What is Magento?

Features & History of the Most Popular E-Commerce Platform

If you are searching for an ecommerce platforms, you can often come by Magento's name. And from this article you can also learn its features, history and if it is truly for you.

As consumers, we rarely think about how easy it is for us to order online. It’s become so easy and convenient that many of us tend to abandon stores if they load for a tenth of a second slower or the checkout contains one more page than we like.

The underlying technology that makes this convenient form of shopping possible, however, is incredibly complex. And one of the most advanced platforms out there is Magento.

In this article, we are going to give you all the information you need to understand what Magento is, how it works and if it is a suitable choice for your online store.

Let’s start with a story to give you some context.

What is Magento?

Magento is one of the most popular eCommerce platforms that has been around since 2008. It is known as one of the most flexible, customizable and advanced platforms on the market.

It is also a platform that is also not for everyone: growing middle-sized businesses and enterprises are the ones who can use it most efficiently, and is not always an ideal solution for small businesses.

The platform is often called the Leatherman or Swiss Army Knife of eCommerce because of the very high level of customizability.

The basic definition

Magento is an open-source, PHP-based e-commerce software using the Zend Framework. This means that anyone (with the proper knowledge) can download, install and customize the platform.

There are also paid options. Initially, the free, truly open-source version of Magento was called Community Edition, and the paid version was Magento Enterprise. In the following chapters, we are going to dissect the differences between the different versions.

Magento offers the possibility to build and customize your online store: to sell your products or services to millions of customers worldwide, integrate external services like payment gateways or CRMs, and use marketing solutions that other platforms have not yet embraced.

Let’s say a few words about how this all came to be…

A brief history of Magento

Roy Rubin and his colleagues at Varien started working on what would later be Magento in 2007. Their intention at first was to create a new version of osCommerce, another open source eCommerce platform. But shortly after working on the project they realized that the system was lacking a lot of features they thought were important and most of what they had to work with was outdated.

So they started working on something unique instead. After only 7 months of development, they launched Magento 1 as a freely available, open-source platform.

  • Roy Rubin started working on Magento when he was a student at UCLA. At first, he had no clear vision. He just started working on this project “to maintain competency level in engineering and development” as he puts it. He did that at Varien, which he founded in 2001.In 2004 they found osCommerceOS Commerce and sometime later found a client who could fund the development. They started working on Magento and Roy became so enthusiastic about creating something new that he shifted their focus and told his developers to go all-in instead of working on it as a side project.Roy was COO when the company was a property of eBay (probably the toughest years in their history), but parted from Magento in 2014. He remained active in eCommerce technology, serving as a strategic advisor and investor for many start-ups and entrepreneurs. He is currently a member of the Magento Board of Directors.

Magento was a success from the start and a great community started to form around it. In 2011, eBay announced that they invested in Magento and acquired 49% of the development company and a few months later bought the rest of it.

After that, the development of Magento slowed down – eBay focused on other projects, and Yoav Kutner, one of the founders even left the company because he thought the vision for Magento was changed with the acquisition.

  • Yoav Kutner is a co-founder of Magento and had a great role in creating the platform. Serving for years as the CTO of the company he was responsible for revolutionizing the e-commerce landscape and turning Magento into one of the most popular solutions globally.After he and Rubin solidified the position of Magento as a market leader, he had a very clear vision about where to take the company and the platform. However, after eBay acquired them, he felt that they lacked the true understanding of “open” and left.He later founded OroCRM, which is an open-source CRM for eCommerce websites where he is still working as CEO of the company.

2011 was also the first year when they first held the Magento Imagine conference. More than 600 merchants, partners,  -and developers gathered in Los Angeles and has been held every year ever since. (In 2018 the event, held in Las Vegas, attracted 3000+ attendies from 60 countries from all over the world.)

In 2015 eBay and PayPal broke up and as a result, Magento was also spun out as an independent company, with its new owner being the Permira private equity fund.

Finally, in 2018, Magento was acquired by Adobe. Magento Commerce Cloud was added to the Adobe Experience Cloud and that is where we stand at the end of 2018. Most of the community was a bit skeptical about the acquisition (due to bad memories from the eBay days), but so far it seems it granted Magento stability and did not hurt its vision. It is also a good sign that Mark Lavelle stayed in his position as CEO.

The community

In the decade after the release of the first Beta version of Magento, a huge community developed behind the platform, numbering hundreds of thousands of developers, marketers, merchants and other professionals. The Magento community Hub currently has 312,000 members with 7,500 certified experts. According to Karen Baker, CEO of ShipperHQ, “24% of the code that goes into the core” is built by the community, but the actual number is even higher as of the end of 2018.

Even in June, TechRepublic wrote that by now more than 50% of the code comes from “developers that are not on the Magento payroll”.

In the community you can also find hundreds of influencers you should follow and listen to if you are interested in Magento – in a roundup, we did earlier you can find 80 of them. Magento itself rewards top contributors with the title of master every year – there are Master Maker, Master Mentors,  and Master Movers.

Many in the community have been working with the open source platform for years, creating extensions, giving advice, providing documentation (which Magento 1 was lacking) and uncovering vulnerabilities.

Bob Schwartz, the former president of Magento (and founder of nordstrom.com) also said that he is particularly proud of the way they were able to build Magento because it makes it possible for 750,000 to 1 million people to make a daily living.

Bob Schwartz

But we should backtrack a bit because in 2015 there was another major event in the life of Magento.

Magento 2

5 years after it was originally announced, Magento 2 was officially released in 2015. This was not just a simple upgrade of the platform: the architecture for Magento 2 was completely changed, performance was improved, many new features were added and the functionality expanded.

After the release of the new version, the different plans were also rebranded in 2017. The former Magento Community Edition (CE), the free edition became Magento Open Source, and the premium enterprise-level solution, Magento Enterprise Edition became Magento Commerce. Later a third, hosted solution was also introduced as Magento Commerce Cloud.

For the first few years, developers were still getting familiar with the fully rewritten architecture but by 2018 mass migration to the renewed platform gained full momentum. Of course, this was fueled by the previous rumors about the support ending for Magento 1 in November 2018 and the official announcement of the real end-of-life (EOL) date of June 2020.

(Since a migration usually takes 6-9 months, that is a pretty close date for the end of support – to learn more about the subject, read our in-depth article about migrating to Magento 2.)

The numbers

Back in 2016, Magento was at its peak, reaching 30% market share. Since then that share has decreased but the importance of Magento did not.

As of 2018, Magento has been the leading commerce solution for 6 consecutive years according to the 2018 Internet Retailer Top 1000 report by Digital Commerce 360. As Mark Lavelle, CEO of Magento Commerce put it,

Leading brands depend on [Magento’s] unique flexibility, which allows them to access different channels of distribution and adapt to the changing commerce landscape.

Different services indicate different numbers of active e-commerce stores that use Magento both worldwide and in the Alexa 1M.

For example, according to the dataset Datanyze gives us, Magento is currently the second most popular e-commerce platform with a 15.01% share of the Alexa top 1M (WooCommerce being the most popular with 27.02%). In their complete database (Datanyze Universe) they measure a market share of 4.27%. This means just over 146,000 websites use Magento.

Then again, BuiltWith data suggests that there are much more than that. In their database, we can see over 236,000 Magento-powered sites (and also a steady increase in the number of sites using the technology). According to them, Magento is currently the 5th most popular eCommerce platform.

BuiltWith also indicates that in the top 1M sites, Magento is the 3rd most popular e-commerce platform, with 15,023 live sites and a 1.5% share.

Magento itself states that there are more than 250,000 merchants worldwide using their platform, which aligns closely with the BuiltWith stats.

We will probably never be able to give you an exact number – there are many factors that can distort these statistics from accounting for each different version of Magento to counting in staging servers. But we can state at least two things pretty confidently:

  1. There are between 200,000 and 250,000 stores globally that use the Magento platform.
  2. There is a steady growth of the number of sites choosing the platform, and the share of Magento 2 stores (compared to 1.x versions) is also growing.

Magento Marketplace

Ready-built extensions and themes (both free and premium) can be downloaded from the Magento Marketplace, launched in 2015.

Extensions: at this moment there are 4,327 extensions available for download on the marketplace.

  • 1,844 of these are for Magento 1, 2,483 for Magento 2 (which clearly shows how the community has shifted its attention towards Magento 2).
  • 4,319 are for the Community/Open Source edition, while 841 are for the Enterprise/Commerce edition.
  • 2,979 are paid extensions with prices that highly vary. The cheapest ones you can buy for $25 and the most expensive extension (Punchout Catalogs) can be yours for $13,000.

Themes: on the official marketplace, there are only 14 themes available for Magento, however, this is not the only place you can get them: you can find 750+ on ThemeForest.

Basic characteristics

Let’s have a look at some of the most important things that you must know about Magento.

Open-source and full customization

Magento is a flexible open-source software, which is a great advantage. As customer behaviors in the digital age are changing by the day, it is very important to be able to react to these changes at any time.

Closed source or boxed in platforms can’t be as flexible: store owners are mostly dependent on the developers of the software, which can mean that they are falling behind their competitors.

If you find some experienced Magento developers your ability to extend the default functionality of the platform is basically limitless – in other words, it is limited only by time, budget, and abilities.

By customizing your platform you can integrate state-of-the-art marketing solutions, create unique brand experiences, add functions that can increase your conversion rates and revenue, and you can optimize your site better to gain more organic traffic. By adapting faster, you will be able to react to changing trends and buying patterns almost instantly.

Scalability

Magento is probably the platform that offers you the best chance at planning ahead. The software can manage hundreds of thousands of products, and with the new, optimized architecture it can handle millions of page views.

In Magento, almost everything can be scaled up and down, so if you have long-term plans for your online business, if you are counting on significant growth, it is certainly a promising option.

Features

Magento has an incredible list of features – below you can find a categorized list in which we compiled the most important ones.

Extensions

As we have mentioned, there are over 4 thousand extensions available just on the official marketplace. This is one of the great strengths of Magento: the community creates new solutions continuously, so there is a good chance that even if you need something more unique, you can find it.

Using 3rd party extensions can reduce development time and cost (however you will still need a professional developer to correctly install them). In Magento 1 conflicts between different extensions often meant a problem, but this was solved in Magento 2.

Hosting

In the Open Source and Commerce versions hosting is not included – you have to find a suitable hosting service yourself that meet your needs. There are multiple services specializing in Magento hosting.

The Commerce Cloud edition includes a fully managed and automated, cloud-based hosting service. With that, you also get an integrated environment for development, testing, and deployment.

Multi-store functionality

Magento allows for the management of multiple storefronts from a single admin area: you can select and control all information in one place which makes administration much easier. You can, of course, use multiple domains, separate or shared catalogs, even different features, languages, shipping methods, checkouts,  and currencies.

Which basically means that you can segment your business by geographical location, customer segments or even manage stores in completely different industries in the same place.

Security

The Magento team issues patches and security updates regularly which you can find at the Magento Security Center. Currently, updates for both 1.x and 2.x versions are being issued and Magento 1 will continue to be supported until the official EOL in June 2020. After that,  however, only Magento 2 will remain, no further updates will be issued for those using 1.x versions.

In Magento 2 the built-in security options were improved: the SHA-256 hashing algorithm decreases the chances of a successful dictionary type attack targeting passwords.

There is also a fraud protection module included in Magento 2 with which the system can identify and reject orders that it thinks are scams. This module offers 100% chargeback guarantee, however, it is a paid service where the price changes based on your number or orders.

Online orders and sensitive transactions are protected by SSL Security Support.

Design

The design of Magento is fully customizable. You can choose to use a ready-built template (there are hundreds of available online, both paid and premium), but you can also decide to create your own – with the help of experienced developers and designers.

Considering the recent wave of migrations to Magento 2: sadly, Magento 1 themes cannot be migrated to the new version, they can be recreated, however. This offers a chance for merchants to reevaluate their design, create a look that is closer to the brand or even change their appearance completely.

Mobile-friendly

Magento 2 is an out-of-the-box mobile-friendly system with fully responsive themes. Like most customers, today find online stores via browsing on their phones and an ever-growing percentage of orders are still done on mobile it is very important to offer a seamless user experience for smartphone users.

(And also because Google considers this as a top ranking factor ever since the “Mobilegeddon” algorithm update in 2015.)

Checkout and shipping

Magento offers a one-page (and 2-step) checkout, integrated real-time shipping rates from UPS, FedEx,  and USPS, and also dynamic shipping rates based on geographical location.

Tax and shipping costs are calculated before the checkouts online, which can greatly enhance user experience as customers can see the total price before they arrive at the last page.

A common reason for cart abandonment is realizing that the total price of the order is going to be higher than what the customer previously saw in their cart (because it didn’t include shipping prices for example)

The expiration of saved carts can be configured, and in order to buy something in the store, users are not required (but can be offered) to create an account, which makes ordering much easier. Online orders can be tracked from the customer’s account.

There are a number of options for shipping as well, like per order or per item flat rate shipping, free shipping option, managing multiple shipments on a single order, or manage to ship by weight and destination.

Payment gateways

Magento offers out-of-the-box integration with a number of popular payment services like Amazon Payment, PayPal, Authorize.net and Google Checkout.  The store can also accept checks, money orders and online purchase orders. For even more payment gateway integrations you can find a lot of solutions available in the Magento Marketplace or create custom integrations.

This is a very important aspect of e-commerce: in different regions and countries, the most popular payment options vary greatly. If you are targeting your services at multiple countries you have to take this into account.

This is an aspect that can have a great impact on your revenue and profit as one of the most common reasons for cart abandonment is the store not offering the payment options preferred by the users.

SEO

In Magento 2 page speed was greatly improved – category and product pages, checkout and CMS. A fast load time not only means better user experience but is also an important factor for search engines in ranking.

Google Site Map creation is also included, the system can generate search engine friendly URLs, and you can manage meta information down to the category and product level.

You can also boost SEO by using a coherent content marketing strategy based on data and research, but this is a topic for another article.

Marketing

There are many options for you in Magento to boost your sales and revenue using the most advanced online marketing methods.

One of the most important ones is probably that now an email marketing automation option is also included, as in the 2.2 version dotmailer integration was introduced. With this, store owners can create and manage automated email campaigns much easier than before, right from the admin panel.

With dotmailer, you can also create push and SMS automation. Dotmailer is a premium service, however, you can try it free with a 14-day trial. Packages after that start at a monthly fee of $250.

There are also many on-site options included, like:

  • Poll creation and management,
  • Landing page creation toolkit,
  • Promotional pricing options and multi-tier pricing,
  • Free shipping promotion,
  • New items promotion,
  • Upsell and cross-sell options in the store and shopping cart,
  • Wishlists,
  • The bundled product offers,
  • Flexible coupon creation and management.

You also have several options to leverage user-generated content (UGC) that usually serves as the best social proof you can get and can help you increase conversion rates. Users can leave product reviews in your store including text and rating.

Catalog management

In Magento you have the option to manage your inventory with back ordered items, minimum and maximum quantities, you can batch import or export catalogs and products (including unique product attributes), you can bundle or group products easily from the interface. You also have the option to create and sell virtual products.

Customer personalized products are also an option: for example, they can upload text, images for monogramming or embroidery, select date/time options etc.

You can create attribute sets and store-specific attributes any time to make product management easier for you, and finding the right product easier for your customers.

Customer accounts & segments

Your customers can purchase a product in your store as guests (making checkout easier and decreasing cart abandonment rate), but they can also choose to register an account in the store.

In their account they can access their order status and history anytime, they can view recently ordered items, set an unlimited number of addresses (and set a default billing and shipping address). They can also see any customer reviews that they submitted in the past.

Magento also has the ability to manage newsletter subscriptions and new features in Magento 2, primarily the dotmailer integration allow for advanced email marketing automation so you can communicate with your customers regularly.

Analytics & reports

Magento can be integrated with Google Analytics. Magento 2 offers 20 reports on the admin dashboard where you can see the most important data in one place and can even customize what do you want to see.

Options include reports on sales, taxes, returns, abandoned carts, top sold products, low stock items, onsite search terms, product reviews, coupon usage,  and top viewed products.

In Magento 2 there is also an option to use RJMetrics, now branded as Magento Business Intelligence, which can provide 75 different reports combining Google Analytics and Magento system data. You can access this in both the Open Source and Commerce versions, however, it is a paid service, with a monthly fee starting at $100.

Order management

In the admin panel, a store owner can see, manage, edit and create orders.

Split fulfillment is also possible as you can create multiple invoices, shipments and credit memos per order. From the admin interface, you can also create re-orders for customers. You can also set automated email notifications about the orders placed.

Customer service

Constant communication and offering the customers a chance to give feedback on all steps of the journey is a very important element of user experience. To enhance it, Magento includes a number of options.

A contact us form is included as well as feature-rich customer accounts. Customers can see their history, track their orders and receive triggered order confirmation and update emails.

Plans: Open Source vs. Commerce vs. Commerce Cloud

For those who want to build their online business using Magento, there are currently three separate options available.

Magento 2 Open Source

The Open Source Edition (OS) is free to download, install and use for anyone. It has a wide range of functions, compared to the premium plan however it can be said that it only contains the basics. (In the case of Magento though that generally still means more than other platforms.)

Admins and developers are free to modify the coding of the OS edition, they can make custom configurations, integrations, and add functions as they see fit.

Specially designed modules can be added in order for the store to be more user-friendly, convert on a higher level, or attract more organic traffic.

There are many freely available 3rd party extensions available on the Magento Marketplace and elsewhere with which you can further extend functionality with less development needed. But in this case, you likely have to make some compromises.

And development isn’t cheap: you will need to be sure you have the time and budget for it. This is one of the main reasons why Magento is not really the optimal choice for those who are just about to launch their first e-commerce store – but more on that later.

Magento 2 Commerce

Formerly known as Magento Enterprise Edition, this is the premium version. (You can find more information about the Magento pricing in our in-depth article.)

One of the main advantages is that it comes with rich out-of-the-box functionality and if you have good developers, the same unlimited customizability.

As Commerce is the Enterprise level solution, it comes with corporate account management features, company credit management,  and support.

Content Staging is also a feature exclusive to the commerce version, allowing store owners advanced content creation and publishing options, scheduling updates from the admin panel, the creation of dynamic pages that can change according to holidays, seasons or other criteria throughout the year.

Magento Commerce is a solution that suits B2B businesses and enterprise-level stores nicely. It is the platform you want to choose if you have an established customer base, large traffic, thousands of products, the need for really high level of customizability, and also have the budget to pay for it.

Magento 2 Commerce Cloud

The real difference between the “simple” commerce edition and Cloud is, of course, the cloud-based hosting that comes with it: a fully automated and managed service that allows users to free themselves from the burden of managing their own hosting or having to choose an external provider.

Also, you get a fully configured environment ideal for development. You don’t need IT personnel for setting the right server configurations, server software, and other aspects alike. The Cloud version also includes an integrated source control management system (GIT), that allows for safe coding, testing of launching Magento stores.

Who is Magento for?

Magento is a platform that is certainly not a one-size-suits-all solution. It has many advantages over other eCommerce software, but some of its characteristics also make it an ideal choice for certain kinds of businesses – and not ideal for others.

First, Magento is a complex, robust solution. Its admin panel became much more user-friendly with the introduction of Magento 2 and the customizable dashboards, but there is still a fairly steep learning curve for users.

This is mostly because of the many options included: it takes time not only to get familiar with all the features included but also to use them properly. (It may help if you are working with developers who provide you support and are willing to guide you through the first stages of using the platform.)

The general consensus is that if your yearly turnover is under $1M, it is not really worth it to start with Magento.

But if you have an established business, you have a customer base, a brand, a significant yearly revenue, it is well worth it to launch a Magento store. This goes for both if you are creating an online store for the brand for the first time or migrating from another platform that can’t really suit your growing needs.

As we have already mentioned, one of the best things in Magento is scalability. If you started your business with another platform but reached its boundaries – either in performance or functionality – you will definitely enjoy a move to Magento.

What platform should you choose if you are setting up a small online business? There are many options that include Shopify, WooCommerce and BigCommerce. These allow for a small budget with functionality that still suits the needs of small-sized businesses and entrepreneurs.

Great successes, great brands

HP made global feel local

One of the best-known brands using the Magento platform is HP. Their main goal with the platform was to create a system with one core that can support hundreds of their stores around the world. In order to do this, they came up with a 3-tiered solution.

HP is currently using a single Magento core for the templates, dashboards, page navigation, and security to the stores targeted at different regions. The second tier is the “HP Universe”, where project management, omnichannel functionality, content strategies, and customer 360 integration are located.

Finally, payments, logistics, language and order management belong to their local hubs. This way they managed to create a flexible structure, in which the basic common elements such as design are controlled in a centralized manner while regions are empowered to provide a local feel and offer solutions to local needs.

BAUHAUS: creating the best B2B experience

In 2014 BAUHAUS integrated Magento with their own ERP system because they wanted to create a new experience for their B2B customers.

They created a system in which they offered order management, credit and account management capabilities and “click and collect” that is connected to their in-house delivery service.

Since the launch of this system, they were able to increase their online revenue by 296% and improve their conversion rates by 376%. Total transactions increased by 205% while B2B business registrations by 80%. All these clearly show that their customers found the new system more user-friendly and suitable for needs.

Oliver Sweeney

This brand is one of those who understands the importance and endless opportunity of the level of customization. They use highly customized digital marketing campaigns, connecting their successful direct mail catalogs with online content.

With Magento Commerce they are managing orders in the mobile application, agents can add items to customer baskets, apply promotion codes, offer store credits and so on.

They can also set up promotions much faster – in a few minutes instead of the 48 hours that was the practice before their transition to Magento. As a result of the new platform, the overall conversion rate grew by 12% mobile conversion rate by 25% and their average order value is also 15% higher.

Summary

Magento is a really powerful eCommerce platform that can suit the needs of basically any business. But it is essentially targeted at upper mid-sized and enterprise level online stores who have a knowledge base, budget and time to properly leverage all its capabilities.

This doesn’t mean that smaller companies should never choose it. In every case, it takes some consideration whether it would not be worth it to invest in Magento. If you are planning for the long-term and you can afford custom development, the answer is certainly yes. (Also, in this case, you should definitely choose Magento 2, click on the link to see in our article why.)

Magento could be the engine behind your growth for years, giving you the options to handle large workloads, millions of visitors, tens of thousands of products, orders, and so on. You can use a wide array of marketing tools, automation, search for extensions and integrations.

And with the help of some good developers, you can make the system do what you want, and customize it as you need.

The one question you need to ask is: do you think your business is worth investing in for the long run? If yes, Magento could provide you with the foundation you need.

Juergen Schreck
Certified Magento Developer and Magento 2 Solution Specialist

Juergen is a 10-year veteran Magento Developer holding multiple certifications. Combining more than 25 years of hands-on experience in software development and business management, his insights provide merchants with creative solutions to gnarly problems and peace-of-mind where the rubber meets the road – turning hard earned traffic into actual sales. Juergen is proud father of two, a foodie and a lover of jazz music.