The apparel chain filed for bankruptcy in January and closed its e-commerce site and stores.
Despite the dark cloud hanging over the virtual payment currency, Overstock and TigerDirect executives say some customers want the option to pay with it, and they are happy to provide it. Together they’ve rung up more than $2 million in Bitcoin payments since January.
Bitcoin, the digital currency that’s been the subject of headlines in recent weeks that read like a soap opera replete with hacks, robberies, bankruptcies and suspicious deaths, continues to have its champions in e-retailing.
Among them are Overstock.com and TigerDirect.com, both of which began accepting the so-called “cypto-currency" in January. Overstock.com announced earlier this month that it has accepted bitcoins as payment for more than $1 million in goods already; $130,000 of which came on the first day bitcoin payment was available. “Our Bitcoin sales are holding steady at about a half a percent of our revenue,” says Overstock executive vice chairman Jonathan Johnson. He anticipates about $10 million to $15 million in 2014 sales will be paid for in bitcoins. Overstock is No. 31 in the Top 500 Guide.
Online computer and electronic retailer TigerDirect.com says it hit the $1 million mark yesterday. The e-retailer, which is owned by Systemax Inc., No. 25 in the Top 500 Guide, says it offers Bitcoin as a payment option because its customers want it. “Our site caters to the DIY and early adopter community, the same type of individuals who are mining, trading, and spending bitcoins,” says Steven Leeds, director of marketing at TigerDirect. “Whether it be innovated payment methods or cutting-edge technology, when our customers talk, we listen.”
The Bitcoin system was created in 2009, and is designed so that no more than 21 million bitcoins can be put into circulation through a process called “mining” that requires substantial computing capacity. Bitcoins can be purchased for conventional currency on a number of online exchanges, and their value fluctuates based on supply and demand.
Johnson says recent events involving Bitcoin, such as the hack and subsequent collapse of Bitcoin exchange Mt. Gox that resulted in the loss of nearly half a billion dollars worth of bitcoins, hasn’t shaken Overstock’s confidence in the digital currency. “For us, the story remains the same. It is another payment method that customers can use and it continues to perform well,” he says. “We view just like a credit card or PayPal [payment], and we turn bitcoins into dollars quickly.”
Overstock uses Coinbase.com, a processor of bitcoin payments, to validate bitcoins submitted for payment and to turn them into U.S. currency, which is immediately deposited into Overstock’s accounts. At this time, Overstock does not retain any bitcoins as bitcoins but Johnson says the e-retailer may begin keeping up to 10% as bitcoins in the near future. “We think Bitcoin will gain traction as a currency,” he says, noting that some Overstock employees have expressed interest in being paid in bitcoins.
Coinbase, which raised $25 million in venture funding in a Series B round in December from investors including Andreessen Horowitz and Ribbit Capital, bringing its total funding to date to more than $30 million, says it will process an e-retailer’s first $1 million in bitcoin payments for free. After the $1 million threshold is met, it takes a 1% fee to change bitcoins into dollars. Department store retailer Lord & Taylor, part of Hudson’s Bay Co., No. 158 in the Top 500, is also using Coinbase to take bitcoins in payment for products made through a mobile shopping app called Pounce. Big Fish Games Inc., No. 159 in the Top 500, recently added the ability for consumers using its mobile games to make in-app and game purchases using bitcoins.
TigerDirect.com uses another vendor, BitPay Inc., to process bitcoin payments. BitPay’s monthly fees range from zero dollars to $3,000 depending on the number of sites supported, service features and whether it takes a cut of the transaction. The no-cost “starter” version, for example, takes a 1% cut of transactions instead of charging a flat fee. Pay versions start at $30 a month but don't take a cut of transactions. Online game purveyor Zynga recently began accepting bitcoins for in-game payments in some games through BitPay. Zynga is the company behind the Farmville game many Facebook users play on the social network.
Less than 1% of web shoppers have used Bitcoin, according to a survey of 7,000 online shoppers conducted by Forrester Research Inc. and Bizrate Insights. While few use bitcoin, 25% of survey respondents say they are curious enough to try it. Forrester analysts Sucharita Mulpuru and Denee Carrington say what the bitcoin phenomenon signals is more important than whether bitcoin goes mainstream. “It is far less important whether Bitcoin in its current form will survive and far more important to consider the disruption Bitcoin and crypto-currencies will usher in,” the pair write in a report titled “Bitcoin: Some Parts Brilliant, Some Parts Sure to Bomb.”
The analysts say that because crypto-currency systems, like Bitcoin, are decentralized—bitcoin buyers and sellers ostensibly control the market—and borderless, they have the potential to transform international payments, which can be costly and complicated for e-retailers today.