What is the right e-commerce platform for us? E-commerce merchants grapple with this question as they start their business and aim for new growth goals. In this article, we have compiled a comparison between Shopify, Magento, and a custom-built e-commerce platform, striving to present clear pros and cons for each option.

We chose these platforms for comparison because they are the most popular and fastest-growing solutions for large e-commerce technology needs. These are also the systems we know best: Crasman designs and implements Magento e-commerce stores, Shopify e-commerce stores, and tailored e-commerce solutions.

Overview of the Platforms

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 renowned for its ease of use, quick setup, extensive range of features, and a broad network of partners (over 42,000 partners) that produce applications (over 6,600 apps) to extend Shopify's capabilities.

Pricing

Shopify offers several pricing levels for different e-commerce merchants: sole entrepreneurs can start with the Basic solution costing $39 per month and can expand the system's capabilities as the business grows.

In addition to the monthly fee, Shopify takes a share of purchases made through the online store. Apart from Shopify's own payment gateway, Shopify Payments, it can integrate Stripe, Paytrail, Checkout, or Klarna for payments. Shopify charges a commission ranging from 0.5% to 2% of total sales, depending on the monthly package used. The costs associated with external payment gateways (Paytrail, Checkout, or Klarna) vary between 1-3% per purchase and can be best found on each payment provider's own website. It’s worth noting, however, that payment gateway fees remain the same regardless of the e-commerce platform used.

Shopify store features are typically enhanced with monthly subscription apps, which also contribute to monthly costs.

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

A comprehensive partner network is available for building a versatile or more specialised Shopify store, but setting up a straightforward online store can also be done through a browser-based graphical interface without coding.

Future Outlook

Shopify is a publicly listed company and reveals its long-term strategy, for example, in its annual reports. Shopify’s strategy is to strengthen the platform at the core of the company and further expand the business upon it. Shopify sets further internationalisation and the development of the retail POS system as its medium-term goals. Longer-term goals include the construction of its own distribution network and offering services to wholesale and B2B e-commerce sectors.

Shopify Pros

• Clear and predictable pricing

• Excellent usability

• Scales for e-commerce stores of various sizes, allowing for growth

• Good interfaces

• Fully cloud-based solution

• Extensive ancillary services for e-commerce traders through applications and the Shopify ecosystem

Shopify Cons

• High costs when e-commerce revenue is sufficiently large (0.5-2.9% of revenue, e.g., a 0.5% transaction share from €10,000,000 sales amounts to €50,000 annually).

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

• The limits of customisation are reached at some point in Shopify's basic versions, but Shopify+ offers almost unlimited customisation possibilities

2. Magento

Magento is an e-commerce platform offered by Adobe. It is particularly popular as a solution for medium and large e-commerce stores. Magento's development began in 2007, and several commercial entities have been behind its development. Magento ended up in Adobe's portfolio in 2018. Magento is available as an open-source Magento Open Source version (formerly known as Community) and a commercial licensing fee-based Magento Commerce (formerly Enterprise) version. Magento can be maintained either in 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 a custom solution is the large number of ready-made functionalities, cost-effective creation of extensions, and the ability to ultimately customise everything — starting from Magento's core. Magento also offers broader basic functionality for B2B e-commerce compared to Shopify. Also worth noting is the Magento “sibling product” Akeneo PIM system for managing large product masses, which seamlessly integrates with Magento.

Pricing

The lowest level of Magento's pricing is achieved by installing Magento Open Source in the company's own server environment. In this case, no licensing fee is incurred, and the cost consists of project work related to the store's installation, configuration, and theme modification. The scale of the project work varies depending on the entity, quality, and desired features. Typically, the initial cost of Magento projects starts from €20-30 thousand and increases with desired features and complexity. In addition to project work, there are monthly hosting and maintenance costs, which, at a reasonable service level, start from €200 upwards.

The commercial Magento Commerce license supported by Adobe can be obtained starting at €25-30 thousand annually. The hosting solution can be managed with similar server solutions as Magento Open Source. The Magento Commerce license brings a significant amount of powerful functionalities and features for the e-commerce merchant.

Under the Magento Commerce Cloud option, the hosting for the e-commerce store is provided by Adobe as a cloud service. The technical infrastructure in this option is built to be highly efficient and operates in Amazon's AWS cloud environment on a Software-as-a-Service basis. Magento Commerce Cloud thus brings along the rich functionalities of the commercial version and hassle-free, scalable cloud-based maintenance. The pricing of the Magento setup is determined through negotiations, but in any case, annual costs amount to tens of thousands of euros. Pricing is based, at least partly, on the e-commerce revenue category.

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

Future Outlook

Magento's transition to Adobe’s portfolio in 2018 raised many questions about its future. The system has a solid user base and is a leading e-commerce platform in several segments. For starting stores, the Magento Open Source version offers extensive functionalities without transaction fees at Shopify’s level (in the case of Magento, the transaction fee is paid to the payment service provider). Magento stores are quite freely integrable and extendable with themes, plugins, and interfaces in necessary directions.

The continuous growth of e-commerce makes Magento particularly interesting for its new owner. Adobe strives to integrate Magento as a natural part of its other offerings (Experience Cloud, Advertising Cloud, Marketo Engage, etc.), making it a suitable alternative for e-commerce traders whose horizon includes significant growth.

Magento Pros

• Wide features for large e-commerce readily available, with the open-source solution

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

• Large user base: many extensions and partners available

• Highly extendable and integrable

• Magento can be fully customised, and expanding its functionalities is cost-effective

• Well scales with the growth of e-commerce

Magento Cons

• Relatively laborious to develop: creating a tailor-made store is a rather large project

• Benefits of the Magento Commerce version are achieved only with significant annual licenses

• Maintaining the infrastructure required by Magento requires special expertise

3. Custom E-commerce Solution

A fully customised e-commerce solution remains a very popular option when the e-commerce turnover is sufficiently large and development needs are individualised. Purchasing software development for e-commerce may initially seem expensive and inefficient, but there are good reasons for it. A custom solution is often at its best when the other backend systems of the business already handle the majority of the functionalities that a ready-made e-commerce product would offer (such as product information management, pricing, ledger, and distribution-related functions). In this case, the ready-made product would contain a lot of unnecessary features and might fit poorly into already existing processes. Then a customised e-commerce solution is a smart choice due to both costs and flexibility.

A custom e-commerce solution often serves as a node integrating several different systems and provides the online store's end customer with a refined user interface behind which other systems handle heavier functionalities.

A completely need-based constructed entity also offers brands the opportunity to stand out in a market where there might be a dozen similar setups built with the same ready-made products. A unique customer experience has value.

Future Outlook

The future of a custom e-commerce store also looks bright— the transition to using cloud technologies has made building scalable technical infrastructure easier and more affordable. It may also be essential for a company to maintain control over its own business entirely in its own hands. An individual player cannot reasonably influence Shopify's or Magento’s global winds, but in collaboration with a valuable partner, anything can be done with the code base under one’s control.

Custom E-commerce Pros

• Full control over the core system of your business

• Flexible integrability with other backend systems

• Differentiation from competitors

• No transaction or license costs imposed by the platform (the payment gateway, however, charges a transaction fee of 1-3% and a fixed fee for its service)

Custom E-commerce Cons

• Development of a custom e-commerce store is costly

• Partner selection becomes critically important

• Requires competent guidance in software development, maintaining an old code base, and systematic renewal

Comparison of Systems