Brick and Mortar merchant initial impressions.

[Jessy Kang]

Reposting this in Marketplace so it actually gets read. Note: because of new forum policies detailed here: http://forum.bitcoin.org/index.php?topic=15643
I will most likely be dropping Bitcoin. Hopefully this thread will still be useful to someone.

There are not a lot of B&M businesses posting here (don't see any actually) so while my business model won't directly translate for many, hopefully it's better than nothing.

I went to a Bitcoin Meetup in NYC yesterday and it's something I'd suggest prospective merchants do. I did not have much to say but the participants had a lot of useful information to offer.

Stats:
I went live with Bitcoin two days ago so I don't have a large enough of a sample period on Analytics to really offer useful intelligence on the effect Bitcoin has on traffic. When I have a full weeks worth of data I will post it.

Demographic:
My client demographic is heavily weighted towards men over 40, this is probably just outside the Bitcoin adoption sweet spot of 20-30 year old men (that's my estimate, if anyone has hard numbers on Bitcoin related traffic/interest by age and gender I'd love to see it). While 40+ are probably the most likely secondary adopters, in my experience they expect a higher level of service and professionalism, so are less likely to be patient with the current clunky Bitcoin applications.

Marketing:
Zero traction in my forum or in conversation with Bitcoin as currency. Most of these guys are high-flyers with large, well balanced portfolios, they have no interest in speculation with unproven technology, or in online purchasing hassles. Bitcoin as hard currency is pushed pretty heavily in this forum- but for most people that just translates as buy things online with a credit card, in 10 more steps than you do now.

What DID generate a huge amount of interest was Bitcoin as a barter medium. Clients hate to fork over a wad of $20s- it's a bit crude and ruins the experience for many. Within our community barter or "tribute" as a means for paying for service is very common. Unfortunately the goods and services that a client has to offer usually are not the ones that the business or it's contractors need. Bitcoins enable any client to earn sufficient funds to visit my facility with a modest investment of goods or his professional expertise. This has a great deal of appeal for salaried employees, who budget for a certain amount of time at the facility each month, and cannot easily increase their income under current market conditions, as well as for the large number of clients who prefer not to pay directly with cash for esthetic reasons.

In-house we have been referring to this as the "Cookie Factor". My neighbors will help me put up a shelf for a tin of cookies or a casserole, trying to pay them in cash equivalent to their time spent on the shelf or my time baking cookies would create discomfort all around. If I tell my clients Bitcoin is "cash", they already pay cash- so have no incentive to go through the hassles of acquiring Bitcoin. Bitcoin as a digital representation of their labor, or goods is another matter.

While I understand there are reasons to promote Bitcoin as hard currency, I am having more success and more client interest by marketing it as a barter medium. Whether this interest translates into sales, and so is a viable strategy for other B&M businesses only time will tell.

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[[Coins!]]

An interesting psychological approach.

'cookies' vs 'currency'

Interesting research, I enjoyed reading your post.

[zer0]

no idea why anybody would want to use bitcoin in a store when we have cash. bitcoin to me exists as a way to safely exchange money on the internets as it cuts out a lot of BS.

example:
Liberty Reserve or WMZ model:
-you have to have your own account
-you have to fund it
-you then send it to vendor
-3rd party funding strictly not allowed
-centralized and all transactions logged

bitcoin:
-customer simply cuts+pastes the payment address
-gives currency to an exchanger, they directly fund that address (3rd party funding)


just need more bitcoin exchangers. where's the ultimate gaming card 2 bitcoin exchanger? paste in your card code, paste in payment address, few mins later it's funded. lot's of ultimate gaming card 2 LR exchangers, this can't be too difficult.

[lizthegrey]

What DID generate a huge amount of interest was Bitcoin as a barter medium. Clients hate to fork over a wad of $20s- it's a bit crude and ruins the experience for many. Within our community barter or "tribute" as a means for paying for service is very common. Unfortunately the goods and services that a client has to offer usually are not the ones that the business or it's contractors need. Bitcoins enable any client to earn sufficient funds to visit my facility with a modest investment of goods or his professional expertise. This has a great deal of appeal for salaried employees, who budget for a certain amount of time at the facility each month, and cannot easily increase their income under current market conditions, as well as for the large number of clients who prefer not to pay directly with cash for esthetic reasons.

In-house we have been referring to this as the "Cookie Factor". My neighbors will help me put up a shelf for a tin of cookies or a casserole, trying to pay them in cash equivalent to their time spent on the shelf or my time baking cookies would create discomfort all around. If I tell my clients Bitcoin is "cash", they already pay cash- so have no incentive to go through the hassles of acquiring Bitcoin. Bitcoin as a digital representation of their labor, or goods is another matter.

I've been starting to think more of Bitcoin as Whuffie or a way of measuring barter-based transactions as well, FWIW.

[Jessy Kang]

I've been starting to think more of Bitcoin as Whuffie or a way of measuring barter-based transactions as well, FWIW.

I had to google it- Whuffie. Awesome link- thanks

My thinking on the subject still has not completely gelled, but as hard as we push "Gold Coins are cash" I think it poses much more of a threat to established institutions when framed that way than as Whuffie/Cookies etc.

Bitcoins- as American as barn raising with the neighbors and an homemade apple pie for looking after the kids for an afternoon.

"With so many American's out of work, it's nice to have a system that reflects rolling up your shirt sleeves and breaking a sweat for your neighbor- even if it is your internet neighbor." Maybe a few stories about frugal middle American house wives using Bitcoins to put more nutritious food on the table during hard times...

Bitcoins have a technical explanation, what they need is an image makeover and a compelling narrative. Something better then hipsters buy heroin with it or the tin hat patrol sticking it to the Man (or Dominatrixes whipping guys for it   )...

http://opinionator.blogs.nytimes.com/2010/10/24/stories-vs-statistics/
http://www.weblog.keepthejointrunning.com/?p=277

[benjamindees]

Could you, in your view, explain the practical difference between a currency and a barter medium?

[AllYourBase]

Thanks for posting this interesting analysis Jessy; very nice to see more businesses using bitcoins in some fashion or another, be they fully government-sanctioned, or the kind I like. 

You seem to have quite a knack for being a bitcoin propagandist    Your examples certainly work for in the US, and it'd be good to have them.  Hopefully someone will take the same idea and run with it in other countries, since bitcion is transnational. 

To me, the biggest draw of bitcoins is being able to start businesses that couldn't otherwise exist.  Much easier to make homemade jam and sell it for bitcoins than to open a jam store in town, or even stock your jam on the local store's shelves.  All about lowering barriers to entry (aka enriching us all). 

[Jessy Kang]

To me, the biggest draw of bitcoins is being able to start businesses that couldn't otherwise exist.  Much easier to make homemade jam and sell it for bitcoins than to open a jam store in town, or even stock your jam on the local store's shelves.  All about lowering barriers to entry (aka enriching us all). 

Well... I need a bit more data but it's starting to look like established businesses like mine will have a significant edge with Bitcoin over freelancers and independents.

There's a large number of people selling all sorts of things for Bitcoin, but they are not competing with large companies at the moment. Their marketing copy is poorly written and not particularly compelling, their service intermittent, portfolios and catalogs either incredibly basic or non-existent.

Once the big boys step into the sandbox with multivariate optimized sites, fine tuned for maximum conversion over hundreds of generations, off-shore client reps, a structured service and fulfillment methodology- if the current group does not step up their game considerably they are going to get buried. Because large businesses can take Bitcoin also, their conversion rates are far higher, and they can afford much slimmer profit margins.

If it turns out "homespun" is what the market wants we can also build a hundred feeder sites with central CMS management in days with matching bogus social media profiles and make it look just like a nice young artsy couple next door. I'm not saying that's good or right of course, just market realities. It's just currency, and larger companies are better at making more of it.

The key now is staking out market share, get as many customers on board now paying Bitcoin and focus on retention over short term profits so they are comfortable and don't jump ship with the big boys come rolling though.

[smackdaddy]

Do you run an escort service?

Reading your post was very interesting to me...I've been trying to come up with what your business could possibly be and that's the best I can do.

Bitcoins would seem like the ultimate currency for this industry for many of the reasons you describe.

edit: Hovered over your link thing or whatever...New York Fetish Fortress. Nice. Not really my thing but yeah, I can see where bitcoins would create a nice intermediary, removing alot of the calousness of cash.

[AllYourBase]

To me, the biggest draw of bitcoins is being able to start businesses that couldn't otherwise exist.  Much easier to make homemade jam and sell it for bitcoins than to open a jam store in town, or even stock your jam on the local store's shelves.  All about lowering barriers to entry (aka enriching us all). 

Well... I need a bit more data but it's starting to look like established businesses like mine will have a significant edge with Bitcoin over freelancers and independents.

I agree that the value proposition, marketing, branding, etc. is lacking for a lot of the items and services being sold here on the marketplace.  Furthermore, once the Walmarts of each industry adopt bitcoins, as you suggest, it will be much rougher to compete due to the market price being lower. 

The strengths of these large companies as I see it are reliability, and low costs.  I think when competing with that, you can use your nimbleness against them.  I know I can't make a jar of jam for as cheaply as one rolling off of a fully automated assembly line, but I can put anything I want on the jar. 

With my jam label I've endeavored to bring a little bit of creativity to the product, in the hopes of building a love for it.  If I people fall in love with my product like I did with the local ice cream shop growing up, then it takes a lot to unseat that.  That freshly baked Otis Spunkmeyer cookie fresh out of the oven, aroma wafting down the line for the snack bar will get me every time compared to a little debbie snack cake for a third of the cost. 

As for what do people with bitcoins want to buy?  Not sure.  It is a deflationary currency, meaning it's worth more tomorrow than today (assuming more people keep joining on).  That means your value proposition better be damn good, because I have to want it twice as bad to actually buy it and forego the reward of holding onto those bitcoins until tomorrow.

I heartily agree that building customer loyalty will go a long way as larger and more businesses join the field.

[Jessy Kang]

Do you run an escort service?

Reading your post was very interesting to me...I've been trying to come up with what your business could possibly be and that's the best I can do.

No, not an escort service. BDSM dungeon, strictly legal and non-sexual. If you want to start a new threat about adult Bitcoin businesses I'd be happy to offer some input, but escort services are a pretty bad idea for a few reasons.

Bitcoins would seem like the ultimate currency for this industry for many of the reasons you describe/

Actually they create a lot of problems that will have to be solved. Adult oriented businesses (even the totally legal ones like mine) are tolerated so long as we are VERY well behaved, stay within both the letter and the spirit of the law, and pay our taxes on time and in full to the last dime. Anything else and you are just asking for trouble.

[Jessy Kang]

I agree that the value proposition, marketing, branding, etc. is lacking for a lot of the items and services being sold here on the marketplace.  Furthermore, once the Walmarts of each industry adopt bitcoins, as you suggest, it will be much rougher to compete due to the market price being lower. 

Great points, it's a shame there's not a dedicated forum for merchants for all this.

The strengths of these large companies as I see it are reliability, and low costs.  I think when competing with that, you can use your nimbleness against them.  I know I can't make a jar of jam for as cheaply as one rolling off of a fully automated assembly line, but I can put anything I want on the jar. 

Walmart may not be nimble- but they have thousands of fairly small suppliers who are. You have to be prepared for them to pitch their product, based on the success of yours.

I'm Chinese, Westerners say we copy, we say why reinvent the wheel? If someone else has done it successfully, why not use those same things in our business? Big American business is starting to think the same way (Apple). In the case of my dungeon I based the entire booking and staffing methodology right out of TPS- occasionally people recognize it as such and find it hilarious we ripped off a car company production model. It works, we took it. It's so weird none of our competitors have figured out how to copy it from us.

Creativity is a wonderful thing- but we all know creatives usually get ripped off and only a tiny percentage make the big bucks. It sounds like you have some great ideas, but you'll need to be pretty fast to stay head of the pack once Bitcoin catches on.

[AllYourBase]

Walmart is the king of consistency in American retail.  I can walk into any Walmart across the country and expect to find the same products at approximately the same prices, and for it to always be in stock.  Although they could regionalize and have different suppliers for the same product, I'd expect that would detract from their competitive advantage of consistency.  As such, I think their suppliers must not be small at all, though if I had access to their books I could tell for sure! 

We'll see, but I'd wager that if it didn't cost 5k in time, fees, and expertise to try out a crazy new idea, we'll see a lot more creativity.  The way I see it now is like a lawnmower mowing the yard.  Anything under 6 inches gets cut down, but transplanted trees are allowed to remain.  I'd like to see it more like no lawn mower, where there are a thousand seeds competing to become that tall tree, and may the best ones win.  I hope bitcoin can do that, otherwise I'll just keep looking 

I like the idea of copying what works.  I'm not convinced anyone can have a truly unique idea that didn't build upon ideas from others.  We stand upon the shoulders of those who came before so how can we claim it all as ours?  I think the future will see less 10-20 year research projects, and more incremental improvements on a daily basis.