{Note: this blog is part of our Q&A series, were we answer the most common questions about Shopify & Ecommerce on Quora, Reddit and other popular websites}
Shopify is simply the tool that enables you to sell almost anything online. So it's a bit like asking “do people make money selling stuff online?” Well the answer is hell yeees.
I think the deeper question you are hinting at is “if 1000 new people launch a Shopify store, how many of them statistically make a) meaningful revenue in the first year and b.) are actually profitable?”
Now here the numbers look bleak, but not because of Shopify but because launching a successful business is hard… anywhere.
Again the statistics here are not readily available, but I can safely say that 95-97% of newly launched stores will not make 6 figures in the first year of launching (so roughly stay below the ~10k/month mark and even ~100k/year mark). In fact the vast majority of them will barely even make a handful of sales and give up within the first 3 months.
A good indicator of that is how many people start the free trial on Shopify but don’t switch to a basic plan afterwards. Last time I heard this was around 98%. Now of course many of those people are just “playing around” and “testing” but it also includes everyone who seriously tried and gave up.
Out of the tiny percentage of stores that will make some revenue, not all of them will be profitable of course. Some of them will be breakeven, a few even have negative margins at first. Here’s a distribution of the ‘contribution margins’ of stores compiled by one of the most popular profitability apps for Shopify stores (they aggregate data from tens of thousands of stores):
Ok the average contribution margin is 23.7% (for my store in that example its 13.2% lol), that doesn’t sound too bad. But two things to note here. First, again this just includes stores that already reached a certain scale (6 figures or higher), so it excludes all the ones that tried and gave up. Secondly, contribution margin is your profit margin after taking into account: discounts, refunds, COGS & marketing expenses. HOWEVER, it does not take into account your overheads: Shopify subscription, transaction fees, app subscriptions, CRM costs etc. etc.
This means that in reality, the AVERAGE store makes under 15% profit margin. And that’s being conservative. Again this is the profit that your store generates before you pay yourself (the owner) out anything.
So yea it's rough out there. On the flip side, you can be an outlier on that chart and be smashing out >50% margins (extremely difficult in my experience, especially consistently).
But here’s the thing, you’ll never find out where you end up on that distribution if you don’t try. Best of luck :)
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For more detailed information on Shopify profitability distributions see:
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