Jewelry retailers discuss why they have adopted cryptocurrency in their business. Is it right for you?
Cryptocurrency might be a volatile market, but it is not a new one. Reeds Jewelers, with 65 stores, and California jeweler Stephen Silver, with two locations, have both been accepting crypto since 2014. In subsequent years, a few stores have joined them, including Marks Jewelers in Pennsylvania and Oliver Smith in Arizona. Still, crypto has largely been the purview of online-only stores and luxury watch resellers.
Hemal Nagarsheth, partner in the financial services practice of Kearney, a global strategy and management consulting firm, confirms the trend is still young. “We have observed cryptocurrency being introduced as a payment option via partners for some boutique jewelry merchants, and one prominent online luxury marketplace, as well as stated plans for acceptance by various luxury handbag and watch brands,” he says.
Why stores are taking the plunge
More and more retailers are testing the waters, confirms Jon Bumann, general manager at Chalmers Jewelers, with two locations in Wisconsin. His stores began accepting major cryptos, such as Bitcoin, Ethereum, and Litecoin, in April 2021. “The market was doing well, and I had been mining it, and then Shopify allowed that to be an option, and said they could accept it through Coinbase,” he explains. “Our dive into them stems from the allure of lower processing fees, faster payments, less potential for fraud, and zero chargebacks.” In March 2022, Continental Diamond in St. Louis Park, Minnesota, became the first store in the state to accept cryptocurrency. “We already accept all kinds of items in exchange for our product,” says Andrew Furman, manager of his family’s second generation store. “We do trades all the
time. We take people’s old gold on trade. We take people’s diamonds on trade. We take people’s fancy watches on trade. So why not accept cryptocurrency as well?”
Yet, Nagarsheth relates that consumer acceptance is slow. “We have found, in our consumer surveys, that
there is not as yet a significant base of cryptocurrency usage. Affluent consumers, [such as] those with annual income greater than $200,000, [value] convenience and rewards when deciding which payment method to use for a purchase.”
Who is the crypto customer?
Bumann notes that most of his crypto customers are men under 35, who purchase fashion jewelry, engagement rings, diamond studs and gold chains. “They made this money, [and] if they see the market starting to dip, they want to go buy something,” he says. “I see that same thing when the stock market fluctuates. People pull their money out and come in and buy gold.”
Crypto could also appeal to shoppers looking to avoid international transaction fees, reports Nagarsheth. “Cryptocurrency could hold appeal to purchasers who face friction and high costs when having to transfer fiat money [coin and paper currencies] across borders. There could also be appeal and added value for consumers in high-inflation markets who may see potential future appreciation of cryptocurrency as
a built-in hedge to store assets, versus fiat money accounts.”
How to accept digital currency
Setup is easy, and fees are low, stresses Bumann: “You could set up a digital wallet in 10 minutes.” He confides that the fee to transfer crypto to his bank is low and based on network usage. “We might move a few thousand dollars, and it might only cost us $1.00 or 40 cents. And that’s the only fee we pay.” He adds that he is constantly reevaluating his strategies and now only accepts USD Coin (USDC), an Ethereum-based stablecoin pegged to the US dollar. If customers want to buy something from his store with another type of cryptocurrency, they need to first convert their currency to USDC — and the customer pays the fee for that conversion.
Some stores don’t even use digital wallets, remarks Furman. “We didn’t have to set up a digital wallet, because we’re using Bitpay. They let you instantly convert your crypto to US dollars, or [you can] keep a percentage of the payment in crypto.” He says that his transaction fee is “similar to a credit card fee.”
Understanding the challenges
One of the biggest challenges associated with consumer adoption of crypto is messaging, declares Nagarsheth. “Convincing consumers that they can securely make large value purchases with cryptocurrency will present a headwind, especially as breaches gain prominence in media reporting.” He also notes a lack of consumer awareness and sophistication regarding cryptocurrencies, and that “marked declines in value for leading cryptocurrencies may dissuade future interest.”
Furman sees cryptocurrency as an opportunity. “It’s opening up a new market for customers to buy. It’s really just a new payment method. And any way we can make it easier for our customers to interact with us, as retailers, in my mind, is a win,” he says. “We need to figure out how to make our transactions as easy as possible for our customers. And the easier we can make it, the more we’re going to sell.”
Eventually, crypto will be widely accepted, concludes Bumann, adding: “Companies like Coinbase already offer debit cards that allow consumers to pay for their purchases at any retailer that accepts Visa. Your store may already be accepting converted crypto and you don’t even know it.”