While speculation regarding the future of bitcoin has run rampant for the past year, the fact that the digital currency is making headway among ecommerce retailers cannot be denied.
Earlier this year, Overstock.com became the first major online retailer to accept bitcoin. The Motley Fool reports that the online retailer has already exceeded $1 million in total sales.1 Initially, the company had projected that sales processed in the digital currency during the first year would range somewhere between $3 million and $5 million. In fact, according to The Guardian, during the first day of accepting bitcoin alone, Overstock collected $130,000 in sales in bitcoin.2
Based on the latest figures, Overstock is now revising those figures and has estimated that sales in bitcoin could reach $15 million by the end of the year. Based on the current growth rate, the CEO of Overstock has even indicated that bitcoin sales could top $20 million. Prior to making the decision to accept bitcoin, the company conducted extensive research and found that consumers who use bitcoin often spend more on their orders, on average, than consumers who use credit cards.
Those figures alone have been enough for many other online retailers to turn their attention toward the digital currency and consider it as an accepted form of payment. While such large sales numbers are certainly enough to garner any retailer's attention, there are also many other benefits to accepting bitcoin. One of those benefits is the ability to avoid fraud that can take place in the form of charge backs to credit cards. Additionally, many retailers have found that they are able to get paid faster when consumer payments are processed with bitcoin versus credit cards. While it typically takes three days for payments to become finalized with credit cards, when a consumer pays with bitcoins, the retailer is paid immediately.
Retailers who make the decision to accept bitcoin also pay lower processing fees than with both PayPal and credit cards. Furthermore, it is the bitcoin processor that assumes all of the risk, rather than the retailer.
The ability to actually bring in a larger profit margin per sale is yet one more incentive that could drive additional retailers to accept bitcoin in the future. The Motley Fool reports that ecommerce retailers, such as Amazon and Overstock, typically have profit margins below five percent. When traditional payment processing fees amount to 2.5%, that means that profit margins can easily be slashed to 2% or even less. By making the choice to accept bitcoin, ecommerce retailers are able to remove expensive credit card payment processors from the mix and immediately boost their profit margins.
Josic Media reports that a significant percentage of the bitcoin orders received by Overstock during the first day of acceptance were actually from first-time customers. Clearly, the ability to pay in bitcoin served as a major incentive to drive new customers to Overstock, yet one more benefit that online retailers can anticipate by accepting the digital currency as a form of payment. The bitcoin community remains loyal and is often actively seeking places to spend bitcoin currency.
Currently, e-commerce comprises approximately 6% of the total amount of retail sales in the United States, according to The Motley Fool. This certainly leaves ample room for growth. Further estimates indicate that apparel/accessories and electronics will account for just under 50% of all e-commerce sales in the United States by the year 2016.
A number of small businesses across the United States as well as Europe have already embraced bitcoin with open arms. Many such businesses include restaurants and bodegas. BusinessInsider found that even in situations in which bitcoin accounted for a small percentage of overall sales, retailers still found that accepting the digital currency was beneficial. As an increasing number of brick-and-mortar establishments continue opening their doors to bitcoin, the chances are good that e-commerce retailers will continue that trend, as well. Shopify, the well-known e-commerce platform, recently made the decision to allow 75,000 e-tailers to accept the digital currency, according to BusinessInsider.
Exactly how much of future ecommerce trade bitcoin will account for in the future remains somewhat speculative. A report published by Digital Journal recently indicated that bitcoin may soon pass up PayPal in terms of US dollar transactions. Currently, the digital currency records almost $300 million in transactions on a daily basis.3
As an increasing number of e-tailers turn their attention toward the benefits offered by accepting bitcoin and begin to make inquiries about how they can tap into those advantages, it becomes clear that bitcoin is certainly more than just a passing fad, as many at first supposed. In order for ecommerce retailers to remain competitive, it may very well become necessary to offer bitcoin as an accepted form of payment sooner rather than later.
1) Bitcoin Is Providing Big Profits to E-Tailers.
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3) Retailers Of All Sizes Are Warming Up To Bitcoin.