Total Cost of Ownership: how to calculate the true cost of your ecommerce platform

When choosing an ecommerce platform, fashion brands often fixate on upfront costs. But it’s the hidden, long-term expenses (the ones that surface over 3 to 5 years) that can make or break your margins. Total Cost of Ownership (TCO) puts those costs into clear view.

In this post, we’ll break down the key components of TCO to help you make smarter, more strategic decisions when choosing your ecommerce tech stack.

The high cost of underestimating TCO

TCO goes far beyond license fees or build costs. It includes development, support, integrations, hosting, upgrades, and everyday operations.

For CFOs and CTOs, TCO is essential to:

• compare platforms apples-to-apples

• avoid budget surprises

• plan long-term investments more confidently

When budgets run over, teams often have to cut corners on scope, design, or delivery. This weakens the foundation of the platform, slows development, and limits innovation. At worst, escalating costs can force a premature and expensive replatforming (which, let’s face it—no one wants to do more than once if they can help it.)

Essential KPIs for tracking TCO

There are two key measurements to assess the profitability and sustainability of an ecommerce platform. Using both gives you a complete picture of your investment and its impact on your business.

1. Total Cost of Ownership (TCO) as a percentage of Gross Merchandise Value (GMV)

This metric shows how much of your annual revenue you’re reinvesting in your platform. Expressing TCO as a percentage of GMV helps you gauge the platform’s cost-effectiveness and supports financial forecasting. Ideally, this KPI should stay below 1%. Track how your TCO evolves as your business grows. A healthy platform should support scale without increasing overhead. If your TCO as a percentage of GMV or per order is rising year over year, it may signal inefficiencies or limitations in your current setup.

2. Total Cost of Ownership as a percentage of Capital Expenditures (CapEx) and Operational Expenditures (OpEx)

CapEx covers investments in product development, including platform costs. OpEx includes ongoing expenses for maintaining the system. Together, they form your overall budget.

To ensure your ecommerce platform is sustainable and doesn’t consume too much of your budget, track what portion of your CapEx and OpEx goes to TCO—and watch how this changes over time. A healthy TCO trend is one where costs remain stable or decrease as your business scales, even as you add more SKUs, markets, or channels.

With this in mind, let’s now explore the critical cost categories that make up the TCO equation.

Breaking down the Total Cost of Ownership: 8 essential components

1. Development expenses

The lion’s share of developing a digital flagship store typically goes towards development. It consists of four elements: design, back-end development, front-end development, and plugin development.

Design: Some ecommerce platforms offer ready-made templates for quick and affordable store setups, ideal for smaller brands. Others provide full creative freedom, allowing brands to build a unique, custom digital flagship store. While custom design requires more investment, it enables a tailored brand experience that can boost customer engagement and sales.

Back-end development: Keeping an online store running smoothly requires ongoing maintenance and updates of plugins and integrations. This need varies by technology: cloud-based SaaS and headless platforms typically minimize back end development costs. In contrast, open-source platforms often demand significant back-end development, with costs influenced by the platform, location, and development partner.

Front-end development: With any type of ecommerce platform, brands will require front-end development to create their digital storefront. This requires a dedicated agency partner, and the price will depend on the platform, country, time-to-market, and efficiency of the front-end partner. 

Plugins or app development: This can be one of the most significant expenses in the development process. Ecommerce platforms vary in their native features—with some lacking essential industry-specific functions, requiring you to purchase additional modules, plugins, or apps to fill the gaps. The cost depends on the platform, the type of app, and the pricing model.

These costs can take many forms: one-time payments, monthly subscriptions, or transaction-based fees. Before signing with a provider, carefully consider which features you need and how each will be charged. It’s also important to forecast future growth, especially if your apps charge extra fees per transaction.

2. Additional integrations

Additional software may need to be added to your technology stack. Each platform offers a different default setup, which may include enterprise resource planning (ERP), customer relationship management (CRM), content management system (CMS), or inventory management software (IMS).

To accurately estimate third-party costs, start by identifying what systems are required. Compare your current ecommerce platform’s setup with the new one. For example, if your current platform includes a CMS but your new platform doesn’t, you’ll need to source and integrate an external CMS.

Integrating multiple technology partners is often necessary to deliver the desired customer experience, but it does come with additional costs. These costs typically fall into three categories: software purchase price, integration fees, and licensing fees over 3 to 5 years.

3. Infrastructure fees

Infrastructure costs are split into three sections: hosting, domain and security.

Hosting fees vary based on your business size, platform provider, type of ecommerce platform, and the complexity of your infrastructure.

For small businesses with minimal infrastructure needs, hosting is typically straightforward and affordable. In contrast, mid-sized and large enterprises often require more advanced hosting solutions. Their platforms must be scalable and capable of handling high traffic volumes and seasonal spikes, such as Black Friday or major sales events.

Buying a domain varies depending on your brand's name. It’s an easy purchase unless your preferred domain name has already been bought. Then the price depends solely on the owner. After the purchase, you need to make a once-a-year payment to keep your domain.

Security comes in a variety of prices and payment options. You need an SSL certificate for your website but you can get it for free from places like Let’s Encrypt or as a monthly subscription, once-a-year payment or a lifetime purchase. 

4. Platform licensing 

Platform licensing varies depending on the technology you choose and the size of your company. When assessing the potential spend, first consider your growth plans and potential pricing plan change over time. 

Revenue-based fees

There are three most popular pricing strategies. Check the pricing model and then make a few rough calculations with different revenue scenarios. Here is how you might be priced:

GMV percentage fee: It’s a percentage paid from all your revenue. Verify whether this percentage is sustainable for you. There are a few ways that providers calculate GMV. It might be a flat fee based on a three or four-year-long commitment and it’s spread across the time. The more you commit, the smaller percentage you will pay, but if you don’t achieve the contracted revenue, you will need to renegotiate the terms based on your sales.

Revenue tiers: This pricing model charges a fixed fee based on your annual revenue bracket, with tiers set by the platform provider. For example, you might pay one rate for revenue under $10 million, a higher rate between $10–25 million, and another for anything above $25 million. While it’s a common pricing model, it can also prove to be risky. If a brand grows faster than expected, you could quickly move into a higher tier, facing significantly higher fees. In some cases, this can make your current platform financially unsustainable, forcing you to replatform sooner than planned.

Transaction-based fee: Some ecommerce platforms apply a fixed percentage fee to each transaction. This model ties platform costs directly to sales volume and does not require committing to projected revenue levels or predefined pricing tiers.

Software fee: Ecommerce platforms typically charge a software licensing fee, which may be free, subscription-based, or a one-time cost. This fee may or may not include additional services such as hosting, support, maintenance, or updates. It’s important to review which elements are included and which require separate contracts or payments.

5. Operational costs 

Operational costs are often overlooked until after the ecommerce platform is in place, which can become a problem when maintenance and preparation for key sales events or new collections turn out to be more expensive than expected.

Operational costs differ hugely from one ecommerce platform to another. Some considerations:

• Platform maintenance is essential—and often expensive. It includes bug fixes, minor functionality issues, and unexpected technical problems that need ongoing attention.

• Effective support can greatly reduce maintenance costs. However, if support is slow to respond (especially in a complex ecommerce setup) it can lead to rising expenses and operational delays.

• Brands may need front-end developers to build new storefronts for marketing campaigns or update your main store to reflect trends. Selling in multiple markets may mean extra storefront fees that add up quickly. The cost also depends on your platform’s technology. Headless, API-first platforms are usually easier and faster for developers to work with, reducing development time and cost.

• Different platforms require different team structures. SaaS and headless platforms often need only a small, sales-focused team. In contrast, older monolithic platforms usually require larger, specialized teams.

6. Research and development

Ongoing research and development is key to adapting your online store to customer needs by enhancing experiences and adding new features. R&D is often underfunded and cut during budget constraints, but that said, high R&D costs usually stem from platform inflexibility. Outdated, complex systems make even simple updates slow and expensive, requiring specialized teams and risking falling behind competitors.

7. External resources

Sometimes an in-house team isn’t enough to complete certain tasks. Therefore, it’s important to consider what services you’ll invest in, what is the scope of platform’s provider responsibilities, and if you choose to use external resources or extend the in-house team.

External resources may include:

External developers: With legacy monolithic platforms, brands would typically hire specialized developers or partner with a software company to take care of the maintenance.

SEO consultants: When creating new pages and designs, some brands choose to work with an SEO specialist to assist with optimizing these elements.

External testing agency: Some ecommerce platforms don’t have an extensive QA testing policy, so  may need to pay extra for an external QA engineering team.

Data migration outsourcing: If an ecommerce platform provider doesn’t offer data migration services, brands will need to manage it with the help of an in-house team or outsource the project.

8. Platform upgrades

Regular updates are essential to keep a digital flagship store performing well and ready for new features. Upgrade costs vary significantly by platform type, reflecting the effort required to implement new versions.

SaaS and headless platforms typically handle upgrades automatically and cost-effectively, with minimal disruption. Legacy monolithic platforms, however, often require costly, complex upgrades. New versions may not be compatible with existing apps, necessitating extensive retesting and rebuilding of integrations. This increases costs and can introduce bugs that affect site performance, often causing sales slowdowns.

The best value comes with staying power

When evaluating a new ecommerce platform, businesses typically focus on two main factors: functionality and cost. Too often, the initial price tag becomes the deciding factor. But what seems more affordable upfront can lead to higher long-term costs due to hidden fees, maintenance, or scalability limitations. A Total Cost of Ownership (TCO) analysis helps avoid these budget surprises by ensuring the platform you choose delivers a strong return on investment and supports sustainable growth.

Understanding the full TCO is essential to protecting profitability and building a foundation for scalable expansion. In the end, the best value comes from a platform that meets your current needs and can evolve with your business—not just the one with the lowest starting price.

See the total cost (and total value) of moving to Centra. Let’s run the numbers together—get a demo.