Bitcoin Shop Inc. runs an e-commerce marketplace offering about 140,000 products, which on the face of it isn’t all that remarkable. What sets the 1-year-old site apart, though, is that it accepts only digital currency. No cards or bank-account transfers, please, just Bitcoin, Dogecoin, and Litecoin.
But Arlington, Va.-based Bitcoin Shop has grander ambitions than catering to the limited market of digital-money enthusiasts. “A site that just accepts Bitcoin doesn’t make sense,” Charles W. Allen, a veteran investment banker who took over in January as Bitcoin Shop’s chief executive, tells Digital Transactions News.
Instead, the company is overhauling its site to make it easier for customers not only to acquire and spend alternative currencies but also to run price comparisons across multiple competing stores. The rebuilding project has been a major undertaking lasting about six months so far, and Allen says he hopes to have the new site live in time to take advantage of the holiday shopping season.
Ultimately, Bitcoin Shop’s ambition is to commercialize Bitcoin and other forms of digital money. “Where we’re really going is that we want to use this e-commerce platform as an on-ramp to digital-currency adoption,” says Allen, who led the company’s public offering in February, in the process raising $1.87 million. Listed as an over-the-counter security, Bitcoin Shop remains the only publicly traded Bitcoin-related business in the U.S.
The Web site operates as an online marketplace much as eBay Inc. and Amazon.com Inc. do. It neither sells its own goods nor fulfills orders, leaving inventory and fulfillment to its client merchants. Its breadth of merchandise is broad, ranging from appliances and computers to sporting goods, watches, and tools.
With the current site, the company collects a commission on each sale amounting to 15% to 20%, which includes taxes, shipping, and transaction processing. But Allen says that will change when the new platform goes live and Bitcoin Shop adopts an affiliate-marketing model. In this model, merchants pay what amount to referral fees to the host site for each sale.
To handle transactions, Bitcoin Shop uses Singapore-based GoCoin Pte. Ltd., an alternative-currency processor in which Bitcoin Shop is a lead investor. To make it easier for users, the company is working with a Bitcoin wallet company Allen prefers not to name just yet to integrate its product with the new site. He’s hoping these moves will lure more U.S. consumers into alternative currencies by streamlining the process of registering for an account. “You haven’t seen mass adoption of Bitcoin because it’s hard,” he says.
But it’s the upcoming price-comparison capability that may hold the biggest potential to draw in users. “It’s a big project,” Allen says. “It’s taken longer than we expected. But it’s the Kayak of e-commerce. It can stand on its own. [Even] if you took Bitcoin away, [this] will attract customers.” Kayak is a Web site that allows users to isolate deals on hotel rooms, flights, and car rentals.
The new capability will collect and present competitive prices from a range of major retailers, Allen says. “If you shop at my site, I’m going to check prices at four for five big-box retailers,” he promises.
Access to public equity markets could also prove to be an advantage as the company gears up for the site’s debut. “We’re kind of uniquely positioned with the advantage of being a public company,” Allen says,
But Bitcoin Shop may have to hurry things along. The company lost $4 million through June on $16,286 in revenue, mostly in processing fees, according to its most recent 10-Q filing with the Securities & Exchange Commission.
Also, the consumer market may not be the most promising avenue for alternative currencies, says George Peabody, who follows Bitcoin as a senior analyst at consultancy Glenbrook Partners, Menlo Park, Calif. For consumer transactions, “We have a payment system [already] that works pretty well,” he notes. “The use of alternative currency for consumer transactions is a second-order problem.”
More promising, he notes, are the markets in micropayments (generally, transactions under $5) and in so-called supply-chain payments, or really big business-to-business transactions. “This is where math-based [payment] rails would be pretty useful,” he notes.
Still, Peabody admits there are advantages for merchants. “The demographics of the people who use Bitcoin are attractive for merchants,” he says. “It’s easy to accept Bitcoin, and if you’re a merchant [accepting Bitcoin] you’re guaranteed to get press.”