How much does a Magento ecommerce store cost to run?

M Ryan M Ryan

Magento v2 is software used to build and operate ecommerce stores. It is provided in three versions:

  • Magento Open Source (previously Magento Community), licensed under an open source license (Open Software License ("OSL") v3.0) with the full PHP source code published at GitHub, is free software
  • Magento Commerce (previously Magento Enterprise) is the paid-for, commercially licensed version of the software with additional features, which costs from around $2,000 per month
  • Adobe Commerce Cloud (previously Enterprise Solutions Cloud Edition or ESCE) is essentially Magento Commerce hosted by Adobe and paid for with a monthly fee, which costs from $3,300 per month

To illustrate how to calculate the cost of running a Magento ecommerce store, this article describes sites at two levels of revenue, $100,000 and $5,000,000 per year.

What are the costs of running a Magento ecommerce store with $100k annual revenue?

For an ecommerce business getting started, or one running to the side of your core business, the running cost of a Magento Open Source ecommerce store with $100k annual revenue is $9,130. This assumes use of a simple server hosting service and self-reliance in terms of running the site and the associated IT.

  • Magento Open Source $0 per year - the Open Source version of Magento 2 is free
  • Hosting $600 per year - while there are plans available for as little as $5 a month onto which you could theoretically install Magento Open Source, a more powerful service with a higher level of support is worth the additional cost for resilience, performance and peace of mind.
  • Payment services provider $2,750 per year - this can be a large cost for an ecommerce store operator, typically charged as a percentage of the money being processed through the store checkout (including cart total, shipping fees plus any taxes) and can be as high as 2% of sales, plus 30¢ per transaction. For $100k revenue including shipping and taxes, where the average total order value (AOV) is $40, this would be $2,750.
  • Domain name registration $30 per year - a small but important annual fee to register and then retain ownership of your domain name. Popular domain name registrars include GoDaddy and Domain.com.
  • SSL certificate $250 per year - to enable your site traffic to be protected by encryption
  • Third party applications $500 per year - allowance for plug-ins from the Magento store to add one or two features you feel the core software is missing
  • Technical services $5,000 per year - at the $100k level of annual revenue there is not much budget available to hire professionals to maintain your site, you will need to rely on your own capabilities and occasional intervention when updates are an absolute must.

What are the costs of running a Magento ecommerce store with $5m annual revenue?

The typical annual cost of running a Magento ecommerce store with $5m annual revenue is $235,880. This assumes use of Adobe Commerce Cloud which includes the server hosting and a range of additional costs below that must be considered when drawing up a budget:

  • Adobe Commerce Cloud $39,600 per year - this fee includes the software and its hosting.
  • Payment services provider $130,000 per year - calculated as before at 2% of sales, plus 30¢ per transaction, for $5m revenue with AOV of $50 (inc. shipping & tax), this would be $130,000. Given this level of spend you need to focus on finding a payment processor that will offer you strong rates and include optional extras such as fraud protection.
  • Domain name registration $30 per year - a small but important annual fee to register and then retain ownership of your domain name. Popular domain name registrars include GoDaddy and Domain.com.
  • SSL certificate $250 per year - to enable your site traffic to be protected by encryption
  • Content Distribution Network $0 (included) - a CDN enables your images and other static files (unchanging parts of your website) to be served quickly to website visitors. CDN fees are included in Commerce Cloud, otherwise budget ~$500 per month depending on your service provider, the volume of traffic your site generates and the size of the images and scripts that it serves to visitors
  • Third party applications $6,000 per year - to add functionality to your Magento store, for example a more sophisticated on-site search, product recommendations engine, data feed management, tax calculations, carrier management, personalization, email marketing, typically $500-$1000 per month for a small store
  • Development & support team $60,000 per year - to maintain the code, integrations, develop enhancements - a minimum of $5,000 per month, more realistically $10-20k and can be much more than this for larger sites

The total cost of operating a modest ecommerce store with annual sales of $5m based on Magento Commerce Cloud can therefore be around $235,000 per year, equating to just over 4.5% of sales. Even before adding the cost of building your Magento store and getting it live, which has not been discussed in this post, this is clearly a considerable sum. Your setup requires careful thought, detailed estimation and a robust business case before committing to the project and the spend, and then rigorous supplier selection and commercial negotiations with providers before committing to spend.

This article was updated on March 10, 2021

M Ryan

M Ryan is an ecommerce consultant with twenty years experience working with retailers, consumer brand manufacturers and other consumer-facing businesses helping them to develop their ecommerce strategy, implement ecommerce technology and improve their ecommerce operations. He works extensively throughout US and Europe, with clients including global brands, large retailers and household names in consumer goods.

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