fact, you don't even get a website with it.  What you do get is a checkout experience.  So the businesses that use Shopify Lite, use it to sell on Facebook or to have buy buttons on their existing WordPress site.  The plan has a $9/month fee.  And processing transactions is 2.9% plus the $.30 per transaction fee.
2. Shopify Basic – The Shopify Basic plan has a $29 per month base fee.  Transaction fees are 2.9% and 30¢ per transaction.
1. For key features, Shopify Basic includes 2 staff accounts.
3. Shopify plan.  And unfortunately, this plan doesn't have any name to distinguish it from other plans.  Just Shopify plan.  This plan has a $79 per month fee.  Transaction rates are 2.6%, which is about 10% lower than Shopify basic.  And the 30¢ per transaction fee remains.
1. For features, the Shopify plan allows 5 staff accounts and up to 5 POS locations.  It's also the first plan to allow Gift Cards.  So if your business needs Gift Cards, the Shopify plan will be your starting point for consideration.  Or another way to think about is to ask yourself if Gift Cards is worth $50 per month to your business.
4. Shopify Advanced.  This plan's monthly fee is $299.  Its transaction processing fee is 2.4%, which is about 8% lower than the Shopify plan and 17% lower than Shopify Basic.  And it includes the 30¢ per transaction fee.
1. For features, staff accounts are boosted to 15 and POS locations is up to 8.
5. Shopify Plus.  Shopify's flagship level comes with a much higher monthly fee.  It's negotiated with Shopify and starts at $2000 per month.  Transactions fees are 2.15%, which is 10% lower than Shopify Advanced and 26% lower than Shopify Basic.  The same 30¢ per transaction applies.  One key thing to note about the financials is that the Shopify Plus plan does not charge a transaction fee when using a third-party credit card processor.
1. And we've already covered the features of Shopify Plus, which are a significant improvement over the other plans.
6. So there's one last plan that I want to mention.  It's not a plan that Shopify markets.  It’s the Inactive plan.  It allows you to have a website through Shopify, but you can't process transactions as checkout is disabled.  Now that is useless to most stores as the whole point is to sell online.  But there are a few scenarios where it is useful and I've built a few stores using this unofficial plan.  One example is a furniture store that sells Italian leather furniture.  Now their licensing with the manufacturer doesn't allow online sales.  All transactions must be done in their retail stores.  But I built out their entire product catalog in a Shopify store so customers could browse their options before coming into the store.  And instead of an Add to Cart call to action, the store has encourages customers to submit their email to get pricing information.  Yes, the manufacturer doesn't even allow online publishing of prices.  Now this store works as a great online billboard for the business as they now have a web presence and it does lead generation as customers can browse the catalog and become more educated on their choices.  The monthly fee from Shopify for an Inactive store is only $14 per month.

I've just explained the 6 different Shopify plans available.  For this next discussion though, I'm only going to include 4 of those plans.  Those 4 plans are Shopify Basic, Shopify, Shopify Advanced and Shopify Plus.  The other two plans - Shopify Lite and Inactive are for very specific use cases that make those decisions easy to make. 

So let's look at deciding which of the 4 plans is best for your business.  I recommend that you first look at the financials for your business.  I've built a tool that will help you compare the financials of all 4 plans using your business' actual data.  It's an Excel file that you can download.  I'll include a link to it in the show notes.  Note that downloading the files opts you in to my email list that informs you of new podcast episodes.

Now, when comparing the 3 lower plans, there are two inputs that drive the financial equation.  One is your average order size and the other is the number of orders per month.  Basically the higher the volume of sales you are doing, the lower transaction fee from a higher plan can outweigh the increased monthly fee of that higher plan.

Roughly, that threshold is around $16,000 in monthly sales to move from Shopify Basic to Shopify.  And at about $110,000 per month to move from Shopify to Shopify Advanced.  If you are near one of those thresholds, download the Excel file and put in your business' actual numbers for average order size and number of orders to get a more accurate recommendation.

Now the financial evaluation of Shopify Plus has a couple of more parameters to consider.  The first is how many separate Shopify stores you will be running.  Because in Plus, the monthly fee includes up to 10 stores while in the lower plans each store requires a separate monthly fee.  Shopify does require that all of the stores under one Shopify Plus umbrella be part of the same business or brand.  So, if you have two stores and one of them sells baby clothes while the other sells shoes for women, they could not be under the same Plus umbrella.  Now I previously mentioned that one reason for multiple stores is for different countries to help with localization.  But here's a couple of other reasons you might have multiple stores that do fit under one umbrella.  The first is for different customers that operate under different business models.  For example, I commonly create separate stores for consumers, wholesale and promotional businesses even though the product catalog is the same across them all.  And another reason to have multiple stores is to have single product stores that are focused conversion funnels for a specific customer.  So let's you sell leather goods, you may want to spin up a store for Father's Day that is focused on your top-selling wallet that makes the best gift for dads.

Another financial factor to consider when evaluating the cost of Shopify Plus is the reduction in Shopify app fees that you may have by moving to Plus.  If you are using apps for features that you will get included in Plus, you'll be able to reduce the spend on apps. 

The Excel tool I've provided will factor in the number of Shopify stores you have and any app fees that you'll save into the total cost calculation.  In general, if your store is generating $680,000 per month, it probably makes financial sense to move to Plus.

So, by now you should know which Shopify plan makes the most financial sense for your business.  Now its time to look at the features and see if those are a reason to go for a higher-level plan.  For example, if you have a small volume business which in this case means less than $16,000 per month but you need Gift Cards then you are going to need the Shopify plan.  There's very little feature difference between Shopify and Shopify Advanced, so that is mainly a financial decision. 

Now there is a big feature difference between Shopify Plus and the 3 lower plans.  But those features come at a much higher monthly fee and a one-year commitment.  If it makes financial sense to be on Plus, it's an easy decision and you basically get all of the features for free.  But if it doesn't make financial sense, you still may be drawn to the features.  My advice, don't even consider Plus unless your store is making $200,000 per month in sales.  And if your store is at that volume, you know your business well enough to make an informed decision yourself on the benefit of the features.

Leveraging the full power of Plus will require most stores to hire outside Shopify Experts for implementation.  So that's a cost to be aware of when making the decision. 

If you make the decision to go with Plus, then you do another financial calculation to determine if Shopify Payments or third party processing offers the best deal.  The Excel tool will help you make that decision.

Here's my last piece of advice on Shopify plus.  If you are building a brand new store for a brand new business, do not let the Shopify sales team sell you on signing up for Plus now.  Shopify has an entire sales team dedicated to selling you on Plus.  And they are very good at it as there are many feature benefits to Plus that can sound enticing to a new store owner.  But no new store should start on Plus.  You can upgrade at any time.  New stores with no sales history should start on the lower plans and build their businesses.  And then upgrade later when it makes financial sense or the feature benefits are clearly understood.  A new store shouldn't start out with a $24,000 expense - that's 12 months of Plus at $2,000 a month.  Unless of course you are Kylie Jenner and know your new Shopify store will be mega-successful. 

Shifting back to the lower three Shopify plans, you can save money by paying in advance.  You can pay for 1, 2 or even 3 years in advance and save money.  This is great if cash flow is not an issue for your business.  The savings is 10% for one year and goes up to 25% for 3 years.  To pay for your plan in advance, you will need to contact Shopify support.

In summary, Shopify provides 4 different plans to choose from.  You should look at the financial cost of each plan as the higher-level plans can save significant money for higher volume stores.  Most stores will make a mostly financial decision.  While some store's decision will be influenced by features like Gift Cards.  Furthermore, if you choose to go with Shopify Plus, you should make a second financial decision on whether Shopify Payments or third party processing is better for you.

That's it for picking the right Shopify plan for your business.  Thanks for listening.