International retail giant Overstock.com is reporting that it expects to complete $3m in total bitcoin sales for 2014.
The figures are notable given that the e-commerce company had issued a wide range of potential estimates for its first-year bitcoin sales over the course of the year. In March, CEO Patrick Byrne suggested Overstock was on pace to achieve $10m–$15m, or even $20m, in bitcoin sales.
Such estimates were also below the $5m Byrne said Overstock originally anticipated, though on par with those suggested by Overstock chairman of the board Jonathan Johnson in interviews.
Judd Bagley, director of communications and general manager of Overstock’s Cryptocurrencies Group, confirmed, however, that the company had expected a higher figure than $3m.
Bagley told CoinDesk:
“While we’re still very happy with sales to customers paying with bitcoin, the numbers didn’t meet our initial expectations.”
The company reported that, in total, roughly 11,100 customers have so far paid with bitcoin at both its US and international websites.
The release comes amid a potentially bearish cycle for bitcoin news, with many major news outlets emphasizing the decline in bitcoin’s value against the US dollar over 2014.
Overstock became one of the largest merchants to accept bitcoin in January of this year, a decision that provided widespread publicity for bitcoin and arguably sparked an uptick in interest among US and international merchants.
Sluggish international sales
Bagley indicated that Overstock attributed its total sales shortfall to its “lower than expected international sales”. The company said international customers now spend “a couple thousand dollars a week”, though it expected figures to be closer to the $7,000–$8,000 a week it sees from US shoppers.
However, Bagley stated that international shoppers tend to spend more than the average US customer.
“Something interesting to note is that the average sales were unusually high, on the order of $400-$500 at times,” he said. “So the few people making purchases were buying a lot, but they were very few, like four or five a week internationally.”
Overstock did not provide exact details into how much of the $3m total could be attributed to international sales. Although, it confirmed in early March that it had generated $1m in sales over a roughly two-month period, a time during which bitcoin payments were available solely in the US.
Such estimates would suggest that bitcoin spending declined over the course of the year, with only an additional $2m in spending having been observed from US and international consumers over the remaining 10 months.
Bagley went on to confirm that US sales have tapered off since January, but that the company’s sales have solidified at a steady rate.
“It’s been a very gradual decline,” he said. “It certainly has been a decline from the first month, but it’s reached a steady state of $7,000–$8,000 a day. As I recall, it’s been that way since about September.”
The company opened bitcoin payments to worldwide consumers in September, extending the option to 107 new markets via its international website O.co.
Powerful metrics
Though bitcoin sales were less impressive than hoped, Bagley stressed that Overstock has seen significant gains, and more importantly, no drawbacks, from its support of the bitcoin ecosystem.
In particular, Bagley emphasized that 50% of its bitcoin sales were completed by customers who had previously not shopped at Overstock.
“It’s impossible to overstate how valuable this is to the company, given the high cost of new customer acquisition in this extremely competitive marketplace,” Bagley said.
Bagley pinned the average cost industry-wide for e-commerce merchants to acquire a new customer at around $20, suggesting Overstock could have saved as much as $200,000, minus the cost of the initial integration, acquiring bitcoin customers.
The comments provide further evidence that one of bitcoin’s most powerful value propositions currently may be the decrease in marketing costs the decision can provide.
A CoinDesk poll from April found that nearly 25% of all merchants cited the marketing opportunity presented by bitcoin as key to their decision to accept the digital currency.
O.co image via Shutterstock