What is the right e-commerce platform for us? This is a question many e-commerce entrepreneurs wrestle with as they start their business and aim for new growth targets. In this article, we've compiled a comparison between Shopify, Magento, and custom e-commerce solutions, endeavouring to present the clear pros and cons of each option.

We selected these platforms for comparison because they are among the most popular and fastest-growing solutions for major e-commerce technology. These systems are also the ones we know best: Crasman designs and implements Magento online stores, Shopify online stores, and custom e-commerce solutions. 

Overview of the Systems

1. Shopify

Shopify is a cloud-based e-commerce platform used by over a million online stores in 175 countries. Founded in 2006, Shopify is known for its ease of use, rapid deployment, extensive feature set, and broad partner network (over 42,000 partners) that produces apps expanding Shopify's capabilities (over 6,600 apps).

Pricing

Shopify offers several pricing tiers for different online merchants: sole proprietors can start with the Basic level solution costing $39/month and can enhance the system's capabilities as their business grows. 

In addition to the monthly fee, Shopify takes a cut of purchases made through the store. Besides Shopify Payments, Shopify can be integrated with Stripe, Paytrail, Checkout, or Klarna for payment processing. Shopify charges a commission of 0.5-2% of total sales, depending on the monthly package used. The transaction costs of external payment gateways (Paytrail, Checkout, or Klarna) range from 1-3% per purchase and are best found on each payment provider's own site. It’s worth noting that payment gateway fees are the same regardless of the e-commerce platform used.

Shopify store features are typically enhanced with subscription-based apps, which also contribute to the monthly cost.

Shopify does not charge annual licence fees. Technology and maintenance costs are included in the monthly fee.

For building a diverse or more specialised Shopify store, a comprehensive partner network is available, but setting up a simple online store can also be accomplished through the browser-based graphic interface without coding.

Future Prospects

Shopify is a publicly listed company and outlines its long-term strategy in annual reports, among other things. Shopify’s strategy aims to strengthen the core platform and further expand business on top of it. Medium-term targets include continued internationalisation and the development of the POS system for retail. Longer-term goals of particular interest include building its own distribution network and offering services in wholesale and B2B e-commerce. 

Shopify Advantages

• Clear and predictable pricing

• Excellent usability

• Scalable for stores of different sizes, with room for growth

• Good interfaces

• Fully cloud-based solution

• Extensive ancillary services for e-commerce merchants via apps and the Shopify ecosystem

Shopify Disadvantages

• Relatively high costs when the e-commerce revenue is sufficiently large (0.5-2.9% of revenue, e.g., 50,000 € per year from 10,000,000 € sales at a 0.5% transaction share).

• In basic versions, Shopify's purchase funnel and functionalities are very similar (albeit highly effective), with little room for modification

• The limits of customisation are reached in Shopify’s basic versions at some point, although Shopify+ offers almost unlimited customisation options

2. Magento

Magento is an e-commerce platform offered by Adobe, particularly popular as a platform solution for medium to large online stores. Magento’s development began in 2007, and several commercial entities have been involved in its evolution. It became part of Adobe’s portfolio in 2018. Magento is available in an open-source version called Magento Open Source (formerly Community) and a commercial license-based Magento Commerce (formerly Enterprise) version. Magento can be maintained either as a cloud solution (Magento Commerce Cloud) or as a separate installation in the company’s or an external service provider’s server environment. Magento’s biggest advantage compared to Shopify and custom solutions is the abundance of ready-made functionalities, cost-effective creation of extensions, and the ability to customise virtually everything – starting from Magento’s core. Magento also offers broader basic functionalities for B2B e-commerce than Shopify. Note also Magento’s “sister product,” Akeneo PIM, intended for managing large product masses, which integrates seamlessly with Magento.

Pricing

The lowest pricing tier for Magento is achieved by installing Magento Open Source in the company’s own server environment. In this case, there is no licence fee, and the cost consists of project work related to store installation, configuration, and theme modification. The scale of the project work varies depending on the provider, quality, and desired features. Typically, Magento project start costs range from 20,000 to 30,000 euros and increase with the desired features and complexity. In addition to project work, there is a monthly hosting and maintenance cost, which, at a reasonable service level, starts from two hundred euros upwards.

The commercial Magento Commerce licence supported by Adobe can be accessed starting from 25,000 to 30,000 euros per year. Hosting solutions can be managed with similar server solutions as for Magento Open Source. The Magento Commerce licence brings a significant number of powerful functionalities and features for the e-commerce merchant.

In the Magento Commerce Cloud option, the e-commerce hosting is provided by Adobe as a cloud service. The technical infrastructure in this option is designed to be highly efficient and operates in Amazon’s AWS cloud environment with a Software-as-a-Service approach. Magento Commerce Cloud therefore provides the commercial version’s rich functionalities along with carefree and scalable cloud-based maintenance. The pricing of the Magento package is determined through negotiations but, in any case, involves tens of thousands of euros annually. Pricing is at least partly based on the annual revenue class of the e-commerce store. 

Magento reaches its full potential when the business is sufficiently large and the store’s maintenance is professional.

Future Prospects

Magento’s transfer to Adobe’s portfolio in 2018 raised many questions about its future. The system has a strong user base and, in many segments, remains a leading e-commerce platform. For new stores, the Magento Open Source version also offers extremely comprehensive functionalities without the transaction fees at Shopify's level (in Magento’s case, the transaction fee is paid to the payment service provider). Magento stores are quite freely integrable and expandable in the required direction via themes, add-ons, and interfaces.

The continuous growth of e-commerce makes Magento particularly interesting for its new owner as well. Adobe is striving to naturally integrate Magento into its other offerings (Experience Cloud, Advertising Cloud, Marketo Engage, etc.), making it a fitting option for e-commerce merchants aiming for significant growth on the horizon.

Magento Advantages

• Extensive large online store features readily available with an open-source solution

• No Magento-charged transaction fees (payment gateway still charges a transaction fee of 1-3% and a fixed fee for its service)

• Wide user base: many extensions and partners available

• Highly extendable and integrable

• Magento is fully customisable, and extending its functionalities is cost-effective

• Scales well as the e-commerce business grows

Magento Disadvantages

• Reasonably laborious to develop: developing a unique and customised store is a fairly large project

• The benefits of the Magento Commerce version can only be accessed with significant annual licenses

• Maintaining the infrastructure required for Magento requires special expertise 
  
  
  

3. Custom E-commerce Solution

A fully customised e-commerce solution remains a very popular option when the e-commerce revenue is sufficiently large, and the development needs are unique. Initially, buying software development for e-commerce may seem expensive and inefficient, but there are good reasons for this approach. Often, a custom solution is most useful when other backend systems of the business already handle a large part of the functions that a ready-made e-commerce product would offer (such as product information management, pricing, accounts, and distribution-related functions). In such cases, a ready-made product would contain much unnecessary functionality and might poorly fit the already-existing effective processes. Thus, a custom e-commerce solution is a smart choice for both cost and flexibility reasons.

A custom e-commerce solution often functions as a hub integrating several different systems and provides the finalised interface to the e-commerce end customer, while other systems handle the heavier functionalities in the background.

A solution built entirely to fit the needs also offers brands the opportunity to differentiate in a market that might be saturated with a dozen similar overall solutions built with ready-made products. A unique customer experience holds its value.

Future Prospects

The future for custom e-commerce solutions also looks bright - the transition to cloud technologies has made building scalable technical infrastructure easier and more affordable. For companies, it might also be essential to keep control of their business entirely in their own hands. Individual operators cannot feasibly influence the global winds of Shopify or Magento, but with a good partner, anything can always be done with one's own code base. 

Custom E-commerce Solution Advantages

• Full control over the central system of the business

• Flexible integration with other backend systems 

• Differentiation from competitors

• No platform-imposed transaction or licence fees (the payment gateway still charges a transaction fee of 1-3% and a fixed fee for its service)

Custom E-commerce Solution Disadvantages

• Developing a custom e-commerce solution incurs costs

• Partner selections play a vital role

• Requires skilled software development management, maintenance of the old code base, and systematic renewal
  
  
  

Systems in Comparison

Is there anything else you'd like to know? Would you like help in system considerations? Book a time here for a discussion with me to explore a suitable solution for your needs.