You may have seen Mark Zuckerberg's announcement today that they are rolling out a new feature in Facebook called Shop. It seems like a very attractive proposal so I thought i'd dig a little deeper into the true costs involved.
Facebook Shop
The new Facebook Shop app looks very attractive as it will connect with your Instagram account also. There's no monthly charge for Shop so at first glance it's a no-brainer. So how will Facebook monetise it ? Facebook's revenue model is based on ads which they are quite upfront about so don't expect your shop to be visible to everyone unless you pay for the privilege. But there's another hidden cost. Every transaction will cost 5% for processing. For the purposes of comparision that means for every £1000 of turnover per month, it will cost you £50 and for every £5000 of turnover it'll cost you £250.
Bigcommerce
Bigcommerce is classed as Software as a service or SaaS for short. You pay a monthly subscription and that covers the platform, hosting and 24/7 support. And it's fast too: pages load quickly from state-of-the-art servers globally. As well as a fully featured ecommerce store with way more features than the facebook Shop out of the box, you can connect it to Facebook, Instagram, Ebay AND Amazon. Sounds expensive but in comparison is not. So let's look at the costs. We would recommend a payment gateway such as Stripe for a new start up as they only charge 1.4% (+20p) per transaction. Bigcommerce charge a monthly subscription based on the number of facilities but it starts at just £24 plus VAT per month.
So, for our £1000 of turnover per month it will cost £28.80 (£24 + VAT) + £14 for card processing. A total of £42.80. On our £5000 per month turnover the difference is even more stark: £28.80 + £70. A total of £98.80 and a saving of over £150 per month. Nearly £2000 per annum.
Self Hosted
As my final example, we'll look at the cost of a self hosted ecommerce site built on Woocommerce or Opencart for example. We will take the annual hosting and SSL cost and divide that by 12 to give a monthly comparison and that will give us a figure of £25 + our £14 for card processing on £1000 of turnover. However for our £5000 of turnover we will switch to a more cost effective solution such as Paymentsense. Typically there is a £15 per month fee for the gateway plus Costs of approx 1% for credit cards and 0.5% for debit cards so we'll take an average of 0.75%. So, £25 for the hosting + £15 for the gateway + £7.50 for card processing. A total of £77.50, yet another saving and the greater the turnover, the greater that difference will be.
A real world example
A lot of food vendors have sprung up recently as a direct result of the Covid 19 lockdown. Some are local shops delivering goods directly to the neighbourhood. Others are a more traditional takeaway offering. These types of business have the added option of selling through apps such as deliveroo and just eat but with a 25% commission before delivery costs, can you really afford that ?
We will assume that this is a new business just launched with a turnover of £500 per week or £2000 per month. Using Facebook Shop it will cost you £25 per week in commission costs. Let's now consider Bigcommerce which I should mention is currently FREE for the first three months. You would only have the card processing cost of £7 and remember you can STILL connect your shop to Facebook and Instagram.
Here at Phoenix we think it's a no-brainer and have put together a Low Cost Ecommerce Package based around Bigcommerce to get new businesses ready to take money online within 48 hours for a fixed price. If you have any questions about starting in Ecommerce we are always happy to talk.
