What is Shopify and how does it work?

Launching an online store comes with a lot of excitement — along with a little bit of fear. You have to coordinate a ton of moving parts to bring your store to life, from setting up your website to finding and listing products to marketing and accepting payments. Shopify seeks to make managing all those processes easier by offering all those functions through one easy-to-navigate platform.

Below, CNBC Select details what you need to know about Shopify including how it works, how to get started and some pros and cons. Read on to see if Shopify may be right for your small business.

Shopify is a software-as-a-service (SaaS) platform that lets you launch online stores to sell products online. Shopify provides tools and integrations to help you manage the website, checkout and sales processes, inventory, shipping, marketing, reporting and more.

Shopify is a subscription-based service, which means you pay a monthly fee to access its features. There are four pricing plans to choose from:

Each plan comes with differing features related to shipping needs, payments, taxes and international sales. For instance, with the Shopify, Advanced and Plus pricing tiers, sellers receive up to $200 worth of shipping insurance coverage for each eligible Shopify Shipping label. However, this feature is not offered through the Basic pricing tier.

Also, markups on credit card processing fees change depending on your plan. The Basic plan has the highest markup while more expensive plans have lower payment processing markups.

Some features are consistent across all pricing tiers, like analytics, app integrations to help you manage inventory and more, integrations with social media and other lead generation channels, online selling capabilities and in-person point-of-sale systems.

If you’re worried about choosing the wrong plan for your business, you should know that it’s fairly painless to switch between tiers. Plus, Shopify offers your first month as a customer for just $1 across all plans so you get the chance to test-drive the plan you pick.

It’s also important to note that the monthly price for each tier is slightly higher if you choose to pay month-to-month instead of yearly. Monthly billing prices are as follows:

Basic: $39/month

Shopify: $105/month

Advanced: $399/month

Plus: $2,300/month (on a 3-year plan)

Shopify lets sellers manage all of their business operations, data and analytics in one place. That’s what makes it an attractive option for new business owners who don’t have the time or money to master multiple third-party systems.

With Shopify, you can launch a sales page, manage inventory, view sales data, connect to marketing channels and even offer customer discounts all through the same platform. Here’s how it works and how you can get started.

Sign up for Shopify

When you first sign up for Shopify, you’ll start by answering a few questions about how you plan to run your business — questions like, “Are you just getting started or are you already selling?” and, “Where do you plan to sell?” Just answer them to the best of your ability so Shopify can tailor the experience based on what you plan to sell.

You’ll then be prompted to create a Shopify account using an email address and password. New users get to take advantage of a three-day free trial that doesn’t require inputting their credit card information. Once the trial is over, you’ll choose a plan and be charged $1 for the first month.

Review some basic steps for setup

The Shopify dashboard opens with a checklist of steps to help you launch your store and begin selling. Steps include things like adding your first product to your store, customizing your store, linking Shopify to your store’s domain (this is the URL that directs people to your website), naming your store, choosing a plan, setting your shipping rates and setting up Shopify Payments so you can accept and process credit card payments. The setup process also allows you to place a test order for a product so you can ensure things are running smoothly.

Select a theme

The platform offers several free themes to get you started. Paid themes can range in cost from $140 to $450.

Once you decide on a theme, you can install it with just a click and then begin customizing it on your dashboard. You can upload a logo for your store, change the store colors, letter fonts and even include your social media handles so visitors can find you on Instagram, TikTok, Facebook, Twitter, Pinterest, Snapchat and other sites.

Below is a snapshot of an example custom merchandise shop I’m building through Shopify. I selected the free Spotlight theme and created a logo for the store and uploaded it onto the site. Then I enabled the main menu display underneath the logo.

When customizing your store, always remember to hit the “Save” button periodically, otherwise when you navigate to a different page all your progress will be lost.

Add your domain name

Your domain name, or URL, the address of the website your customers will visit. When you first sign up for a Shopify account and start working on your store, your shop’s domain name looks like a string of letters and numbers ending in .myshopify.com. You’ll want to change this so your domain name is more reflective of your brand and what you sell.

You can buy a domain name through Shopify or through another website hosting service like Bluehost or GoDaddy and connect it to Shopify. Note that when you buy a domain name — whether it’s through Shopify or somewhere else — you’ll need to pay a yearly fee to keep it.

The domain I entered into Shopify costs $15 per year. When you type in your desired domain, Shopify will tell you whether the name is available and provide other options for your domain based on small tweaks — like adding extra words to your domain name or using .org or .net (this can affect the yearly price you’ll pay).

Include information about your store

To make your online business enticing and understandable to your customers, you’ll need to include a homepage title and meta description of your shop. The meta description is a short summary that appears under the homepage title in Google’s search results. It tells you what you can expect when you visit a website.

You’ll also want to include an image or logo that will show up every time you share the URL for your store.

Pick your products

One of the most important parts of the process involves deciding what you’ll sell and for how much. If you’re selling apparel, for instance, you’ll want to come up with a product title that accurately describes the item and fill in additional information on what customers can expect from the product.

Below, I created an example listing for a themed bachelorette party hoodie. If you don’t know what to include in the description, the platform has a handy AI-generated text tool. All you need to do is input a few short phrases and keywords about your product and its material and Shopify will generate some text for you. I used keywords like “relaxed fit,” “cotton,” “hoodie” and “bachelorette party” to generate some text for my description.

This is also where you’ll want to include some product shots or mockups to help people see the product in action and get a better understanding of what it will look like in person. If you’re selling apparel, some great shots to include would be models wearing your items. If you’re selling a gadget, tool or household item, get some shots of the product styled by itself and being used.

Here, you’ll also want to set the price for your listing and include any variants. Variants are common when selling apparel since not everyone will be ordering the same size or color. You can add options for variants based on several clothing features like size, color, fabric, neckline, target gender and target age group.

Set your shipping rates

Most online stores charge a fee to cover shipping. When setting your shipping rates, keep in mind your location and how far you may be shipping your products. International shipping likely cost more so be sure to account for these expenses.

Shopify offers a set of shipping rates that you can edit.

Set up Shopify Payments

This step ensures you can accept and process payments online. To set up Shopify Payments, you’ll need to select it from the setup checklist and choose what payment methods to add. PayPal is automatically included as a payment method but you can add more by typing in the name of the method. Typing in “credit” for example populates the major credit card providers like Discover, Mastercard, Visa, Diners Club and more.

You can also accept buy now, pay later (BNPL) services by typing in the ones you wish to accept.

During setup, Shopify Payments will ask for some basic information about who you are — like whether you’re selling as an individual, a registered business or a non-profit, as well as your address and identifying information.

Then you’ll proceed to add a bank account in the banking information section (so you can receive money from your sales). Bank accounts are connected to Shopify through Plaid, which is another platform that lets users securely connect their accounts to other websites to share information.

Launch your store

Once you’ve set up your account, customized your store and added your products, you’re pretty much ready to launch.

Remember that you must select a paid plan in order to launch, otherwise your shop won’t be viewable to the public. But before you do that, use the test order feature to make sure everything’s running smoothly before you launch.

Pros

• Get the first month for $1. It’s nice to have a (nearly) free month (plus three days from the free trial) to test out the site and see if it suits your needs. Try to make the most of this time by trying out as many features as interest you before you have to start paying a regular subscription fee.
• Easy to use. Shopify is fairly intuitive to navigate and use. You can sign up, customize your website and start listing products all within a few hours, and you don’t need to have any knowledge of coding.
• Multiple selling channels. Shopify offers multiple ways to sell, including online, in-person and through other platforms and apps like Shop.
• Create customer discounts. The platform lets sellers create their own discounts and accept gift cards. Specific discounts supported include an amount off a product, an amount off an order total, free shipping and “buy X get Y.”
• Many different app integrations. Shopify already comes with a lot of features, but it also allows you access to apps that integrate with the platform that can help with social media marketing, inventory tracking, dropshipping and more.
• Offers resources. Shopify has a blog to help e-commerce business owners with everything from ideation to getting started to marketing their products. There are also several handy start-up guides to walk you through different aspects of the platform.

Cons

• Short free trial period. Some competitors like BigCommerce offer longer free trial periods compared to Shopify’s.
• Basic free website themes. While Shopify offers both free and paid themes, there are currently just over a dozen free themes and many of them are fairly basic. For more dynamic themes, you’ll need to shell out some extra cash.

Signing up for Shopify is very easy and just takes a few minutes. Simply go to the Shopify website and click on “Start free trial” in the upper corner. You’ll answer a few short questions about the type of business you want to run and then be prompted to enter an email address and password.

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