Purchasing Luxury Items With Bitcoin? The Good, Bad & Satoshi
Initially invented as a decentralized alternative to traditional means of payment, Bitcoin has eventually become a favored vehicle for traders that can bear extreme gains and losses thanks to its volatility. However, as its popularity has grown over the past few years, merchants are now accepting it along with fiat currencies as well.
Of note, luxury shops start jumping on this train as well. Aurae Lifestyle has witnessed significant growth in luxury purchases due to the recent appreciation of Bitcoin.
We’ve decided to conduct our own research in this area to find out what motivates buyers and sellers to switch to this hi-tech means of payment, obstacles experienced and benefits obtained.
Luxury brands start accepting Bitcoin
Prior to 2017, only a handful of adventurous luxury merchants accepted Bitcoin as a form of payment. Some online shops would timidly place their BTC addresses somewhere in the footer of their webpages hoping that savvy users would find their way to make the payment, but that was basically it. Now that Shopify has officially enabled crypto payments on its platform and Woocommerce supports a whole suite of plugins for this purpose, things have become much easier for all the parties involved in the process.
Some of the big luxury brands that have already enabled crypto payments on their websites include:
Travala.com: this luxury travel agency offers not only Bitcoin but also a wide variety of altcoins for payment along with traditional fiat-based methods.
Louis Vuitton, Cartier, and Prada plant to use blockchain for tracking counterfeit merchandise.
As larger and established luxury brands embrace the blockchain and cryptocurrency as business as usual, smaller companies are sure to follow suit. Just like other innovations, the blockchain and cryptocurrency come with pros and cons for all participants of the process.
All great merchants have a customer first mindset, so let’s take a look at potential benefits luxury buyers gain when their favorite brands add cryptocurrency to the list of accepted forms of payment.
- Instant transactions: With Bitcoin, the average time needed for a transaction to be confirmed depends on the time needed for a new block to be created which is 10 minutes on average. This time may be longer when the network is congested, but still, it is never higher than a couple of hours. In addition to Bitcoin, there are also other altcoins such as TRX and EOS that allow confirming transactions in mere seconds. If you want to buy luxury goods with cryptocurrency, ask if your boutique of choice accepts these methods as well.
- Crossborder (international) purchases: Banks and other centralized financial services typically offer their services within the borders of their jurisdictions and large purchases across borders typically involve international wire transfers and depending upon the merchant and the customer’s international limits, credit card transactions. While payment services such as PayPal were initially designed specifically for this purpose, transaction size limits suppress the amount of large scale luxury purchases they can facilitate. For smaller purchases, transaction fees play a critical role in determining if purchases will be made using PayPa. With cryptocurrency, network fees are determined at a Satoshis per Vbytes (sats/vByte), and the amount of BTC sent does not influence sats/vByte but rather network congestion and the weight of the block. As such, for a large purchase, network fees are not dependent upon the purchase price. An analogy for the common person would be vehicle traffic, tolls and wait time. Tolls paid are independent of the value of the vehicle and the time you wait is totally dependent upon traffic at the toll booth (network fees). Given this dichotomy, luxury purchases in certain cases may be viable when using cryptocurrency.
- Transparency: Every transaction in crypto is registered on a public ledger for any interested party to verify. Buyers would have no difficulty proving their payment as they can simply show the link with transaction confirmation.
While buying with BTC or any other crypto has certain advantages, there are concerns that consumers should be aware of. Cryptocurrencies are in a nascent form when compared to traditional methods of payment and they come with a number of caveats that users should be aware of Fraud. With cryptocurrencies, there is no way to undo a transaction or to get a refund once completed. This, unfortunately, attracts individuals with a natural proclivity to commit fraud. So, it is up to the buyer to trust but verify the merchant in order to have any type of recourse if there are transaction problems. To avoid such a scenario, verify the credentials of the luxury merchant prior to placing an order. Websites providing third-party reviews such as Trustpilot can also be useful when conducting your research.
- Volatility creates uncertainty: It’s no secret that Bitcoin is pretty volatile. The luxury watch that today costs $10,000 may lose a sizable percentage of its value in a single day. Can the luxury shop of your choice stomach this volatility? Is their business model strong enough? Make sure that the company has a solid background and study who you are dealing with before you make any payment.
- High fees when the network is congested: Bitcoin, due to its technical characteristics, imposes very high network fees when too many people try to send funds over the network at the same time. This usually happens approximately once in 3 years when BTC price surges making everyone crazy about it. Consider making payments with TRX and other alternative cryptocurrencies if congestion is too high.
- Basic technical knowledge is required: Cryptocurrencies were created and adopted by technical individuals who take pride in speaking their own language. Unfortunately, this requires some fluency and knowledge about their protocols and processes. Hence, it is important to have some basic technical skills.
Benefits for merchants
Now, what do cryptocurrencies have to offer from the merchants’ point of view? We’ve uncovered four benefits of accepting cryptocurrency during our conversations with luxury shop owners:
- Expanded geographical footprint: With cryptocurrencies, you can easily accept payments from customers all over the world. There’s no more need to limit customers to a specific region due to payment processor protocols.
- Expanded customer base: Not only is the geographical footprint established, but many early adopters of bitcoin have migrated from mass-market buyers to luxury buyers. While we do not know who they are, according to CBS News, there are nearly 100,000 newly minted bitcoin millionaires.
- Reduce costs for the banking infrastructure: The costs to set up a wallet to accept BTC or any other cryptocurrency are negligible when compared to bank fees and centralized payment processor fees.
- “Holla Back” at Chargebacks: With cryptocurrency, merchants control the refund process and are not subject to the whims of customers that abuse chargeback privileges.
Concerns for merchants
Of course with benefits, there are also challenges and issues that merchants should consider as well should they decide to accept BTC and other cryptocurrencies.
- Legal questions: Since cryptocurrencies are not controlled by any central entity, many questions about their legal status emerge. There’s just a small handful of countries where Bitcoin is defined as a legal means of payment. Others either strictly forbid it or provide absolutely no recourse and guidance which leaves cryptocurrencies in the grey area. If you’ve decided to accept BTC or any other cryptocurrency as a method of payment, please consult your tax attorney, your tax accountant and your legal representatives to ensure that you comply with the regulations of your jurisdiction.
- Volatility: This problem is perhaps the most acute for merchants that can lose their income in a short period of time when BTC price abruptly drops. To avoid such a situation. Consider converting BTC into some stable coin such as USDT or USDC right after you receive the payment or add these coins into the list of available options.
- Shipping overseas: While cryptocurrencies make it really easy to accept cross border payments, shipping is another matter process. If you decide to expand your geography, think thoroughly beforehand about how you are going to deliver goods to your customers.
- Technical implementation: While there is a big bunch of tools to automate fiat payment processes, tools are not that robust with cryptocurrencies. You can simply put your BTC address into the list of available payment options, but the lack of automation adds technical complexities. If your website runs on Woocommerce or Shopify, you can make use of their built-in plugins. Alternatively, you may want to apply some tools provided by third-party applications such as Bitpay.
Cryptocurrencies represent a high-tech tool designed to resolve some specific issues of centralized payment systems. As this system itself is still relatively new, one would naturally expect that the challenges listed above would inhibit adoption for many merchants. Boutiques and other luxury merchants should weigh all alternatives prior to implementing cryptocurrencies along with other traditional payment methods.
Top 3 luxury boutiques accepting cryptocurrency
Despite the obstacle, some merchants take the risk. Below, we are going to give a quick rundown of 3 popular online shops in the luxury segment where one can buy jewelry, watches, and other exclusive items for crypto.
Background: Launched in 2016, Bitdials positions itself as a bitcoin-only luxury boutique. Among luxury items offered on the platform, one can find watches, jewelry, gold, spirits, cars, and different stylish items such as leather bags, belts, and lighters. The shop doesn’t sell anything by itself, though. Instead, it acts as an aggregator of dealers helping buyers find the best option. In addition to BTC, customers can pay with ethers and a few other altcoins.
Traffic statistics: Due to its longevity, Bitdials.eu has managed to garner a solid audience. Site traffic has bounced from 10k to almost 100k unique visits per month according to Similarweb.
Customers’ reviews: TrustPilot gives BitDials the best assessment as its average rating makes up 4.9 stars out of 5 based on 190+ reviews. The customers praise the platform for the smooth shipping process, excellent service, and punctuality.
Background: Bitluxuria is one more luxury boutique that accepts cryptocurrency as the only means of payment. The range of goods is limited as they focus mainly on jewelry and watches, with a preference for smaller and refined choices. The company is officially registered in New York, New York, USA. Along with Bitcoin, customers can also make payments using Litecoin as well.
Traffic statistics: 1,000 unique visitors per month according to SEM rush.
Customers’ reviews: Bitluxuria is slightly behind Bitdials as far as ratings are concerned, but their ratings are very robust with an average of 4.5 stars based on 20+ reviews on TrustPilot. The team standing behind the project has a personal approach to each of their customers and provides white-glove service as well.
Background: De Louvois has been around since 2016 and has managed to significantly expand the range of the offered products. Their target audience consists of successful tech entrepreneurs, early investors and adopters of Bitcoin, and professional traders. The company itself resides in Versailles, France.
For those inclined to learn more about Delouvois, check out our interview with the founder of De Louvois, Matthiew Michard.
In addition to traditional watches and jewelry, the website offers cars, artworks, and even real estate. The primary focus of the company, according to Michard, has always been on the arts. As most of the online shops selling artworks for crypto suffer from bad user experience and design issues, De Louvois strives to “bring some glamour to the industry that really needs it”.
Traffic statistics: 45,000 unique visitors per month according to SEM rush.
The relationship managers at Aurae Lifestyle are keenly aware and uniquely equipped to source, procure and shepherd the process of purchasing luxury goods globally. Additionally, our global relationships in the travel industry position us well to provide real value to our clients. From private aviation to first class commercial service to luxury vacation estates and unique one-of-a-kind destination experiences, the Aurae team is prepared to plan and support you as you enjoy the life you have created. This benefit is enjoyed by members of Aurae Lifestyle at no cost. Not a member of Aurae Lifestyle? If you qualify, we definitely encourage you to examine if membership is right for you. Even if membership is not a fit, we encourage you to reach out to one of our relationship managers if you need assistance in making a high value, cross border luxury purchase.