You don't understand what people are saying here. Noone is saying anything about profit margins, they are saying that people arent going to want to pay 20% more than they would pay with government currency when its just as easy to use the currency they already have in their hands.
So the choice is to pay $5USD for something, or pay $7USD to buy bitcoins, then lose a few dollars on transaction fees and exchange fees and "seller inflation" because he has no idea how stable the currency is and then get the same product.
You are talking about a specific scenario: everyone let's trade in bitcoins because it's the new hipster thing to do!
While the situation is as follows: Hey, I have some bitcoins anyway and need to spend them, what do you have?
I'm not advocating for everyone to effectively trade in dollars but using bitcoins, I think we can all go B2B and trade the bitcoins among ourselves. If all vendors accept bitcoins, and some vendors are clients to other vendors, how silly would it be to convert all bitcoins into dollars, then dollars into bitcoin as a client, then buy stuff, then the vendor converts the bitcoin into dollars.
Also, transaction parity aside, which can work for you or against you in half the situations respectively, the process of paying for a 100$ item is as follows:
- convert some dollars to bitcoin on mtgox through dwolla for example (supposedly 101$, you give 0.25$ to dwolla-mtgox transfers and 0.6% to mtgox (so just below 1$)
- you pay the merchant 5 bitcoins (example) for his item listed in bitcoins
- the merchant has 5 bitcoins, converts them to dollars (0.6%) and withdraws them (another 0.25$), effectively losing a 2% tax on the whole value/benefit transaction.
This might look ugly on a local shop (where you can use dollars), but consider the implications of international trades, where you pay a receiving fee if you use paypal, an obligatory forex fee (2% or more) and the client's paypal fee, and your withdrawal fee. Or in the case of CC processing, you pay a 2-5% fee on received payments.
Also, let's not forget:
- you can maintain a specific sum of liquid funds in BTC and USD and only exchange when needed
- you can declare the item sold for a lower profit margin and pocket the rest because you don't declare taxes on the BTC transactions
- you can wait 1-2-3 days and place exchange orders at beneficial rates (the btc can vary up to 5% a day, you can add a small bonus like this, not that hard to do)
- other vendors want your bitcoins