How Does Shopify Work?

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how shopify works

If you’ve ever thought about starting an online store, you have probably heard of Shopify. Perhaps you’ve even run into Shopify while doing some online shopping yourself. But if you haven’t heard of it, you’ve probably already guessed that Shopify is a tool that helps to build an online store.

Let’s dive a little deeper into the world of Shopify, learning exactly what it is, how it works, and who it can be beneficial for. 

What is Shopify?

To put things simply, Shopify is a type of e-commerce platform. If you were to look up ECommerce in the dictionary, you would find this definition: “Commercial transactions conducted electronically on the internet.”

In simpler terms, ECommerce refers to any transaction or payment that is made online. Anytime you purchase something on Amazon, eBay, or another website, you are engaging in a form of ECommerce. 

The main difference between Shopify and other ECommerce websites like Amazon and eBay is that Shopify is a specialized ECommerce Platform. While Amazon and eBay are great places to sell products, they don’t allow you to create your own space.

When you sell on platforms like these, most people who come across your products are looking for that specific product – not searching for your store or products.

On the other hand, Shopify allows you to set up your own online store and promote your brand. Once your name has a positive reputation, people can come to your “store” and shop right from their own homes. 

Shopify is a specialized ECommerce Platform that provides you with everything you need to create your own online store. It provides business owners with everything they need to create their store, showcase their products, promote their brand, accept payments, engage customers, and so on. 

How Does Shopify Work?

The main draw behind Shopify is its ease of use. With Shopify, you can have your own online store up and running in just a matter of minutes. It provides all the tools that you need to create your brand, display your products, and sell and collect payments with ease.

Unlike traditional websites that require designers and programmers to set up, Shopify gives you everything you need to do it all on your own. This saves you a great deal of time, and even more so, a great deal of money. 

Here’s how it works in a simple step by step guide:

Step 1: Sign up for an Account

The first step to setting up your Shopify account is to tell them a little bit about your business. The more details you know, the better they can customize your interface to make creating your website as simple and as straightforward as possible.

Though it isn’t necessary, we highly suggest that you start with a free trial. All of Shopify’s plans come with a 14-day free trial, and this gives you the opportunity to test if it is the right fit for you and your business. 

To do this, head to the Shopify homepage and select “Start Free Trial”. Here you will be asked to enter your email address, create a password, and select a name for your store. Once you’ve entered your details, you’ll be asked a series of questions like:

  • Are you already selling?
  • What is your current revenue?
  • What industry will you be operating from?

The more honest you are and the more details you can provide, the better Shopify will be able to customize your store for you. 

Once you’ve answered your questions, you’ll be asked to enter your address so that you can get paid. And that’s it – once you’ve entered all of your information, you can now start building your store!

Step 2: Learn more about the Setup Process

Once you’ve signed up, now’s the time to start building your website. As soon as your setup is completed, you will be directed to your Shopify Dashboard.

On the left-hand side of the Dashboard, you will find your main menu. This is where you can go to review orders, add or review products, manage your customers, and focus on marketing or analytics. This self-guided, easy-to-understand menu allows you to work on customizing your website at your own pace. 

With the 14 days free trial, you will be able to set up your store and explore most of the features of Shopify. With that being said, you won’t be able to make your store visible to others or process payments until you purchase a plan.

You can utilize the 14-day trial plan to acquaint yourself with the design features of Shopify and see what your store will look like before you decide to actually launch.

If you aren’t ready to dive right in and start working by yourself, you can also use Shopify’s self-guided setup for your store. Their guided setup will help you step-by-step as you add your products, customize your theme, add your domain, and set up payments for your store. 

If you want, you can also check out some of Shopify’s tutorials and help options. You can find tutorials and help articles at Shopify’s Help Centre, or use their step-by-step guided compass to learn how to set up your store.

Shopify also offers plenty of other self-help and self-learning options, including a large online community and video courses taught by industry experts. 

Step 3: Start Building Your Website

Shopify’s Dashboard makes it easy to build your website. Let’s take a look at some of the tools they offer to help you get started:

  1. Add Your Product

Starting on the “Home” page of your dashboard, you are given the option to “Add Products”. This is a great place to start building your store. To do this, simply click on the “Add Products” button. From here, you will be taken to another page where you will be asked to fill out the information about your product. You will be asked to add:

  • A Title
  • A Description
  • Product Photos
  • Product Price
  • Inventory Information
  • Shipping Information
  • Customs Information
  • And any information regarding customized options for your product.

When adding your products, always be sure to click “Online Store” in the right-hand menu. This will ensure that your product is displayed on Shopify. 

You can also use this part of the Dashboard to help Organize your products. In the right-hand menu, you will see an “Organization” option. Here you can organize your products by type, vendor, or collection.  

When finished creating and organizing your product, you can save it as a draft or publish it. When you publish your product it means that potential buyers can now see it. If you aren’t ready to publish, you can save your product as a draft to continue editing and publishing later.

You will find these options under the “Product status” portion of the 

“Add Product page” (on the right hand side). 

  1. Customize Your Theme

Once you’ve added your products, you can now customize your theme. This is also done on the “Home” page of the Dashboard. Under “Design Your Store” you will find a button that says “Customize Theme”.

Clicking on this button will allow you to add your logo, change your colors, and add images that you would like to reflect your brand. You can browse through a variety of free themes to use for your store, or you visit the Theme Store to shop through even more themes that may fit your brand better.

Once you find a theme you like, click “Add Theme to Library”. This will download the theme for you. If you would like to use it for your site, click on the actions button next to the theme and then click “Publish”. You can click on the “View your Store” button to preview your newly themed page. 

When ready, you can click the “customize” button to start customizing things like the header, the image banner, the text, and any collages. You can also use this to customize your catalog and your contact page. 

One of the best things about Shopify is that every aspect of your page is customizable. You can save your changes and preview as you go until your page is exactly what you visualize it to be. 

  1. Add your Domain

Now your page looks the way you want it to look to portray your brand. It’s time to connect your domain. A domain name is an address that people can type into the search bar to find your page. “www.Shopify.ca”, for example, is Shopify’s domain name. 

You can do this from the Homepage of your Dashboard. Click on “Add a Domain”. 

From here you have the option to connect to an existing domain, transfer a domain, or buy a New Domain. If you wish to buy a new domain, simply click on “Buy New Domain” and enter the address of the domain you have in mind.

The search tool will let you know if that domain is available and how much it will cost to buy. If not available, it will also provide you with a list of similar alternatives that are available. 

When you find a domain name you like, click on “Buy”. If you already have a domain that you would like to connect to, you can do that as well. 

  1. Set up Your Shipping Options

The next task you should tackle is setting up your shipping options. Under your Home page, click on “Set up Shipping”. When you click this button, you will be redirected to a page where you will be guided to set up all of your shipping preferences.

Here you can choose where you will ship to and how much you will charge for shipping rates. You can set how much you will charge for General shipping, Domestic shipping, Cross Border shipping, and shipping to the rest of the world.

You can also set up custom shipping rates for specific products and turn on backup shipping rates if anything goes wrong at checkout. 

You will also enter your package sizes on this page, set up a local pickup address (if applicable), and set up carrier accounts. Shopify also allows you to purchase discounted shipping labels and create custom packing slips for fulfilled orders.  

Step 4: Checkout the Dashboard Panel

In your Dashboard Panel, along the left-hand side of your dashboard, you will find your Home tab as well as several other tab options, including orders, customers, products, analytics, and so on. Let’s take a quick peek into each of them:

  1. Orders 

Unfortunately, you won’t be able to make any sales with your 14-day free trial. Therefore, you won’t be able to view anything on your order page either.

With that being said, if you do decide to sign up for a plan, you will be able to view everything related to your orders under this tab. Under the “Orders” tab, you will be able to:

  • View an order
  • View an orders history or timeline
  • View payment details related to an order
  • Check the currency of an order
  • Add tags, notes, or edit an order
  • Edit customer information related to an order
  • Contact a customer about an order or send an email
  • View an order status

You’ll also be able to use drafts to take orders over the phone and view what items have been put into a cart but haven’t been checked out. 

  1. Products

We already entered some of our products in step 3, but you can add and edit your products anytime you like using the “Products” tab. In this tab you can add product titles, descriptions, and photos.

You can also add or edit product prices, inventory and shipping information, and product options. Shopify also allows you to preview what your search engine listing will look like for SEO purposes. 

Under the Products Tab you can also:

  • Keep track of your inventory
  • Manage incoming inventory
  • Manage and edit your collections
  • Sell and issue gift cards
  1. Customers

Anytime a customer places an order in your store, their information is automatically added to the customer list. After that, you can manage their information and create profiles under the “Customer” tab on your Dashboard.

Under this tab, you can add, edit, and manage customer profiles, send customers emails, or send them discount offers. You can also create mailing lists and create customer groups. 

  1. Analytics

Analytics can be defined as, “the process of discovering, interpreting, and communicating significant patterns in data”. It tells us important information that is relevant to improving our business. 

Who has been referring to your store? Where are your customers from? What are your most popular products? These are all things that you can learn from your Shopify Analytics. 

When you open the Analytics Tab on your Dashboard, you’ll be presented with an array of data about your Shopify store. You can explore your Shopify Analytics page to discover:

  • How many sales you have made over time
  • How many visitors you have had at your store
  • Percentage of customers that return for a second purchase
  • How many items have been added to a cart or reached checkout
  • Your conversion rate
  • Your total order value
  • The average value of an order
  • Where traffic is being generated from
  • Where sales are being generated from 
  • Top landing pages

And so much more. So when you need information and data pertaining to your store, your Analytics Page is where you will go. 

You can also use this page to view reports regarding your sales, acquisition, orders, profit margin, customers, behaviors, finances, marketing, and inventory. 

  • Acquisition Reports

Acquisition reports focus on customers that have visited your store. Your Acquisition report will tell you how many visitors you’ve had over time and how many sessions each visitor has had. It will also tell you the geographic location of your visitors and where your visitors are being referred from.

This is especially useful information if you are using specific marketing efforts like social influencers. Your analytics can tell you which influencers are driving traffic to your page and how many are converting to sales. 

  • Behavior Reports

While Acquisition reports focus on where your visitors and customers come from, behavior reports focus on what those visitors do while on your page.

Behavior reports will tell you your most popular landing pages, what people are searching for, what type of device your visitors are using to search, and what type of marketing campaigns attract your visitors.

They will also tell you the speed of your online store, your conversion rates, and product recommendations based on searches and visitor behavior. 

  • Sales Reports

Shopify’s sales reports tell you everything you need to know about your sales over time. In this section of Shopify you can learn more about what products interest your customers and which ones aren’t selling. You can view your reports by channel or by individual product. 

  • Order Reports

As you would expect, Shopify’s order reports give you analytics regarding your orders. In this section of your reports, you can see your order volume and your order fulfillment, and information regarding shipping, delivery, and returns.

Depending on your needs, you can view information regarding your overall orders or view data regarding a specified period of time. 

  • Profit Reports

Shopify’s profit reports tell you data regarding your profit margins. You can view your profit per product, by product variant, or by point of sale location on this page. This page will also give you data regarding discounts and refunds. 

  • Finance Reports

Shopify’s Finance Reports will help you find key information regarding your Shopify store finances. You can find details related to your total sales as broken down into sales, shipping, and return amounts on this page.

You can also find information regarding how payments are being made (i.e. Paypal, credit card, etc.). You can view reports for specific channels or across all channels. 

In the sales section of your financial report, you can find information pertaining to your gross sales, discounts, returns, net sales, shipping, and taxes. You can also find information regarding liabilities and gross profit. 

  • Marketing Reports

If you want to learn about the effectiveness of your marketing campaigns, your marketing reports are where you will turn. Shopify’s marketing reports will tell you which marketing campaigns are driving the most traffic and conversions and which ones aren’t working out so well. This will help you better understand where your marketing efforts should be spent and where you can save your money. 

  • Inventory Reports

If you are on a Shopify Basic Plan or higher, you will have access to inventory reports. These reports can help you track your end-of-the-month inventory and how much is being sold daily. On your inventory reports you can:

  • View your month-end inventory snapshots
  • View your average inventory sold each day
  • View your percent of inventory sold
  • View and ABC analysis by product. 

Step 5: Sign up For a Plan

Okay, so now we know everything that you can do with Shopify. If you’ve already set up your store, you’re almost ready to start selling. You can use your 14-day free trial to set up a store and explore everything that Shopify offers, but you won’t be able to sell your products on Shopify until you purchase a plan. 

Shopify offers three different plan options: The Basic Shopify Plan, The Shopify Plan, and the Advanced Shopify Plan. Some Shopify features are included within all plan types.

All three plans, for example, include an online store, a blog, a website, and 24-hour customer support. All plans allow you to sell on different account channels and load an unlimited number of products.

All Shopify plans also include manual order creations, discount codes, free SSL certificates, abandoned cart recovery, and gift card options. 

Here are the differences that you can expect between the three plans:

The Basic Plan

The Basic Shopify Plan costs $29/month and is recommended for those just starting out as an e-commerce business. The plan allows access to 2 staff members and allows you to assign up to 4 inventory locations.

Unfortunately, the basic plan does not create reports for you, nor does it include the calculation of third-party shipping rates. The Basic plan allows you to sell in up to 133 different currencies but does not include international domains or pricing. 

The Shopify Plan

The Shopify Plan costs $79 per month and is recommended for those looking to grow their in-store or online business. The plan allows access to 5 staff members and allows you to assign up to 5 inventory locations.

The Shopify Plan includes standard reports but does not include the calculation of third-party shipping rates. You can sell in 133 different currencies, and international domains and pricing are included. 

The Advanced Plan

The Advanced Plan is quite a jump from the other plans, starting at $299 per month. With that being said, it is Shopify’s most comprehensive plan and includes all of Shopify’s advanced features and tools. This plan is recommended for booming businesses that require advanced reporting. 

With the Advanced Plan, you can allow access for up to 15 staff members and can assign up to 8 inventory locations. Reports included in the plan are advanced and third-party calculated shipping rates are included.

The Advanced Plan includes international domains and pricing and per variant international pricing, which is not included in the other two plans. 

Basic PlanShopify PlanAdvanced Plan
Cost$29/month$79/month$299/month
Staff access2 members5 members15 members
Inventory Locations458
ReportsNot includedStandardAdvanced
Third-Party Shipping Rate Calculations
International Domains and Pricing
International Pricing (per variant)

What is Shopify Lite?

If you’re not looking to build an online store but simply want to add a sales element to your website, Shopify Lite may be a better option for you. With Shopify Lite, you can turn any website into a sales website.

The Lite plan, for example, allows you to add a “buy” button to any site, including social media pages and blogs. The Lite Edition of Shopify allows you to add Credit Card Payments anywhere and can help you create invoices to get paid. It offers 24-hour customer support and costs only $9 per month. 

What is Shopify Plus?

Shopify Plus is for large businesses that are already bringing in a significant profit each year. It is used by some of the world’s biggest brands, including Pepsico and Unilever. The plan costs $2000 per month but includes all of the features of a regular Shopify plan plus much more. 

The Shopify Plus Plan includes various special features like Shopify Flow that allow you to add animation to your page. It also allows unlimited selling opportunities, unlimited bandwidth, unlimited staff accounts, insightful data reports, and so much more. 

Should You Use Shopify?

The best part about Shopify is that it has a plan that can benefit anyone. With plans starting at just $29 a month, even businesses that are just starting out can utilize Shopify to start selling online.

If you aren’t sure whether Shopify is for you, take advantage of their free 14-day trial to test it out. There are no commitments, and you can use this time to see whether or not Shopify is the right choice for your business. 

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Kareena Maya

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Kareena Maya is a freelance writer focused on the personal finance and travel spaces. He frequently writes about credit cards, banking, student loans, insurance, travel rewards and more. His work has been featured in publications such as Forbes Advisor, Bankrate, Credit Karma, Finance Buzz, The Ascent and Student Loan Planner.

Kareena Maya is a freelance writer focused on the personal finance and travel spaces. He frequently writes about credit cards, banking, student loans, insurance, travel rewards and more. His work has been featured in publications such as Forbes Advisor, Bankrate, Credit Karma, Finance Buzz, The Ascent and Student Loan Planner.