ECOMMERCE TOOLS   |   10 minute read

Amazon vs Shopify- Comparing the eCommerce Channels

Both Amazon and Shopify offer eCommerce business owners a different set of features and advantages. Knowing what criteria to use to make the best selection is essential, and we’re here to help.

Setting up your eCommerce shop can feel like deciding between opening a small standalone store on a city street and opening the same store in a mega mall. The first offers a unique and personal experience, the second provides enhanced visibility and ease of setup. Each has its advantages and setbacks that can impact the success of your business.

With so many features on either platform and so many considerations to keep in mind it can be hard to know where to start. In order to make that choice easier we’ve looked at the most important criteria.

Pricing, Transaction Fees & Profit Margins

As an eCommerce business founder and owner you likely want the freedom to set the prices for the products being offered yourself. The ability to do so and make other choices is part of why you set out to start your own business and not work for someone else.

Setting an appropriate price point for the products you’re selling is dependent on a few factors, including what your competitors are selling a similar product for, what transaction fees are being taken by the storefront platform and what operating expenses you have. All those will determine first what price you set and your subsequent profit margins.

First, what kind of fees can you expect to pay to do business on Amazon and Shopify?

  • Amazon’s Professional Selling Plan costs $39.99/month. The Individual Plan, for those who are selling fewer than 40 items monthly, has no subscription fee but pay $0.99 per each item sold.

  • Shopify has three tiers of business memberships, ranging from $29/month to $299/month. Each one offers a different set of features, including reporting, customer support and more. There’s also Shopify Lite for just $9/month that comes without a standalone storefront but allows the seller to add products to and accept credit card payments from Facebook and blog posts.

Amazon product categoriesJust some of the Product categories for selling in Amazon

Related blog: Amazon Inventory Management by TradeGecko

Those are your upfront costs of setting up your storefront operation on those platforms. Now that you’ve made your products available, what kind of cut of the purchase price will each take via transaction fees?  

  • Amazon will take a per-item transaction fee that varies depending on which of the site’s categories your product falls under. Those fees apply to both Professional and Individual Selling Plan members. While the Individual plan has no subscription fee it does charge a flat $.99 per item on top of the category-based fee.

  • Shopify takes a percentage of the purchase price that depends on which membership tier has been chosen. Basic Shopify = 2%, Shopify = 1% and Advanced Shopify = 0.5%. Sellers using Shopify Payments pay no transaction fees.

Knowing what fees are taken out by the platform – to cover their own operating costs – will help you set prices that are profitable for your business.

If you were going to set a $10 price on an item, for instance, but know that a platform is going to take 3% off the top, you know you’re only going to get $9.70 of that. Setting a slightly higher price point - say $10.50 -  means more will be taken in fees but your final revenue is closer to the $10 you initially aimed for.

Those fees impact your profit margin, requiring you to adjust appropriately. Shopify offers a simple calculator to determine what markup (the amount over your expenses) to place on each item.

Related blog: Shopify Inventory Management by TradeGecko

Fulfillment: Getting The Product to the Customer

Once you’ve converted the customer from a lead to a customer, they expect the product they just purchased to be sent to them. It’s a step in the process that shouldn’t be overlooked. Customers get upset when you don’t do this.

  • Collecting buyer information: Anyone buying products on Amazon needs a single Amazon account. Sellers will receive whatever addresses and billing information the buyer have added to their profile there. On Shopify, buyers will have to fill out their information for each seller
  • Once the order has been placed on both Amazon and Shopify, the seller receives an email or text alert they have a new order pending.
  • Shipping the order takes place at a fulfillment center of the seller’s choosing. Both Amazon and Shopify allow sellers store their inventory at an off-site warehouse which is where the product will actually be sent from.

Fulfillment by Amazon is also an option available to sellers of either platform. That service allows sellers to have their products housed at Amazon fulfillment centers and be sent directly from there, meaning you can take advantage of their finely-honed logistics.

There are additional fees for using FBA, of course, though they should be compared to the costs of contracting with a warehouse yourself.

Shipping comes with its own set of expenses as well. Whether or not the platform charges a shipping fee, there are going to be costs from the delivery company - UPS, FedEx, USPS etc - incurred.

  • Amazon Professional sellers are charged for shipping of media items such as books, movies etc. Individual sellers are charged shipping rates on all products regardless of category.
  • Shopify sellers are not charged additional shipping fees. Sellers at different membership levels get different carrier discounts.

eCommerce Platform Branding & Marketing

As the old saying goes, you can lead a horse to water but you can’t make it drink.

For eCommerce retailers, leading a horse to water involves making customers aware of your store and its offerings. You can’t close a sale without first accomplishing that initial, vital goal.

If you were setting up a physical retail location you would spend time worrying about signage, product displays and advertising in local media. Similar issues need to be pondered by eCommerce operators.

  • Many of those points are moot when using Amazon as your eCommerce platform. While you can display the name of your store, which comes with a custom Amazon.com domain, and add descriptions to product listings, there’s little in the way of branding available to set your storefront apart from all the others on that platform.
  • Shopify, in contrast, offers sellers a variety of themes for their storefront that can be customized with additional design work. While every storefront gets a free subdomain (ex: mystorehere.myshopify.com) sellers can choose to map that to a domain of their own to increase the branding power.

In 2017 Amazon introduced Stores, which offer more customization and branding options.

Amazon Store

No coding necessary when designing an Amazon Store

When it comes to promotion and marketing, Amazon offers a variety of advertising options that will bring specific listings to the top of search results or otherwise feature them to increase discovery. Shopify, meanwhile, recommends taking a more organic approach and focusing on tactics such as search engine optimization, social media promotion, advertising elsewhere on the web and more. Those recommendations are applicable and relevant no matter what platform you choose.

Related blog: TradeGecko’s Library of Inventory Management Basics and B2B Tips

Choosing Amazon is akin to placing your products on another retailer’s shelves. It’s great and simple because you don’t have to worry about nearly as many logistics, but comes at the cost of not being able to personalize the experience, connect directly with customers and tie your own fate to theirs.

Choosing Shopify is more like owning your own corner store, allowing you to create a wholly unique experience and brand. That can foster customer loyalty and brand awareness, but also means a lot more uphill skiing, especially in the initial stages of operation.

Less experienced eCommerce business owners may opt for convenience and fewer headaches while those who have the required resources may want to choose Shopify and maintain more control over all aspects of their operation.

Shopify vs Amazon Side-by-Side Features Comparison

shopify

amazon

Subscription-based tool. Complete, out-of-the-box solution

Online marketplace with millions of sellers and shoppers.

24/7 support via live chat, phone, email, and Twitter

World-class Amazon Seller Support to handle customer inquiries, refunds and returns by live chat, phone, or email.

 

Customers are already primed to buy

eCommerce Store Design

Over 70 templates  Upload your own images and descriptions, but the overall layout and design of your store page is recognizably Amazon’s.
Closed system: you can only modify your store to the extent that Shopify allows 
 SSL certificate is included
  Features
Shopify handles the technical parts of your store which means you don’t ever have to worry about performance, security, and scalability. Just upgrade your plan to scale up.

Vast range of products sold through its marketplace. You can even sell services rather than physical goods.

Fulfillment by Amazon (FBA) program, which you to access Amazon Prime customers, and lets Amazon handle the storage, packing and shipping of your products.

Sales stats and reports
True Costs

 

Starting at $29/month for Basic Shopify. You can upgrade to Shopify Plan at $79/month or Advanced Shopify at $299/month.

Free trial available, no credit card required.

 

When using FBA, there are a range of fees varying from $2.41 up to $137.32 for fulfillment fees (per unit). Then there are monthly inventory storage fees ranging from $0.69 to $2.40 per cubic foot. These prices are totally dependent on the size, volume, and type of product, and even the time of year.

Individual sellers don’t pay a monthly subscription like Professional Sellers do. Instead, you pay a $0.99 fee for every product you sell.

Each plan includes domain name, SSL certificate & web hosting

You may see more product returns.

Has its own Shopify Payments solution costs flat rate of 2.9% + 30 cents per transaction (powered by Stripe).

Shopify offers all popular 3rd party payment gateways, but Shopify charges extra 2% fees on each transaction thru 3rd parties.

Amazon Pay is its main payment gateway. You can accept major credit and debit cards through this, but not PayPal.

 

Cons

Extra costs: Shopify has a monthly fee, but it also has an App Store. Adding third party apps can increase your monthly costs.

Marketing: You are fully responsible for promoting your business and building your brand awareness.

You’re up against a lot of competition. At times, you’ll be competing against Amazon.

3 other Challenges: Tracking inventory with FBA since it’s out of sight out of mind.

Every U.S. state has different rules for sales tax collection.

 

Since Amazon has strict guidelines on how to prep and ship your items, it takes time to get used to them.


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