Popular online computer hardware and software retail giant Newegg has announced it is now accepting bitcoin as a payment option – a move that had been widely anticipated by its customers.
The Los Angeles-based company, which recorded $2.8bn in annual revenue in 2013, made the announcement today, saying it will use BitPay as the payment processor to convert bitcoin sales into US dollars.
In a statement, the company’s Chief Marketing Officer Soren Mills proclaimed that Newegg and bitcoin are a fit – primarily because of its customers’ early adopter mentality:
“Newegg’s customers are among some of the earliest bitcoin miners and are enthusiastic proponents of the cryptocurrency. Adopting bitcoin as a payment method is another way we’re responding to our customers’ diverse needs.”
Calls for integration
Newegg’s bitcoin curiosity has been talked about for months, with ‘teaser’ responses on Twitter when its followers raised the issue of the company accepting bitcoin.
Still waiting for an update, but will let you all know as soon as we receive word! RT @TheIanMerrill: @Newegg do you take #bitcoin yet?
— Newegg (Official) (@Newegg) January 9, 2014
“Our customers have been reaching out to us on Facebook and Twitter asking for us to accept bitcoin,” Mills told CoinDesk. “Prior to the actual integration, we spent several months conducting due diligence to ensure a smooth transition once we decided to move forward.”
The online retail industry has slowly been opening the doors to bitcoin buyers since late last year. Newegg’s direct competitor TigerDirect began accepting bitcoin in January, following Shopify’s addition of the digital currency as a payment option for its vendors back in November 2013.
Overstock also opened up to bitcoin payments via Coinbase on 10th January, a good six months ahead of schedule.
Choosing BitPay
Like TigerDirect and Shopify, Newegg decided to partner with BitPay as its payment processor for bitcoin transactions.
The Atlanta, Georgia-based company recently raised $30m in venture capital, and currently processes over $1m a day in bitcoin payments for merchants. BitPay takes bitcoin and converts it to cash for its customers.
Mills said:
“Working with BitPay to implement a bitcoin payment option at Newegg was a seamless process and our partnership gives us the capabilities we require for high-volume e-commerce.”
Newegg pointed out BitPay’s reliability and scalability as factors in choosing the company as its bitcoin payment processor.
BitPay competes with processors such as Coinbase and GoCoin for merchant business. These bitcoin payment processors make money from charging fees, although the amount levied is much lower than that demanded by credit card processors.
Growing acceptance
Overstock’s bitcoin sales figures have been healthier than many had predicted. By March, it had announced $1m in sales from payments made in the cryptocurrency and expects to pull in $20m in BTC sales by the end of 2014.
The popularity of bitcoin payments at the company have been a surprise, even to its CEO Patrick Byrne.
Newegg, which sells computer hardware and software, expects to see a sales uptick in certain product categories as a result of its bitcoin integration.
In fact, it was equipment that could be used in cryptocurrency mining that solidified the company’s decision to take the digital currency as a form of payment.
Mills told CoinDesk:
“We already offer gear that’s commonly used in bitcoin mining – items such as specialized video cards, motherboards, cases and cooling accessories. In fact, this is another way we assessed that our customers were ready to make purchases using bitcoin.”
Companies with sales volumes like Newegg and TigerDirect go some way to silence two of the main criticisms of bitcoin as a retail form of payment.
One was that the block chain would not scale to cope with large numbers of transactions. The other being that payment processors like Coinbase and BitPay wouldn’t be able to deal with price volatility once billion-dollar businesses signed up.
However, “once we brought BitPay in to help us with the integration, the process was very straightforward,” Mills pointed out.
Fast-expanding market
Forbes lists Newegg as the 172nd largest private company in the United States. Founded in 2001, it currently has 2,600 employees and has been profitable every year of its existence.
The company filed an IPO application in 2009, but changed its mind shortly after and formally withdrew the application in 2011, saying it would pursue other funding options.
The company is a favorite of self-build hardware fans, and regularly tweets photos of its customers’ rigs on the official Newegg Twitter feed.
Good for bitcoin: 69% of electronics are purchased online. Source: MarketingProfsConsumer electronics are the most lucrative segment of a rapidly growing online retail market, which is worth about $43.8bn a year in the US alone, according to MarketLine – 21.9% of an overall $200.4bn total in web sales.
Thanks to a partial reprieve from state sales taxes and changing consumer habits, online retail is projected to reach $371.4bn annually by 2017, according to Forrester Research.
Demand for bitcoin
As one of the longest-running and most popular computer-related retailers online, there has been a lot of demand for Newegg to start accepting bitcoin.
While it could serve as a financial boon for the company, it is also certainly smart marketing.
In a statement, BitPay Executive Chairman Tony Gallippi said:
“Newegg has been the most requested retailer from the bitcoin community and our collaboration will serve this pent-up demand.”
Soren Mills believes finally getting on board with bitcoin as a payment method will boost Newegg’s revenue, although he’s not making any promises.
“It’s difficult to speculate on [increased sales], but I suspect that our ability to accept bitcoin will fuel revenue growth, rather than simply replacing sales that would otherwise have been executed using US dollars,” he said.
Additional reporting provided by Jon Southurst.
Disclaimer: CoinDesk founder Shakil Khan is an investor in BitPay.
Newegg logo image via Creditcardpayment.net
Correction: Overstock is partnered with Coinbase, not BitPay. The article has been updated to reflect this.