The vast majority of ecommerce stores are hosted on software platforms specifically designed to sell goods or services.
Unless you’re one of the few brave souls that attempt to code an ecommerce platform from scratch, you’ll likely be leveraging a pre-made platform (the most widely-known examples are WooCommerce and Shopify).
These platforms generally fall into two categories: software-as-a-service (SaaS) or open-source.
These terms may be foreign to you, but they’re essential to understanding — especially if you want to scale your business down the road.
By the end of this post, you’ll understand:
- The difference between SaaS and open source ecommerce platforms.
- The benefits of each.
- Examples of platforms in each category.
Why you need an ecommerce store
An ecommerce store is a website that allows you to sell your products or services online. You need an ecommerce store because it gives you a platform to reach a larger audience with your product or service.
Even though you may leverage omnichannel selling across social media, Amazon, or brick-and-mortar stores, you need a place to call “home.”
This is your ecommerce store, which is often hosted on a web server and accessed via your brand’s domain name.
Now that we know why you need an ecommerce store let’s move on to the first question: what is SaaS ecommerce?
What is SaaS ecommerce?
As mentioned above, SaaS stands for software-as-a-service. SaaS platforms are often subscription-based web apps that run in the browser.
These platforms allow licensed users to access and use their ecommerce store from anywhere, as the SaaS provider stores and maintains the information.
It’s also a turnkey solution where merchants typically pay a fee based on the number of seats used and their desired level of service.
It is good for non-technical merchants and is characterized by cloud-based delivery and monthly service fees.
What is open source ecommerce?
Open-source ecommerce is a software platform that is “open” to everyone, meaning anyone can access, use and make changes to its underlying code.
Open-source software is often developed by a community of developers rather than a single company.
These platforms are ideal for tinkerers, as anyone can access the codebase. They’re also great for in-depth customization but come at the cost of being more complex and challenging to maintain than SaaS solutions.
Key differences between open source and SaaS
On the surface, open-source and SaaS ecommerce platforms are fundamentally the same. They both allow you to create an online store and sell products.
The real differences emerge when you start getting into the complexities of customization and scaling your storefront.
For the best results, merchants must shop around and carefully investigate the functionality, architecture, price, flexibility, and more, even when comparing apples to apples (open-source or SaaS to SaaS).
Perhaps more importantly, you must anticipate what your business will look like in two, five, or even ten years (as much as possible).
Trying to migrate all of your data from a SaaS solution to an open-source solution is an absolute nightmare. The last thing you want to do is sink hundreds of hours and thousands of dollars into a platform that will eventually limit your business growth.
If you are tech-savvy and have a knack (or a least a curiosity) for handling basic code, consider an open-source solution. (You can hire developers for this, too.)
On the other hand, if you don’t have a development or coding background, an out-of-the-box SaaS platform with minimal setup may be the solution you want.
Below are some major differences between SaaS and open-source ecommerce software:
- Build time
- PCI DSS Compliance
Let’s go over each in detail.
The cost of open-source platforms depends on a few factors, such as the hosting you choose, the price of extensions/plugins, and whether you need to hire someone for customization. All these factors will contribute to your total overall cost.
SaaS platforms have a monthly fee that is generally based on the size of your business (i.e., the number of products you have or the number of orders processed per month). You might also be charged transaction fees on top of the monthly subscription fee. These can vary from platform to platform.
While SaaS platforms generally have higher upfront costs, they often have lower overall costs than open-source platforms (at least in the beginning).
This is because you don’t need to pay for hosting, and there are no additional costs for customization, extensions, and plugins.
However, the price increases dramatically when you start scaling your business and moving into the upper “tiers” of SaaS solutions.
For example, if you’re on the Shopify platform and need to move from five staff accounts to six or more, you’re looking at a monthly jump from $79.99 (Shopify plan) to $299.99 (Advanced plan).
That’s nothing to sneeze at.
Lastly, open-source ecommerce may seem more cost-effective than SaaS because it offers a one-time purchase fee instead of monthly fees. Unfortunately, many repair costs, hidden fees, and lost revenue inherent in open-source ecommerce can accumulate in no time.
This effect can be detrimental to SMEs working on a limited budget. Therefore, consider all potential costs before you make your final purchasing decision.
In the following section, we’ll explore the cost of owning open-source and SaaS ecommerce software.
It isn’t hard to install open-source and SaaS platforms. But with open-source platforms, you will need to factor in the build time required to get your store ready for launch. The build time is how long it takes you to get your store up and running and ready for the market.
And if you’re not familiar with coding or website development, then the build time can be quite long for open-source. If you’re willing to get your hands dirty and do some YouTube learning, you can get it done.
But if you don’t have the patience, you’ll likely need to find a web developer or agency to help you with the installation and set-up process.
Besides the software install, you’ll need to set up hosting and install extensions and choose a theme. You can also have someone custom-make a theme for you.
You’ll also need to manage security, hosting, and building your theme. You will control your site’s essence, but the tradeoff means more decision-making and work.
All of this can take a while, sometimes even several months, adding a great deal of time and cost to your endeavor.
SaaS platforms, however, are ready to get up and running immediately. Their functionality entails ready-to-go themes that require little to no coding knowledge and straightforward user interfaces.
Since the providers take care of the responsibilities of security and hosting, you don’t have to fret about doing that.
You could be looking at having a solid internet store ready for business in as little as a few days, or even a lot less in some cases. For example, when using Shopify, you can have your online store set up and running in just a few minutes and with a click of a few buttons.
So, if you’re looking to get your store open and running in the least amount of time possible, you may find that a SaaS ecommerce platform is a good choice.
With the flexibility that comes with open-source ecommerce comes more maintenance needs. Therefore, open-source software requires a good deal more maintenance than SaaS.
As part of licensing, SaaS providers take care of maintenance for you, meaning they’ll continually host, monitor, and upgrade their software. You’ll also contact them if you need to have system issues, such as software bugs, crashes, performance, server issues, etc., taken care of.
Meanwhile, the onus of maintenance with open source platforms is on the merchant or their developer agency, meaning you’re responsible for all infrastructure and admin duties related to the platform.
Therefore, you will be setting up the hosting and staying abreast of any software upgrades and problems. If there are issues in the open-source environment, then you will be the one finding and fixing the issue.
Some entrepreneurs want this high level of control over infrastructure build, performance, and site speed.
When you’re running an online store, you’re going to need support at some point. It’s important to have someone to reach out to when things go wrong or if you need help with something related to your platform.
Both open-source and SaaS platforms offer support in different ways.
SaaS platforms generally have better support since it’s their responsibility to keep their software running and updated.
If you encounter a problem or have a question, you can reach out to the SaaS provider’s customer support team. They will help resolve any issues that you’re having.
With open-source platforms, you do the installation and development yourself. Therefore, you’re responsible for your support. This keeps costs down, but it can sometimes be difficult to find answers to your questions.
So if you run into any issues using the software, you must rely on online communities and knowledge bases for help. Answers usually take about 24 hours if you fill out an online form. That’s quite a while to wait if you are selling and shipping products.
Then, you must collect the community takeaways and fix things on your own or pay someone to do it for you. Unfortunately, there is no guarantee that you can always find someone for this or that they have the skill and expertise to solve the problem.
Some ecommerce sellers that are experienced and tech-savvy may not have a problem with this. But if you’re not comfortable troubleshooting technical problems, open-source might not be the best solution.
PCI DSS compliance
Security on their site should be every online seller’s top concern. And with as much information that’s being exchanged, ecommerce platforms must be PCI DSS compliant.
PCI DSS stands for the Payment Card Industry Data Security Standard. It is a standard that companies must follow to provide a secure environment for their customers. All businesses that store, process, or transmit credit card information must follow this requirement.
The PCI SSC, which administers and manages the PCI SSC, states on its website that under PCI DSS, safeguards must be put in place by “web hosts, shopping carts, ecommerce and retail merchants, and others who accept electronic payments or provide services to those who do” that include “encrypting all data, maintaining secure systems and networks, and developing strong access control measures.”
Therefore, if you plan to accept credit card payments electronically as an ecommerce store, you need to be PCI DSS compliant.
Open-source platforms typically don’t come with PCI compliance. Plus, the compliance level you need will depend on how big your business is. So as your business grows (or shrinks), you’ll need to scale the level of compliance to it.
The good news is that both open-source and SaaS platforms can be PCI DSS compliant. But the level of compliance will differ between the two types of platforms.
With a SaaS ecommerce platform, you’re licensing the software from a provider. Most of them offer Level One PCI compliance as a standard, meaning they are responsible for ensuring that their software meets all PCI DSS requirements.
Here, you don’t have to worry about PCI compliance since it’s the provider’s responsibility. Additionally, the provider updates any newly introduced security patches website versions.
However, with open-source platforms, you’re responsible for ensuring that the software is PCI compliant. You need to ensure that your hosting environment, website, and payment gateway are PCI compliant. This can be daunting if you’re unfamiliar with all the requirements.
If you’re unfamiliar with PCI compliance, then it’s best to leave it to the experts. Or you can use a SaaS platform so the provider can take on this responsibility for you.
As far as your online shop’s security is concerned, both open-source and SaaS platforms have pros and cons. They both can be made very secure, though.
With a SaaS platform, you don’t have to worry about hosting the software or maintaining servers. The provider takes care of all that for you. And since the provider is responsible for keeping the software up and running, they also take care of security.
The provider will install security updates and patches to keep the software secure. SaaS software providers will also have a team of experts monitoring the platform for potential threats.
Additionally, they take care of yearly risk management and on-site compliance to ensure your online store is secure. If there is a security breach, the provider will be responsible for handling it and ensuring that it doesn’t happen again.
However, you’re responsible for security with open-source platforms since you’re hosting the software yourself. You need to ensure that your servers are secure and install all security updates and patches as needed.
Moreover, you will have to manually take care of any released updates and security patches. Doing this can lead to a lot of time and effort spent too. Of course, this will be necessary to secure your platform.
You also need a team of experts to monitor the platform for any potential threats. If there is a security breach, you’re responsible for handling it and ensuring it doesn’t happen again.
One of the biggest differences between the two platforms is customization. Since open-source platforms make their underlying code dynamically accessible, they edge SaaS solutions in this category.
That means you will be able to change any features you desire in terms of design and functionality, thereby constructing a brand new online marketplace from the bottom up without being held to any pre-existing integrations.
You won’t get access to the underlying source code with SaaS ecommerce solutions, but many still grant you the customization needed on the front-end to make changes. Unfortunately, this deeply restricts your ability to customize a store’s functioning and features.
Still, you’ll be happy to know that plenty of SaaS platforms provide access to plugins, pre-designed themes, modules, extensions, and apps that give you the ability to add extra functionality to your store. Some of these plugins are even free.
The best ecommerce platforms will have an app store or marketplace where you can browse through all the available options and find what fits your needs.
With SaaS, you typically get everything needed to run a store successfully right out of the box. With features and integrations like CRM tools, accounting software, built-in payment processes, email referral marketing services, and more made available, merchants can launch their ecommerce store quickly and start selling without hassle.
Open-source platforms take a more a la carte approach. You have to manually build your site how you like it, but this allows you to only download the plugins or extensions you need.
Additionally, you need to find reliable developers who can help you set up and maintain all these integrations.
Open-source platforms are very flexible and can be scaled to meet the changing needs of your business.
As your business grows, you can add new features and integrations to your store without hassle. You can also modify the source code to make changes to the existing features.
While most SaaS platforms offer flexibility, they are not as customizable as open-source solutions.
If you need a lot of flexibility and customization, then an open-source platform might be a better option.
Costs of open source ecommerce software
With all the websites announcing how free or low-cost, their open-source software is, you would think that it would always be the cheaper solution for your business.
The reality is that it IS often free to download and use, but there’s a catch: using the software to create a viable online store has some associated costs. And those costs can be substantial.
Here are a few to consider:
- Licensing fees
- Hosting fees
- Agency fees
- Maintenance fees
- Compliance costs
- Extensions or apps
If you are acquiring a paid licensing solution, you will need to factor in its cost. Licensing fees can add up, especially if you need multiple plugins.
Additionally, if you are working with a team of developers, they will also need access to the software. You will need to purchase multiple licenses, which can also pile on the cost.
Licensing fees can be tier-based, percentage of sales-based and continuous revenue-based. For instance, vendors such as BigCommerce and Magento use a revenue tier strategy for doling out licenses. That means they automatically increase licensing fees to the next pricing tier as soon as the business’s revenue increases.
High-volume brands can expect to pay $29.95/month, $79.95/month, and $249.95/month, as their revenue grows from 0 to $50k, $150k, and more per year under this strategy.
Other vendors like Shopify use a percentage of a sales-based model in which you are charged a certain percentage (usually 0.15%-0.25%) of your total sales in addition to the monthly subscription fee.
Then there are vendors like WooCommerce that don’t have any licensing fees but make their money by selling extensions and plugins instead.
These costs can also add up, sometimes even more than a traditional SaaS platform. For example, the cost of the average Shopify plugin is $50/month, while the WooCommerce extension costs $149.
All these costs must be considered when determining which platform will be more expensive for your business in the long run.
Hosting and set up fees
If you don’t have an in-house IT team, you will have to hire someone to set up and host your open-source software. The setup fees will depend on how complex you want your website to be and who you hire to do it. The hosting fees can range from $50-$250/month.
Also, when selecting a third-party provider to do your hosting, it’s essential to find one that can handle your business’s traffic volume and any spikes that can accompany it.
What you think may be the cheapest option won’t be when your site is out or bogged down at key times. Then, you’ll experience lost revenue and additional costs to change or upgrade.
As mentioned, open-source offers a way to achieve the level of customization you need. As such, things can get complicated quickly. If you don’t have an in-house team, you’ll likely need to hire an external or internal agency or web developer to help you with your website.
Agency fees can range from $50-$250/hour on the low end, but you could easily be looking at a cost of six figures for enterprise-sized stores, depending on how complex factors such as design, build, and integration are.
Once your site is up and running, you will need to maintain it. This includes keeping the software up-to-date, backing it up regularly, monitoring for security breaches, and more. In other words, you will still need to rely on developer talent.
This includes updating the software, backing up your data, and fixing any bugs you come across. These maintenance tasks can be handled in-house or by a third-party provider. The costs of maintaining an open-source ecommerce site can range from $50-$250/month on the low end to tens of thousands of dollars per month for enterprise-level stores.
PCI DSS compliance costs
The cost of keeping PCI compliant is about $300; you can expect to pay that annually. A large business can expect the cost to be $70,000 and up. The costs are necessary since you may face stiff fines, lose consumer confidence, have your ability to accept payments stripped, or suffer financial consequences related to fraud.
You’ll also need to factor in the cost of security for your website. This includes things like buying an SSL certificate and setting up a firewall. Security costs can range from $50-$250/month.
Extensions or apps
If you want to add any extensions or themes to your website, you will need to pay for them. These can range from $0-$200/month.
You’ll also need to factor in the cost of any integrations you want to add to your website. These can range from $0-$100/month.
As your business grows, you will need to upgrade your website. This can include adding more products, increasing your bandwidth, and upgrading to a higher-priced plan.
Upgrades can range from $0 to next to nothing to $500+/month to get access to impressive features. It could be well worth the cost for stores where the volume merits these upgrades.
Costs of SaaS
The cost of SaaS can be figured out by taking agency fees, apps or extensions, and any integrations into other systems used and adding them to the SaaS’s monthly subscription rate. The rate for a subscription ranges from $0 to $5,000/monthly.
For a baseline, the cost to build the front-end of an ecommerce store ranges from 5,300 – $21,000, according to Acropolium. The time it takes to do this is around 10 – 12 weeks.
Advantages of open source
There are advantages to open-source to consider, including:
- Flexibility/Complete control: You’re in the driver’s seat. If you want to make a change, add a new feature, or customize the look and feel of your store, you can do so without waiting for anyone’s permission.
- Community support: Because open-source platforms are so popular, a large community of developers and experts can help you if you get stuck.
- No vendor lock-in: One of the dangers of SaaS platforms is vendor lock-in. If you ever want to leave the platform, it can be very difficult (and often impossible) to take your data with you. With open-source, you own your data and can take it with you if you decide to move on.
Disadvantages of open source
There are disadvantages to open-source platforms, including:
- Complexity: Open-source platforms can be difficult to use, especially if you’re not a developer. If you’re not comfortable working with code, you might consider a SaaS platform instead.
- Security: Because open-source platforms are so popular, they are often the target of hackers. This means that you need to be extra vigilant about security on your website.
- High costs: There are a lot of high costs associated with open source software like licensing, hosting, agency fees, and more. These add up quickly.
Advantages of SaaS
Now let’s look at some advantages of SaaS:
- Fast set up: With SaaS, you can be up and running quickly. There’s no need to install anything or worry about hosting fees.
- Ease of use: SaaS platforms are designed to be easy to use. This means that you can get started without any prior experience.
- Security: Because the provider hosts the platform, they are responsible for security. For the most part, this means that you can relax and not worry about being PCI DSS compliant or hacked.
- Scalability: It’s easy to scale a SaaS platform. If you need to add more users or increase your bandwidth, you can do so quickly and easily (but often at a high cost).
- Customer support: When using a SaaS platform, you have access to customer support. If you ever have a problem, you can get help quickly.
Disadvantages of SaaS
- Customization: One of the disadvantages of SaaS is that you can’t customize it to your specific needs. If you need a custom feature or want to change the look and feel of your store, you’re out of luck.
- Vendor lock-in: As we mentioned before, one of the dangers of SaaS platforms is vendor lock-in. If you ever want to leave the platform, it can be very difficult (and often impossible) to take your data with you.
- Upfront costs: SaaS platforms are great for businesses with cash flow that need to immediately get a storefront up and running. However, starting at zero, you may not be able to afford the startup costs of a SaaS store.
- Lack of choice: When you’re using a SaaS platform, you’re limited to the provider’s features. You’re out of luck if they don’t have the features you need.
How do I pick?
Now that we’ve looked at the advantages and disadvantages of both open source and SaaS ecommerce platforms, it’s time to decide which is right for you.
SaaS might be the right choice if you’re looking for a platform that is easy to use and set up. If you’re looking for a flexible platform that gives you complete control, then open source might be the way to go.
Cost is usually a deciding factor as well. Open source can be expensive, especially if you need to hire an agency or developer to help you. SaaS, on the other hand, has a monthly subscription fee that is often less expensive in the long run (but costs more in the beginning).
The best way to decide is to try out a few platforms and see which one you like best. Also, read the reviews and thoroughly research your solution. Once you’ve found the right platform, you can start building your store and selling your products.
Now that you know how to choose, let’s look at some examples of open source and SaaS ecommerce platforms.
Examples of Open Source
Some examples of open-source platforms include:
- PrestaShop: PrestaShop is a popular open-source platform that is extremely easy to use. To choose your level of self-control, they offer a choice of either a fully-hosted version or one you can host yourself.
- Magento: Magento is another popular open-source platform. Its flexibility and wide range of features make it so sought after.
- WooCommerce: Powering more than 37% of internet stores is WooCommerce. The easy-to-use platform is built on top of WordPress.
- Shopware: Shopware is a German company building software since 2000. Although not as popular in the U.S., 100,000 businesses power their ecommerce stores with it.
- OpenCart: OpenCart is a very user-friendly platform. It has a wide range of features and supports multiple languages and currencies.
- Zen Cart: This user-friendly platform has an excellent product management system. From managing inventory to creating sales and specials based on trends, you have total control with Zen Cart.
- X-Cart: X-Cart is a solid and flexible, and powerful ecommerce platform. They have an impressive list of features but upgrading to get them all can be pretty expensive—around $495 to start.
Examples of SaaS
Some examples of popular SaaS ecommerce platforms include:
- Shopify: Shopify is one of the most popular SaaS platforms. It’s easy to use and has a wide range of features. You can also find many apps and plugins to extend its functionality.
- BigCommerce: BigCommerce is another popular SaaS platform. It offers a wide range of features and is scalable to businesses of all sizes.
- Wix: Wix is a SaaS platform known for its ease of use and affordability. It’s a great option for small businesses and startups.
- Ecomitize: Ecomitize is another SaaS platform, and it integrates with SkuVault Core to allow you to easily scale your internet business.
- Salesforce Commerce Cloud: Salesforce allows brands to launch quicker, creating unified buying experiences across all their channels, whether their store, mobile, social, or web.
- Volusion: Volusion is a popular SaaS platform that has been around since 1999. It’s easy to use and has a wide range of features. Their support and educational tools are also top-notch.
- Squarespace: Squarespace is a SaaS platform known for its beautiful design templates. It has a wide range of features, including an easy-to-use drag-and-drop builder.
- SubscriptionFlow: SubscriptionFlow is an AI-based Subscription Revenue Management System. It helps businesses manage subscription orders, recurring billing, payment processing, and CRM solutions.
Scaling Your Store
Remember that choosing the right platform for your online business will enhance your business operation and the customer experience. Once you’ve chosen the right platform, you can start building your store and selling your products. Then, when your business starts to grow, you can scale your store to accommodate your new needs.
If your ecommerce store is product-based, don’t forget inventory control. SkuVault Core is the perfect inventory management solution for product-based businesses. With SkuVault Core, you can track your products, manage your orders and fulfill your orders quickly and easily.
SkuVault Core also integrates with some of the most popular ecommerce platforms, making it easy to get started. So if you’re looking for an inventory management solution for your product-based business, check out SkuVault.