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How To Make Money On Shopify


How To Make Money On Shopify 31.10.2019Leave a comment
How To Make Money On Shopify

What is Shopify, and how does it work?

Shopify is an online e-commerce platform that helps individuals start, develop, and manage their business. Users are given the opportunity to create their online stores and are offered with plenty of options for customization.

Selling can happen in multiple places such as on the internet, social media, brick and mortar, and pop-up stores. Shopify will help you with managing your products, inventory, payments, and shipping. Since this platform is hosted and cloud-based, the only thing you need to worry about when using Shopify is having an internet connection.

The monthly prices of subscription are $29, $79, and $299 for basic Shopify, Shopify, and Advanced Shopify, respectively. The pricing plans have different features, so feel free to read more about the differences. You can also choose to try the platform on a 14-day free trial.

Pricing
Pricing

You don’t really need to be a web designer or developer to customize your online store as Shopify has got an online store builder and themes for you.

Shopify is available in all countries. Although the admin language of use is limited to 19 widely spoken languages, the interface that customers will access can be set up in any language.

What do you need to start selling with Shopify?

All you need is to have a product to sell and register with the platform with a suitable pricing plan. If you don’t have products at the moment, you can also go for dropshipping with Shopify, which just means that your customers’ orders will be shipped directly from your wholesaler to them.

We will explore dropshipping in more detail later in this article. And, as mentioned earlier, Shopify lets you sell in all kinds of locations, whether online or in person.

How do payments work on Shopify?

You are free to accept your payments in your customer’s preferred method if the third-party payment intermediary is supported by Shopify. You can look up the list of supported intermediaries by region and countries in Shopify’s payment gateway list.

Payments
Payments

Shipping with Shopify

You can ship your products yourself. However, if you do not want to be involved with any shipping or you have difficulties shipping all of your orders, you may also use third-party fulfillment services and get service organizations to do the job for you.

Shopify features

You can benefit from the features that Shopify provides to customize your online business to your own will.

Features
Features

Shopping features – gives you the ability to set up a shopping cart, enable credit card payments, calculate shipping fees and calculate VAT tax automatically and send reminders to customers to complete checkout on the outstanding products in their shopping carts.

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Product features – this includes tools that help you upload pictures, customize them, and write descriptions for these products.

Phone compatibility – you can also choose to add this feature to enable your customers to access your website with an interface that is compatible and convenient with mobile phones.

Access for staff – you can also enable your employees to access your Shopify page and make amendments. Different levels of access are possible to limit the amendments that your staff can make.

Templates and themes – there a very large number of these available in Spotify. Some are free of charge, and some require a payment. You can customize the design of your website using these themes and templates. This is a very good tool to attract your customers to your website visually by making it easy to read and easy to navigate.

Business models for Shopify

There are quite a few entrepreneurial models that you can use to do business with Shopify. They come with their advantages and disadvantages, so I would like to help you compare them and select the best one for your business.

Selling your own products

This is one way of making money on Shopify. You might be trading currently, but you would like to optimize some of your business functions and make them easier.

Or you think you have a talent in producing some products, whether standard or customized. This e-commerce platform could be your solution in setting up a business very quickly with minimal initial costs.

Shopify
Shopify

This is the method that gives you the most control over your business processes because you are the one who makes and holds the inventory. This would give you a better edge over timing issues. What’s more is you will make better margins over your products, because you will be the first-hand seller.

Pros

  • More control over business processes
  • Higher profit margins
  • Use your talent to make money

Cons

  • You need to put in a good deal of effort
  • You bear the risk of not selling your products

Dropshipping

Firstly, to understand dropshipping, this option enables you as a businessman to sell products, which you never see or own. As your customer gives an order, you give another order to a supplier, who then ships the order, but directly to your customer.

Dropshipping
Dropshipping

Advantages of dropshipping

The biggest benefit lies in the very definition of dropshipping, which is that you don’t keep inventory. Most businesses cannot start operating unless they have an adequate amount of investment in their working capital (which includes inventory). Inventory is required to keep the business running because traditionally, businesses have needed their goods to be ready as they received the order. With dropshipping, however, you only buy a product when you have already been paid by the customer, who doesn’t really care how you acquire your supplies.

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The operations become drastically easier with dropshipping. You may be surprised by the number of operational efficiencies that this method can offer. Except for not holding inventory, which implies not owning a warehouse, you will also stay away from packing and shipping, handling returns, and tracking inventory levels for accounting purposes. These perks translate, of course, into financial benefits in the form of decreased overhead expenses since you need fewer resources and employees to manage a business, probably from home or a single room in an office.

Don’t stop reading as we are not yet finished discussing the benefits of dropshipping. Another group of benefits provided by the very nature of dropshipping relates to the scale of your business. As you increase your business scale and grow, you will either sell more quantities of individual products or expand the selection of these goods.

In both cases, the marginal increase in the complexity of your operations will be too low. With a traditional business, if you want to offer a new product, you will need to purchase at least some quantity of this product to make it available for sale.

Meanwhile, dropshipping doesn’t require you to invest this additional capital, but only requires if you to do business with a new supplier. Even if your quantities increase, you are not handling any products anyway, so the complexity of more operations will be burdened on your suppliers.

Disadvantages of dropshipping

On the other hand, the biggest shortcoming of this type of business model is the low profit margins. Setting up a dropshipping business is fairly easy, and you will definitely face heavy competition with businesses that operate at minimal margins in an attempt to boost their revenue and acquire as many customers as possible. The other reason for low profit margins is that you are an intermediary between a supplier and a customer, so the supplier will already sell you the product with their own markup.

Other complications may arise with inventory management. Even though you will not own or hold any, you can never be sure if your supplier still has the needed products in stock. One solution is to synchronize your inventory to the system of your supplier, but this will not always work as some suppliers will refuse to share their information, and if they do, you will need additional technology to make this possible.

Shipping costs for multiple products from different suppliers within a single order may also become an issue when charging your customers. The shipping costs will need to be calculated automatically for the different products, and customers may not be happy with being charged a combination of few shipping costs within a single order.

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Last, but not least, your control over the shipping process is not as high as with traditional business models. There will be situations where you will have to face problems, which were not caused by your fault, but rather by your supplier’s fault. The order may be delivered late, or the wrong products can be shipped to the customer, but you are going to be the one to deal with the end customer and not your supplier.

Here is a summary of the pros and cons of dropshipping.

Pros

  • Low or no working capital investment required
  • Easy to set up and operate
  • Low overheads
  • Flexible location
  • Easy and cheap to scale up your business

Cons

  • Low profit margins
  • Inventory tracking is difficult
  • Multiple shipping costs within a single order
  • May have to deal with customers because of the supplier’s error

Dropshipping from China

Now that you are familiar with the business model of dropshipping, I would like to draw your attention to Dropshipping from China. This country is a phenomenal place in terms of manufacturing as they can produce products very cheaply, giving customers good value for money. This leaves room for a higher markup on price compared to having your products manufactured elsewhere.

Chinese manufacturers have learned how to produce even the most complicated products. As soon as Apple produced its Airpods, Chinese manufacturers came up with an extremely cheap alternative solution. Of course, the quality is not the same, but it’s so much more affordable, and the product is completely usable as well. As both a corporate buyer and an individual buyer, you should know that the Chinese manufacture anything you like, so the variety of their products can be as large as you can think of. Good advice is to order the product you want to sell first, test the quality, and see if it’s worth selling.

As a nation that really likes to work hard, these Chinese producers will deal with your customers in most cases. They will even contact your customers directly to settle issues related to the product and delivery.

Pros

  • High profit margins, because goods from China are cheap
  • A large variety of products
  • Most producers will handle issues with your customers directly

Cons

  • Some goods have poor quality
  • Shipping may take a long time

White labeling

This is a really nice way of doing business with Shopify. It’s similar to dropshipping, but this time your products are manufactured for your brand only. Let’s say you want to sell your own line of shampoos. These manufacturers will produce the shampoo for you and will put your name and logo on the product before shipping.

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White Label
White Label

This way, customers will become more familiar with your brand and will identify your products directly with your company, and there is some room for customer loyalty. This also implies that you can price your products slightly higher thanks to the branding component. So, the profit margins may be above those of dropshipping.

Nevertheless, some negative sides of white labeling also exist. Doing branding, designing a logo, and this kind of tasks can be time-consuming and somewhat expensive. Owning a brand, having third party manufacturer and shipping your products may raise additional problems. Errors caused by your suppliers may have a serious impact on your brand, so you will also need to be extra careful about your reputation.

Pros

  • Enables brand recognition and customer loyalty
  • Higher profit margins than with dropshipping

Cons

  • Branding can be time and money consuming
  • Manufacturer’s errors can be detrimental to your brand name

How to increase traffic in your Shopify online shop

The most convenient and cheap ways of advertising these days are to go for online options. Especially if you are planning to launch a business with an online shop, it’s easier to make your store visible to the customer on the web, in order to help them access your online store by a single click on an ad.

Facebook

Advertising on Facebook has become increasingly popular, with the social media giants offering a variety of features to your ad campaign. It is no secret that Facebook receives a colossal amount of traffic of users, which will enable you to target a very large audience.

Facebook ads give you plenty of room for getting creative. Anything you can imagine is possible to incorporate into your ad, including pictures, videos, and maps. Another great option that Facebook gives you is to limit your spending by selecting options like display your ads every 2 days, or several times per day. So, depending on your budget, you can choose different frequencies of displaying your ads.

However, the best part of advertising on Facebook is that you can target specific groups of people. Let’s say you are advertising college books. Of course, you would want your ad to be viewed by college students and not by people who have no interest in your product. So, instead of displaying the ads randomly, Facebook will target the audience specified by you.

Google

Google is the number one website in the world that gets the most traffic. No other website is close to reaching the heights of Google. So, abundance is not really a problem when advertising with Google.

The company is quite specialized in data science, and your ads won’t be displayed to users randomly. Google makes sure that they advertise products that are likely to be interesting to the viewer by analyzing the shopping and search patterns of that individual.

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There are also other social websites that you can advertise your product on, depending on which gets the most traffic by your target audience. Instagram, Twitter, LinkedIn, and Pinterest are also websites with high traffic. However, note again that you should mainly choose the website by analyzing which of these sites are used most by your customers.

Our verdict

If I were to recommend you either to use or not to use Shopify, I would advise you to go for it. Considering how much of your costs it will save you, the prices are very affordable. It gives you the opportunity to do business and fulfill your dreams and helps you with the process. The tools and features it provides are absolutely incredible, and the good thing about it is that you can get all these online business management tools from one place – Shopify.

You do need to be careful about how you use this platform to your advantage. Weigh the pros and cons of each business model and choose the right one for you. Choose the method, which you would like to use for advertising and link the ad to your online store created by Shopify. Make these right choices, and you’ll fulfill your dream of doing business with ease.

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Andrei Shilkov

Blog author. I am well versed in Finance and Digital Marketing. I have two bachelors degrees in Finance. Born in Russia, but later moved to the USA, to western Pennsylvania, the city of Pittsburgh. I have a Certified Public Finance Officer (CPFO) certificate. I also worked at IRS and Microsoft.

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