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eCommerce Transaction Charges Explained

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eCommerce Transaction Charges Explained

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Update
14 October, 2018

You've made the decision to build an eCommerce website but what percentage of your profits are transaction charges going to eat up?

Finding the best payment gateways for your eCommerce solution can save you a big percentage of your profits.

To show you what you are likely to be paying in transaction fees I've put together several different scenarios to give you a ballpark approximation of running costs.

If you haven't considered the impact of eCommerce transaction charges then this could be a real eye opener for you!

There are two types of transaction charges in this guide. The first is the cost of keeping your eCommerce store open for business and the second is the payment processing transaction cost.

In the case of open source products like Magento or Virtuemart, we need to factor in the cost of hosting, maintenance and general upkeep. This is going to be a general figure because everyone will have different hosting costs and retainer fees.

For this guide, I'm going to use the Magento Community edition as our price point because it is free and compares favourably with a cloud-based solution.

For cloud-based eCommerce stores like BigCommerce, Shopify or Lemonstand then maintenance and hosting is all part of the plan and gets included in the monthly cost. I'm going to use the most popular plan from each provider as our reference point.

I've converted $ to £ at 1.44 the exchange rate at the time of writing.

Using Paypal

100 Transactions Per Month @ £10 Per Transaction Using Paypal
  Magento BigCommerce Lemonstand Shopify Pro Weebly Wix
Monthly Hosting/Software Cost £65 £55 £103 £55 £17 £10
Number Of Products 50GB Unlimited Unlimited Unlimited Unlimited 20GB
Transaction Fees 0% 0% 0% 1% 0% 0%
Transaction Cost £0 £0 £0 £10 £0 £0
Payment Transaction Fees 3.4% + 20p 2.2% + £0.20 3.4% + 20p 3.4% +20p 3.4% + 20p 3.4% + 20p
Payment Transaction Cost £34 + £20 £22 + £20  £34 + £20  £34 + £20 £34 + £20  £34 + £20
Total Monthly Cost  £119  £97  £157  £109  £71  £64

 Notes:

  • The Magento hosting cost is based on a survey of specialist Magento hosting providers. Nimbus Hosting was my benchmark
  • The average transaction cost is £10. 100 orders @ £10 = £1,000 revenue where Paypal's first volume break point is £1,500
  • Shopify claims zero transaction fees, but only if you use their payment gateway. Deduct £10 if you want to use Shopify payments.
  • The Paypal offer from BigCommerce looks excellent value
500 Transactions Per Month @ £10 Per Transaction Using Paypal
  Magento BigCommerce Lemonstand Shopify Pro Weebly Wix
Monthly Hosting/Software Cost £65 £55 £103 £55 £17 £10
Number Of Products 50GB Unlimited Unlimited Unlimited Unlimited 20GB
Transaction Fees 0% 0% 0% 1% 0% 0%
Transaction Cost £0 £0 £0 £50 £0 £0
Payment Transaction Fees 2.9% + 20p 2.2% + £0.20 2.9% + 20p 2.9% +20p 2.9% + 20p 2.9% + 20p
Payment Transaction Cost £145 + £100 £110 + £100  £145 + £100 £145 + £100 £145 + £100  £145 + £100
Total Monthly Cost  £335  £265  £348  £350  £262  £255

 Notes:

If you are going to be building an eCommerce store that processes around £5k per month in transactions then Lemonstand is clearly excellent value for money considering the ease of development over Magento.

Processing 1,500 transactions per month  

1,500 Transactions Per Month @ £10 Per Transaction Using Paypal.
1,500 Transactions @£10 Paypal £15,001 Magento BigCommerce Lemonstand Shopify Pro
Monthly Hosting/Software Cost £105 £140 £350 £125
Number Of Products 1TB Unlimited Unlimited Unlimited
Transaction Fees 0% 0% 0% 0.5%
Transaction Cost £0 £0 £0 £75
Payment Transaction Fees 1.9% + 20p 1.9% + £0.20 1.9% + 20p 1.9% +20p
Payment Transaction Cost £285 + £300 £285 + £300  £285 + £300 £285 + £300
Total Monthly Cost  £690  £725  £935  £710

Notes

  • I've removed Wix and Weebly from this table because their platforms are not designed for this level of processing.

Sagepay transaction charges

100 Transactions Per Month @ £10 Per Transaction Using Sagepay Flex (350 Transactions Max Per Month)
  Magento BigCommerce Lemonstand Shopify Pro
Monthly Hosting/Software Cost £65 £55 £103 £55
Number Of Products 50GB Unlimited Unlimited Unlimited
Transaction Fees 0% 0% 0% 1%
Transaction Cost £0 £0 £0 £10
Monthly Fee £19.90 £19.90 £19.90 £19.90
Total Monthly Cost  £84.90  £74.70  £122.90  £84.70

 

500 Transactions Per Month @ £10 Per Transaction Using Sagepay Plus (500 Transactions per Month)
  Magento BigCommerce Lemonstand Shopify Pro
Monthly Hosting/Software Cost £65 £55 £103 £55
Number Of Products 50GB Unlimited Unlimited Unlimited
Transaction Fees 0% 0% 0% 1%
Transaction Cost £0 £0 £0 £50
Monthly Fee £45 £45 £45 £45
Total Monthly Cost  £110  £100  £148  £140

 

1,500 Transactions Per Month @ £10 Per Transaction Using Sagepay Bespoke
  Magento BigCommerce Lemonstand Shopify Pro
Monthly Hosting/Software Cost £105 £140 £350 £125
Number Of Products 1TB Unlimited Unlimited Unlimited
Transaction Fees 0% 0% 0% 0.5%
Transaction Cost £0 £0 £0 £75
Monthly Fee £100 £100  £100 £100
Total Monthly Cost  £205  £240  £450  £300

Summary of eCommerce transaction charges

Summary Of Monthly Transaction Charges Paypal vs Sagepay
Transactions per Month Magento BigCommerce Lemonstand Shopify Pro Weebly Wix
100 Paypal £119 £97 £157 £109 £71 £64
100 Sagepay £84.90 £74.70 £122.90 £84.70    
500 Paypal £335 £265 £348 £350 £262 £255
500 Sagepay £110 £100 £148 £140    
1,500 Paypal £690 £725 £935 £710    
1,500 Sagepay £205 £240 £450 £300    

Clearly, these examples show that using Paypal is a very expensive way of doing business. For small volumes it is the perfect partner but when you start scaling up the cost really hurts. See my Paypal review for more details

BigCommerce's deal with Paypal for the fixed entry level 2.2% is good value and BigCommerce scores well across the board for transaction charges. For low volume sites then Wix scores well but mid-weight sites are well served with BigCommerce and Shopify.

Lemonstand proves to be incredibly inexpensive considering the amount of power you have underneath the hood and the ease with which you can customise the customer journey.

Of course, there are many other third party payment gateways and Stripe looks like an excellent alternative to Paypal with a fixed rate of 1.4% + 20p although its price moves sharply upwards if you want to process European cards at 2.9% + 20p

Cardstream is a viable alternative to Sagepay for UK users and although it's third party integration is not as well developed it is supported by Shopify as an "off the shelf" integration.

Nochex is another candidate for Shopify users with no fixed contracts and no monthly costs. Rates start at 2.9% +20p. Nochex is 3D secure enabled.

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