Bitcoin for Retailers: How Digital Currency Can Boost Profits
Latest posts by Dean (see all)
- Why commodity-backed cryptocurrencies may be the best investment - August 21, 2019
- FCA held the meeting on increasing control of cryptocurrencies in the UK supervisory authority - August 14, 2019
- What you need to know about Bitcoins - August 14, 2019
Digital currency offers an exciting opportunity for anybody who wants to accept payments over the internet, whether you run a retail website, membership site, charity or anything else. It can also be a great boon to physical retail stores who choose to add it as a payment option.
The main advantages of taking digital currency payments include a reduction in the fees that you need to pay, the elimination of charge back fraud, the ability to tap into an established community of users to find new customers, and potentially the ability to retain control of your funds throughout the process without needing to rely on a third party to act as a middleman between you and your customer.
In this article we will guide you through how to accept bitcoin and other digital currency payments on your website or in your store, or set up a new retail site with digital currency payments already integrated. You will also learn how to fully capitalize on all of the advantages it can offer, how to promote your new service to increase sales, and how retailers can use this technology to capitalize on newly emerging markets or sell their products through additional retail channels.
Although this is a pretty broad topic to tackle on one page, our aim is to provide the most complete beginners guide to bitcoin for retailers that you will find anywhere on the internet.
How To Accept Bitcoin Payments on Your Website or In-Store
To get things started you will need to understand the practical considerations of taking payments in bitcoins or other digital currencies.
Because digital currencies are based on decentralized peer-to-peer networks, you do not necessarily need to set up an account with any third party payment processor to get started – although there are advantages to be gained from doing so, as I will outline below. Accepting payments directly from your customers obviously has a big advantage in that you do not have to pay fees to somebody for them to take payments on your behalf, as you would need to for credit cards or other methods.
Simply to take a payment, all you need is an address for people to send coins to. You can get this from any wallet software or by generating an address and storing its key pair to import into a wallet later. To make it as convenient as possible for people to send payments to you, it is also common to create a QR code for your website visitors to scan; you can make one very easily here.
If you are taking donations then this may be enough for you, or you may like to use something like Embed Bitcoin to create a payment button for people to use.
But of course a retail site does not only need a way to take payments, they also need to know whether a particular customer has made a payment in order to process their order. The most common way to do this is to generate a unique address for each order and then monitor the blockchain to see when a payment arrives to that address.
One of the easiest and cheapest ways to implement this on a website is to use something like the Blockchain.info API, which is a free service for creating bitcoin addresses, monitoring them, and then forwarding payments to your wallet. It also includes a way to check exchange rates, so you can set your prices in your local currency and automatically convert that to the correct amount of bitcoin for each order. You may also consider using a shopping cart plugin like OpenCart.
For physical stores it is possible to accept payments at the till simply using a wallet app and tablet computer (or even a phone!) and to manually verify that the payment has been made. This means you will pay not fees at all, and may work for small stores. For larger retailers, however, it will probably make sense to use a payment processor that is able to provide you with a point of sale system or be integrated into your current system.
Using a payment processor for accepting bitcoin payments on a website means that you will have to pay fees, but it may also have some significant advantages for you. The first of these is that they will probably be able to provide you with an off the shelf solution that you can integrate into your shopping cart using plug-ins, without even the basic programming requirements needed to use an API.
The main reason why many retailers choose to use payment processors, however, is because of the currency conversion service they can offer. Accepting payments in one currency, but having to pay out all of your expenses in another currency, would be a very difficult thing to pull off. Most payment processors will provide a service whereby they instantly sell any bitcoin paid by your customers and then make daily or weekly payments to you in your national fiat currency. Some will even let you choose what percentage you want to convert and then keep the rest in BTC.
Of course another big advantage to using a service like this is that they may be able to provide you with a point of sale system to use in your ‘bricks and mortar’ store.
Finally, using a payment processor may enable you to easily accept payments in your choice of alternative coins in addition to or instead of Bitcoin.
There are many different payment processors out there, but here are some of the most popular examples:
|Payment Processor||Digital Currencies||Point of Sale||Auto-Sell to Fiat||Shopping Cart Plugins Available||Additional Info|
|Coinbase||No fees for the first $1,000,000 of transactions. Easy to set up.|
|BitPay||Easy integration with partner PoS solutions||Free currency conversions and payment processing. Totally free option available or monthly fee for 'business' and 'enterprise' accounts.|
|Coinpayments||More than 55 different coins supported.||PoS interface provided, but not complete system||Offers the widest range of payment options for altcoins.|
|Coinify||Wide range of currency options for converting to fiat|
|GoCoin||Quick set up for accepting multiple currencies.|
|Stripe||Mobile payment solutions, fiat payment processing.|
If you are setting up a new online store from scratch then there are some great ‘store builder’ solutions out there that you can use to set up shop quickly, cheaply and with no technical skills required – and most importantly with a bitcoin payment option already integrated from the start! The most prominent example of this is Shopify, which has a wide range of features and powers thousands of stores all around the world.
Making the Most of Blockchain Technology
Truly making the most of what blockchain technology can offer to your retail business is about more than simply accepting payments. There are loads of other things you can do to offer your customers additional features or to directly increase your revenues.
Rewards & Vouchers
Blockchains aren’t just for ‘coins’ that people can use as an alternative form of money, they can also be used for many other things, like loyalty rewards points, vouchers & gift cards.
By issuing loyalty rewards points over a blockchain protocol you are providing a built-in mechanism through which your customers can buy, sell or trade on an open market, or easily gift them to friends. We all know that ‘word of mouth’ is the best form of advertising, but that is even more powerful if a customer who has earned rewards points for shopping at their favorite store is able to send those points to a friend via email or social media when recommended the store to them. For retailers, blockchain technology can also lower the barriers to entry for participating in joint rewards points schemes with other businesses; RibbitRewards is one example of a loyalty rewards scheme that uses blockchain technology and which is open to new retailers.
Alternatively, digital currencies like Bitcoin can be paid out as a kind of loyalty reward point themselves. Many customers may like to pay using a method that they are more familiar and comfortable with, but then receive some of this exciting new digital currency stuff as a reward for shopping at your site. In addition to being more appealing that in-house reward points, this may allow you to take advantage of some of the additional monetization strategies outlines below.
Vouchers and coupons can also be improved by blockchain technology. Today, many retailers use voucher codes to offer promotional discounts, but that is not ideal for a number of reasons. Voucher codes can’t be given to a particular group of people without others being able to use them. Potential customers who see them often can’t know in advance whether they are still valid. If the retailer limits the number which can be claimed then it is even more difficult for customers to know whether they are valid, and if they don’t then the retailer won’t be able to tell in advance how many could be claimed. Vouchers can be issued over a blockchain quite easily: check out our article on ‘how to make your own digital currency‘ for more information as issuing a voucher is pretty much the same from a technical viewpoint. You can then issue a fixed number of vouchers and still allow your customers to easily trade them or send them to friends and family with minimal costs.
One of the big selling points of digital currency is the fact that fees are lower than for processing things like credit card payments. If you are saving money on payment processing fees then why not pass on part of those savings to your customers? Offering a small discount for anyone who pays using bitcoin is a great way to draw bitcoin users to your site, and can also be a great way to encourage existing customers to use that digital currency and therefore save on your costs and increase your margins.
So far this article has looked at using the blockchain to take payments, improve user experience, and drive sales. But it can also be used to help fund an expansion of your business. Crowdfunding is very popular among digital currency users, and one way its often used which is relevant to retail businesses is the ‘pre-sale’. If you are developing a new product, or perhaps even if you just want to make a large wholesale order, then you may consider issuing a token which can be redeemed for the product in question at a later date. By offering a discount or other rewards for customers who buy into a ‘pre-sale’ a business can raise money for product development or other costs. The advantages of using a blockchain for this are similar to the advantages outlined above for vouchers and gift cards.
Supplementary Monetization Strategies
Introducing new users to digital currency may also open up the possibility of new sources of revenue for your business. Most retailers start accepting something like Bitcoin in order to appeal to people who already use it, but by featuring this payment option on your site you may also find yourself encouraging other people to make the switch. This is especially true if, for example, you pay out bitcoin as a reward to people who buy through your site, or if you offer discounts for its use.
Several major bitcoin wallets, as well as exchange services, offer either an up-front finders fee or ongoing commissions if you refer new users to them. One great example of this for retailers is Coinbase, which provides payment processing services, one of the world’s most popular wallet services, and also an exchange for customers to buy bitcoin from the US or most of Europe. Another great example is Bitshares, which offers stable digital currencies like BitUSD or BitEUR which are pegged to the value of their real world equivalent but still have all of the advantages of the blockchain – and which has its own referral program built into the protocol itself!
Creating a simple ‘get started with bitcoin’ page, or something similar, can improve user experience whilst at the same time driving additional revenue.
Alternative Retail Channels
The most important, but also the most difficult thing for any retail business to do, is to acquire new customers.
One way that you can do this is by opening yourself up to a global audience. Of course this is not appropriate for every retailer – shipping a large freezer across the Atlantic to an individual customer, for example, is unlikely to be viable. But many retail business could do more to drive sales from international customers, and one way to do this is to accept payment in an international currency. By providing more meaningful pricing to international customers as well as allowing them to pay without incurring often opaque currency conversion costs to their credit card provider can make it much easier for a retailer to drive international sales without needing to have a physical international presence.
Another thing to consider is selling your products through channels other than your website. Many retailers sell through major sites like eBay or Amazon as well as their own site, but this can be problematic as your listings on these giant sites often compete with your website in search engine results pages. There are also significant fees to pay for selling through these sites. One interesting alternative to consider is making your products available through the new breed of ‘decentralized marketplaces‘ built to fully harness the power of blockchain technology. These decentralized markets offer a low cost way to reach new customers with minimal fees, native digital currency payments and no worries about drawing traffic from your main site.
Promoting Your Digital Currency Retail Business
Once you have made the decision to accept cryptocurrency and taken care of all the technical requirements to make it happen, all that is left is to let the world know about it!
Social media is a very powerful way to promote your news, as many users love to help promote bitcoin or their favorite alt coin, and will happily share news about new businesses jumping on-board. There are also plenty of popular hashtags and fan pages you can use to jump into an active conversation and put your news in front of potential customers.
Altcoin Demographics & Niche Communities
Many alternative coins have active niche communities who you can reach through their forums or through places like Reddit or Voat. If you are going to accept altcoins and market to their userbase then it is worth taking the time to consider the demographics, as many coins have a distinct appeal to particular groups. For example, if you want to appeal to young people who love humor and fun things then you may well have success targeting the Dogecoin community, whereas if you are selling eco-friendly products then reaching out to the community of a more energy-efficient coin like Peercoin may bring you more success.
For the most part, online directories are pretty much dead. People just don’t use them. But for bitcoin businesses that may not be entirely true. Although it is possible to spend bitcoin anywhere through things like debit cards, many users will explicitly set out to look for retailers who accept BTC and directories are one of the best ways to find them.