Tuesday, May 6, 2014
Online Retailers: 3 Things You Must Do Before Accepting Bitcoin In Your Store
For those involved in the always-evolving world of ecommerce, it’s important to understand the role different payment options can play in both processing and generating revenues. As a senior Economics and Integrated Marketing Communications student at Northwestern University, I’ve researched Bitcoin and other crypto-currencies and found two highly relevant articles. From these articles, I’ve determined three action items any online vendor interested in accepting Bitcoin should carry out.
In an article from BestTechie.com, Craig Vodnik explains a problem vendors who accept Bitcoin and other crypto-currencies can solve: falling prices for digital goods simultaneously increases the percentage of sales taken by transaction costs. Bitcoin is an electronic payment system owned by no organization, meaning transaction fees are incredibly low – around 0.25% to 1.5% with no fixed cost. Given average credit card transaction fees (including fixed cost), a $1.99 transaction costs a staggering 15% (!) of the sales price. Aware of the value this creates for their company, some vendors have offered freebies or rewards programs to incentivize customers to use Bitcoin.
Next, an article from Bizreport.com by Kristina Knight highlights some important takeaways from an April consumer survey on Bitcoin. The survey found that more and more people are becoming aware of Bitcoin and are more willing to use it in transactions. 46% of survey respondents say they are familiar with what Bitcoin is – a 13% percent increase from just January 2014. What’s more, 60% of those respondents claimed they ‘would use’ Bitcoin for online purchases.
With these articles, I’ve determined the three most important things an online vendor interested in accepting Bitcoin should do:
1. Research. It’s important to understand how Bitcoin and other crypto-currencies work before you begin accepting them.
2. Justify it. Is your target market aware of and willing to use Bitcoin? Does your business model involve the micro-transactions that make accepting crypto-currencies especially beneficial?
3. Create value. Customers are now more willing than ever to use crypto-currencies, but the price they pay is the same whether they use a Visa or Bitcoins. It is up to you to incentivize the use of crypto-currencies by adding value to its use. This could be through discounts, loyalty programs, and more.
Crypto-currencies aren’t going anywhere soon, as consumers and businesses alike are becoming more aware of their potential benefits. Above all, accepting Bitcoin is a business decision that requires research and justification just like any other decision. If it makes sense for your business, it may just revolutionize the way you make money.
Andy Bell is a senior at Northwestern University. He will be graduating in June with a double major in Economics & Political Science, along with a certificate from the Medill School of Journalism’s Integrated Marketing Communications program. Questions or comments? Contact him @andytbell.