The retailer side of the bitcoin equation
What drives a merchant to begin accepting virtual currency as payment? And, how can that acceptance help drive sales – and perhaps even change up a retailer's customer mix?
In early November, representatives from three merchants – Amagi Metals, Newegg and the Golden Gate Casino – gathered together at the Aria Resort & Casino in Las Vegas to share their insights during the Money20/20 event. At a panel presentation titled "Retailers Accepting Bitcoin Share Perspectives," the trio explained how virtual currency had impacted their businesses.
Denver-based Amagi Metals – a global e-commerce precious-metals dealer selling gold, silver, platinum and other physical metals directly to its clientele – began accepting bitcoin for payment in 2012.
"It's been a great experiment," said Stephen Macaskill, Amagi's CEO. "We began accepting bitcoin [as a way] to encourage and promote bitcoin. Also, we have a high rate of credit-card fraud in the precious-metals industry – with bitcoin, however, there are no chargebacks, and we don't have to worry about fraud.
"Our customer base has changed as a result of bitcoin. It's brought in a new base of customers – younger and tech savvy. Currently, approximately 30 percent of our customers are bitcoin customers. Also, order sizes have been larger as a result versus our normal order sizes," said Macaskill.
Eventually, he'd like to move to a business format that only accepts bitcoin and other virtual currencies. For now, however, the company accepts the usual mix of traditional payments, although it retains a percentage of its profits in bitcoin: "We keep the bulk of our bitcoin in a cold wallet, and also have a small 'stipend wallet.' I recommend that merchants keep a small amount of bitcoin – even if it's just 1 percent -- in a secure wallet."
Newegg, the online retailer perhaps best known for its computer and other tech offerings, began accepting bitcoin in January 2014 in response to its customers, said Soren Mills, Newegg's Chief Marketing Officer.
"Our customers are at the forefront of mining – it's important for us to support customers who are using the technology. Our customers, then, expect us to be at the forefront of innovation in selling leading-edge products. So bitcoin was a natural fit for us."
"Accepting bitcoin has brought in new customers, and our average order size has increased as a result. Although our sales in bitcoin are only a single digit number as a percentage of our business, we see growth here. Plus, bitcoin offers us more international options and opportunities – there are many advantages when it comes to bitcoin."
Operating in Old Las Vegas since the early 1900s, the Golden Gate Casino was renovated in 2012 and expanded with new luxury suites. In November 2013, it became the first casino to begin accepting bitcoin, along with its sister club, the D Las Vegas Casino, reported CFO Susan Hitch.
"Why wouldn't we enable customers to spend bitcoin with us? Customers can use bitcoin to pay for items in our restaurants, gift shops, the front desk and so on, and we've had a strong response," said Hitch. But, she noted, the casino does not accept bitcoin on the gaming side – doing so would run counter to Nevada Gaming Commission regulations. Tablets programmed with BitPay were installed at each cashier, allowing bitcoin users to pay for services using their mobile wallets.
The "Retailers Accepting Bitcoin Share Perspectives" panel was just one of many sessions at the 2014 edition of the annual Money20/20 event, which took place in Las Vegas in early November. Virtual currency was certainly one of the conference's most talked-about topics, driven by the event's (Bit)coinworld track -- which offered 10 sessions specifically devoted to virtual currency – and approximately 20 virtual-currency companies exhibiting on the show floor (up from six in 2013).
Here are a few additional virtual-currency-related quotes shared in other sessions from this year's Money20/20:
- "This is a society experiment, not a technology experiment. Are we ready to trust something virtual?" – Micky Malka, Founder and General Partner, Ribbit Capital
- "The top emerging bitcoin applications include: remittances, international payments and micro transactions … in all cases, bitcoin is better, quicker, and has fewer fees." -- Fred Ehrsam, Founder, Coinbase
- "Merchants in droves are considering accepting bitcoin." – Cedric Dahl, CEO of Buttercoin
- "I don’t think bitcoin will ever be a currency. I don't think the word 'bitcoin' will exist in 5 years." – Halsey Minor, Founder and CEO of Bitreserve
- "Initial reaction [to virtual currency acceptance] has been slower than some expected in the Western world. Will bitcoin be more likely accepted in countries with civil unrest?" – Jeremy Liew, Partner, Lightspeed Venture Partners
- "Bitcoin is an interesting technology, but it isn't going to displace traditional applications. It's not going to become the fifth payment network nor the second U.S. currency." – David Nelms, CEO, Discover
- "Banks are the biggest red light for bitcoin…[but] they're starting to look at what's going on." – Micky Malka, Founder and General Partner, Ribbit Capital
- "We're just scratching the surface of the blockchain." – Nicole Ibbotson, general counsel, ITC Financial Licenses
- "We're at a similar juncture with the blockchain as we were with the Internet in 1992-1994, in terms of how industries will be affected." – Jim Robinson, Co-founder and Managing Partner, RRE Ventures
Greg Sharpless Gregory is Editor of Virtual Currency Today and Editorial Director of its parent company, Networld Media Group. A b2b-journalism veteran, he has covered a variety of industries and markets throughout his 30-year career, including digital printing, the automotive aftermarket, graphic design, fine art, and others. www