The rapid growth of eCommerce has been a double-edged sword. On the one hand, no borders exist for customers. Marketplaces are getting better and faster, shipping is almost instantaneous, and even returns can be done easily. But on the other hand, with the ease of setting up a marketplace, it has become more difficult to win against the competition. One area that can impact your competitive advantage is your choice of eCommerce platform.
Selecting the right platform is critical and may directly impact your future business strategy and growth initiatives. Many businesses find themselves deciding between Magento or Shopify two of the world’s most popular eCommerce platforms according to Statista. Determining the best platform for your needs can be a complicated process. To help, we have highlighted the top 7 differences between the two technologies.
Both Magento and Shopify have specific advantages, and one may be a better fit than another in certain cases. Researching both to make an informed decision is the business’ responsibility. Use this post as another data point to help you uncover differences that may matter to your business and help guide your decision-making.
How to start?
Model of Delivery
Magento is an open-source eCommerce platform that gives you access to its source code to make changes. This means that after the installation process, merchants are free to make any code changes necessary to better apply the platform to address specific use cases. The open-source software model has grown in popularity and offers many benefits including a large community of developers and the flexibility of nearly endless customization options. As with most open source technologies, customization does require a high degree of technical expertise or the engagement of an external team of developers.
In contrast, Shopify is a closed source SaaS (Software As a Service) eCommerce platform. It means that the merchant works within the standards of the platform as developed. Shopify delivers automatic updates, security patches and other technical infrastructure through its internal research and development efforts. This more traditional software model has its benefits, but as the eCommerce business grows, limitations of the closed source technology may appear. Platform support response times could be slow, merchants are limited by the functionality on the Shopify roadmap. This means that any process or capability change to the eCommerce site needed by the business has to go through the filter “Does Shopify support this?”
Cost of Ownership
Cost of Ownership or Total Cost of Ownership (TCO) is a critical measure of any business investment. In this case, the definition means the total of all costs that a merchant spends to implement and maintain their eCommerce Platform. What are those costs? Let’s see:
1. As an open-source platform, Magento does not require an initial license fee until the enterprise level. By comparison, Shopify subscriptions start at $29/month (see the latest pricing). Sounds affordable, right? But this is the basic plan, with limited functionality. For advanced users with more complex needs, the price quickly increases to $299/month. At the enterprise level, the platforms are relatively the same. Magento Commerce costs $22000/year, and Shopify Plus costs $24000/year.
2. The next cost area is transaction fees. Based on the plan level, Shopify charges merchants an additional fee for each payment made with Shopify Payments. Fees start at 2.9% + 30c per transaction on a basic plan. By contrast, Magento does not charge these fees.
Payment gateways, like PayPal or Stripe, may charge an additional transaction fee. This fee would apply to both Magento and Shopify stores because it is incurred on the gateway’s end. A comparison list of different payment gateways is here.
3. Both Magento and Shopify offer add-on capabilities. Magento calls them “extensions” and Shopify calls them “apps”. The price for both Magento extensions and Shopify apps could be as low as $30 and up to $1000 or $2000, making those add-on costs similar between the 2 platforms.
4. Domain name and hosting are also important cost components. With either platform, the merchant pays for a domain name on their own. Hosting is a different story. The Shopify subscription includes hosting, eliminating the need for additional or 3rd party hosting services.
By contrast, Magento does not offer a hosting option, so the merchant needs to purchase it additionally. In most cases, having hosting as part of the platform offering makes life easier, but not always. ECommerce-provided hosting like what is delivered from Shopify means that the merchant does not control the hosting configuration. Consider a scenario where the Shopify servers go down on Black Friday due to overload. As a Shopify customer, the merchant’s store, and all other stores operating on that Shopify server would be unavailable. Since hosting is not part of Magento, you would have worked with a custom hosting solution specific to your business with the opportunity to scale as needed. It allows businesses to separate hosting costs and have more control over the flexibility of their hosting.
5. The final TCO component is the cost of development. As mentioned previously, Magento requires a certain level of technical expertise to properly implement. Be prepared to spend on development. Without the proper technical skills, Developing an eCommerce store can be difficult. You will need to work with a development team. It will be critical to select experienced professionals to do the development correctly the first time. Re-developing a website as a result of poor initial implementation is a cost no business wants to incur. As a SaaS solution, Shopify requires no extra development work and is ready “out of the box”. With Shopify, a concern is the long-term scalability of capabilities and features. Will Shopify be equipped to address and support your business growth over the next 5 years?
Magento started in 2008, and today boasts a large ecosystem of service providers. It is easy to find an experienced Magento professional in any part of the world. Shopify started a few years earlier, in 2004, so the situation is pretty much the same. The difference between the two is that Magento, as an open-source technology, can be more complex and requires high levels of proficiency. This means that the service provider you choose must be experienced. With either eCommerce platform, take your time and ask detailed questions during the pre-sale phase of the development.
Magento also has a large development community with active forums. For example, StackOverflow is full of fixes, advice and guides. This can be useful for minor changes or simply to learn more about the product.
Magento has 7 different product types (Simple, Configurable, Grouped, Virtual, Bundle, Downloadable and Gift Card), while Shopify has only one – Simple. Why is it so important?
Multiple product types give merchants more configurable options and improve the overall customer experience. It increases the flexibility of the business and allows merchants to sell everything they can imagine online. This includes simple products and complicated product configurations with customization and different purchase options.
For example, consider a clothing eCommerce site that wants to sell both a single outfit, like a men’s suit, or parts of that outfit, such as the jacket or pants. Shopify would struggle to support that, but Magento is built for these scenarios.
Related Post: Get Familiar With All Types of Magento Products
Shopify’s licensing is such that 1 instance = 1 license. A merchant hosting multiple online stores would need to purchase additional licenses. This would also be the case for additional store-fronts as the licensing supports 1 store-front per license.
The number of stores and store-fronts available in Magento is unlimited. This capability could make the life of a merchant much easier when the business starts to grow. From a single administration panel, the merchant can manage different websites, store-fronts and catalogs. International shipping, taxing variations, currencies and payment methods are available out-of-the-box. To understand the importance of this difference, let’s review an example.
Let’s say you are a manufacturer of goods from Spain who wants to sell to Germany. By the law of the EU (Europe Union), you need to create another version of the store for Germany with the .de domain. But what if you next want to sell to the Netherlands? Magento is a much more cost-effective choice in this scenario.
Another cornerstone difference between Magento and Shopify is the management of customer groups. Shopify allows merchants to tag customers. This feature has very limited functionality and is used mostly for marketing purposes.
Magento, by contrast, offers extensive customer groups functionality. Businesses can create different prices for wholesale customers or for those who performed some required steps. Grouping customers helps with taxation, B2B clients, marketing campaigns and much more.
For the needs of B2B eCommerce Shopify offers Shopify Plus. It is an enterprise version of Shopify, which costs $24000/year. Shopify Plus includes personalized support, a set of features for a wholesale channel and advanced integrations. Unfortunately, Shopify Plus was initially designed for advanced B2C businesses, not B2B, and currently lacks some key capabilities B2B customers need. While B2B companies may be able to operate with the existing functionality, at the end of the day they will find that Shopify is not currently able to address some of the complex requirements of the B2B eCommerce model.
On the other hand, Magento has key features for B2B customers. A significant portion of critical B2B functionality is built-in and available out-of-the-box. Features like customer groups, multi-store and so on are available to simplify configuration for the businesses. The open-source nature of Magento also allows the business to expand on these features. Businesses are encouraged to develop custom capabilities to meet specific B2B needs without paying a license fee. The Enterprise version of Magento has B2B features built-in natively that align to B2B eCommerce best practices.
Both Shopify and Magento are market leaders in eCommerce. While they have significant differences and approaches to managing eCommerce, both offer clear benefits to certain business scenarios. Shopify and its SaaS-based subscription model streamline the process to start an online-store in the short–term. On the other hand, Magento and its open-source platform offer more capabilities out-of-the-box and are more scalable and customizable in the long-term.
By first clearly understanding your business’ current and long-term needs, You’ll be able to make the best product decision for your business.