While Bitcoin Spending Fell Short, Overstock’s Byrne Remains Bullish for the Future

When it comes to Bitcoin, no major merchant has more experience with the digital currency than e-commerce giant Overstock.com, which has been accepting it since Jan. 9. Now, with nearly a year of experience under its belt, the retailer will close out 2014 with about $3 million in Bitcoin sales, founder, chairman, and chief executive Patrick M. Byrne tells Digital Transactions News.

That may sound like a respectable number, but for Salt Lake City-based Overstock, which sells everything from appliances to furniture to bedsheets and computer supplies, it comes to 0.2% of overall annual revenue, says Byrne. He was hoping for more. “I thought we’d do about $5 million this year,” he says.

The cause of the disappointing result, he says, is that Bitcoin-denominated orders from overseas customers did not flow in quite as much as Overstock had expected when it opened up acceptance internationally in September. “We thought international would be big,” says Byrne, “but it’s just a trickle. I can’t say why.”

But Byrne is just as optimistic about Bitcoin as ever. He figures sales on the cryptocurrency next year could more than double what Overstock saw in 2014. “At $5 million, I’d be pleased,” he says. “At $10 million, I’d be ecstatic.”

One reason the retailer would like to see Bitcoin sales grow is that users spend big. The top five product categories at Overstock, by Bitcoin volume, tend to be high-ticket goods: appliances, living-room furniture, bedroom furniture, cell-phone accessories, and computer accessories. In terms of Bitcoin orders as a percentage of all orders, the biggest Bitcoin users on the site come from New Hampshire, Utah, Washington, Colorado, and Oregon.

Overstock immediately converts 90% of the Bitcoin value it takes in into U.S. dollars, keeping the remaining 10% as Bitcoin. That has allowed the retailer to insulate itself against much of the digital currency’s volatility. Bitcoin’s value has dropped roughly by half since Overstock started taking it. As of Friday afternoon, it was trading at $357.

For the longer term, Byrne says Bitcoin won’t have to achieve a terribly big percentage of sales at Overstock and other merchants for it to take on irreversible momentum with sellers generally. Bitcoin acceptance “will spread slowly until it reaches 2% of spending,” he notes. “Once it reaches 2%, you can’t afford not to accept it. Once it hits that level, it’ll shoot to 30% over a few years, and then nobody can afford not to accept it.”

But for online merchants to achieve these levels of Bitcoin penetration, the currency will have to become a mainstream payment method for consumers. Here, some observers don’t see much advantage when it comes to a comparison with other electronic-payment methods.

“You’ve got a lot of ways for consumers to transact online,” says Nathalie Reinelt, an analyst at Boston-based Aite Group who follows Bitcoin. With Bitcoin, she says, “I see no value-add whatsoever in e-commerce.”