Shopify is a platform that earns money through a variety of sources, including subscriptions, transactions, referral payments, fees, hardware sales, commissions, and advertising in its app marketplace.
Shopifygenerates the majority of its revenue from the fees it charges merchants for customer orders processed through Shopify Payments. This is supplemented by revenue from Shopify Shipping merchant solutions, other transaction services, referral fees, and the sale of point-of-sale (POS) hardware. The company calculates monthly recurring revenue by multiplying the number of merchants at any given time by the average monthly subscription plan fee.
As a general rule of thumb, a 10-fold multiple is applied to monthly income when estimating the final request. Revenue is recognized at the time of transactions earned with Shopify Payments, Shopify Shipping and other transaction services and referral fees. Shopify's business model is based on its ability to attract new merchants, retain revenue from existing merchants, and increase sales to new and existing merchants. Merchants can list their store's monthly revenue, how much of that revenue is profit, how many orders they receive, add descriptions, and more.
Additionally, Shopify earns commission from the apps it offers to merchants. In conclusion, Shopify's main source of income is from commercial solutions which are higher than subscription revenues in 2011. This allows them to have a higher retention rate in their subscription base which is renewed on a recurring basis. Furthermore, they generate additional revenue through the commission they charge for apps and other services.