Payments

The future of crypto in retail, according to three experts

Why they think some companies might be considering crypto—and where doubts and deliberations could creep in.
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Francis Scialabba

· 5 min read

Off-White and Gucci are into it—Amazon, not so much (yet). Forgive us for sounding a bit cryptic, but we’re talking about paying with crypto.

So, how much longer will bitcoin bros have to wait to buy all their merch with crypto? Retail Brew chatted with three experts on the future of digital currency in retail.

These interviews have been lightly edited and condensed for clarity.

Hemal Nagarsheth, Partner at Kearney

Initial push: A lot of retailers—this follows for years—they like to meet the consumer where they are…And I think a large part of that is providing choice, right? So consumers want a different way. Then a lot of the forward-thinking retailers do adapt. I think the first wave that we saw was mobile payments. Now, crypto is next in line.

Doubts and deliberations: Volatility is likely not to dissipate…So, it’s more about what you do to manage it, and, I think, seeing some of the evolution now that there are emerging options that maybe didn’t exist a few years ago. There is the option, which I think a lot of partners are providing, [where] you can convert the cryptocurrency to fiat at the time of purchase. If you do that as the retailer, you’re minimizing your exposure because you sold the goods at a point of time, and you’ve locked in the fiat conversion rate because you’re converting in real time.

There are [also] solutions that are more closed loop. And what they’re doing is they’re still locking in, essentially, a crypto value paid to the transaction, so that even if they can’t convert in real time…because a lot of these merchants don’t get paid right away…they can still guarantee your rate. If we can see lift in these types of solutions that can help manage the volatility, then retailers don’t have to get into the hedging business.

Up next: What we’ve seen is that there is a proliferation of payments, so I think crypto is likely to have a role. Retailers will likely see—if not now, at least in the coming years—that there is a place for it in their acceptance portfolio. The question is going to be around: What does the maturity curve look like? Because any time new payments have been introduced, there has always been an adoption period.

There’s going to be different adoption curves. Then, based on that, it would make sense for retailers in different segments to say, “Okay, it makes sense for me to join in on this maybe sooner rather than later,” vs. others who say, “I can take more of a wait-to-see approach, because my target customer is likely not one who understands or has the risk appetite.”

Shane Rodgers, CEO of PDX Global

Initial push: [A retailer’s] thinking must be: Well, let’s at least capture that market that wants to pay in crypto—make ourselves attractive to them so that they can come spend their crypto here. And we’ll figure out selling on the other side. But I’ve got to think that their strategy involves reselling that crypto as soon as possible because I doubt they’re in the financial speculation game. They’re in the retail game.

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Doubts and deliberations: What are the odds that [retailers are] going to make a profit on the crypto while they’re holding it? I mean, look what happened in the crypto markets just [the other day]...The price drops 10% in no time—and the retailers would be left holding the bag. That could wipe out profit margins.

Up next: I don’t see it becoming a trend, but it’s hard to say. It gets back to: What is the retailer’s goal? Does a retailer in America, for example, want to get USD, because all their bills are in USD, presumably? Do they want to hold the crypto? And when and why would they want to do that? How does that affect their inventory costs, their operating costs, their financing costs? And then you factor the risk into that? It doesn’t make a whole lot of sense to me.

Ben Weiss, CEO of CoinFlip

Initial push: You’re seeing crypto transform from more of an asset and an investment into a utility and a payment. And for retailers—and especially luxury retailers—the fact that they accept crypto makes them stand out as technologically forward, as progressive, as hip, as cool. They’re also setting themselves up for Web3, for the metaverse. A lot of firms are experimenting with NFTs as well. So I think these retailers are seeing that if they don’t embrace cryptocurrency and some of the blockchain technologies, they’re going to be left out.

Doubts and deliberations: The infrastructure has gone a long way, but also, so has the interface—meaning it’s easier for employees to interact with the software. And that’s always lagged behind in crypto. The underlying tech has always been ahead of usability, but we’re seeing that usability catch up.

Stores have the option now for someone to pay them in bitcoin, and it automatically converts to dollars, so [they] don’t have to hold bitcoin on their books. That’s become way more seamless. So that’s why I think people and companies that were bearish on it a year or two ago have changed their mind. Because the technology has gotten better, and the interface has gotten better.

Up next: You’re seeing the payments being in high-ticket items and luxury goods. No one’s using bitcoin to buy Starbucks because the fees are too high. But what you were seeing before these retailers were people buying houses in bitcoin. People were buying cars, people were buying jewelry. So now we’re going to be buying more expensive clothes, handbags, things like that. But it’s going to be more of the high-end stuff just because the economics and the fees are too expensive.

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