Can anyone here please explain this to me.
If I am a merchant and I accept bitcoins for payment of a tangible good to be delivered via mail, and I mail it out to the customer and he claims he does not want the item afterall (simple return)....how can I refund the person's money in bitcoins if the value keeps changing all the time?
Say I take his 10 bitcoins for $150 value in product. Two weeks later, when I go to refund him, the value of bitcoin is $10, and not $15 anymore. If I refund him the 10 coins, I lose $50 in value.
How can Merchants avoid this?
If this dilemma cannot be solved efficiently, then maybe Bitcoins are really better suited for Online services and Digital goods? Or perhaps items that cannot be returned.
Any thoughts or ideas?
Isn't this the single biggest hindrance keeping Merchants from accepting bitcoins?
That is a contract you are going to have to write up between you and your customers.
As it stands, most people gauge the value of their products in USD - but in the future, that might change to demanding the number of bitcoins you paid be re-paid back, no matter what their worth in USD.
It all depends on the deal you make with your customer. Just be open with them from the start.