In August 2021, German streetwear brand Philipp Plein became the first fashion brand to accept cryptocurrency at its new crypto concept store in London. Soon after, other brands, including Off-White and Gucci, announced they would also be accepting a variety of cryptocurrency on their online platforms and at select stores around the world.
But it’s not just luxury brands entering the Web3 fold. Charles and Keith, an affordable Singapore-based accessories label, is the first homegrown brand in the APAC region to accept cryptocurrency on its e-commerce sites.
The crypto market has recently fallen into a steep dive, however, and strict regulations across countries and potential security issues may pose a risk to its growth in coming years.
So, why are retailers betting on crypto now?
The metaverse meets retail
One of the main factors that has pushed retailers to adopt cryptocurrency has been a desire to take advantage of the higher average spending value of crypto transactions. Forrester Research has found that crypto users have an average order value of US$450 ($650), nearly double the average order value of regular shoppers.
Due to the volatile nature of cryptocurrency, the value of a single token can easily be in the tens of thousands. This enables super high value transactions to be completed with a push of a button.
To a certain degree, these transactions can also be done discreetly, and unlike traditional banking systems such as credit cards, crypto has no effect on one’s credit score. As of now, the most accepted forms of cryptocurrency are Bitcoin, Ethereum and Tether USDT.
In countries where crypto is more regulated, retailers have opted to join forces with licensed payment platforms that are registered with local finance institutions to process transactions.
Charles and Keith partnered with TripleA, a crypto payments platform licensed by the Monetary Authority of Singapore and registered with the US’ Financial Crimes Enforcement Network (FinCEN), as its crypto payment solution provider for the brand’s e-commerce sites. The new payment service will be available on Charles and Keith’s websites in Australia, Singapore, the UK, the US, Canada, Malaysia, and Europe during the initial launch phase from the first half of calendar year 2022.
Since the beginning of this year, a number of brands have begun to process crypto payments in-store. Off-White announced that it would be accepting Bitcoin, Ethereum, Binance Coin, Ripple, and stablecoins Tether and USD Coin at its stores in Paris, London, and Milan.
To overcome the market value differences among the cryptocurrencies, these transactions would be processed via a terminal that exchanges cryptocurrency to fiat money using real-time market rates. Any refunds and returns would be offered with store credit; however, Gucci has announced that its customers would be able to process returns in cryptocurrency.
As the number of cryptocurrency users rises, a multitude of crypto-based services have also come to prominence. Lolli, a shopping rewards platform, allows shoppers to earn Bitcoin for every purchase made with its retail partners – similar to other cashback or loyalty programs.
With Lolli, customers can earn an average 7.5 per cent of the purchase price in Bitcoin. The company has over 1,000 retail partners, including Nike, Sephora, Bloomingdales, and even StockX.
Late last year, data ownership initiative Cirus Foundation launched its own web extension that allows users to monetise their browsing data in cryptocurrency. Installed directly as a plug-in on your browser, Cirus users can decide how much data they want to sell. Payment is made to the user’s digital wallet in Cirus tokens, and the tokens are exchangeable for other cryptocurrencies or cash.
Why would you consider selling your data? The simple answer is major corporations and advertisers have already been tracking your data through the use of apps or social media platforms, for free. With Cirus’ web extension, the power returns to the customer. The user gets to choose how much data they are willing to share in exchange for cryptocurrency.
“With Web 2.0, corporations shared big data with advertisers and users merely received ‘free’ use of platforms and apps…Fast forward to today, with the rise of crypto and web3, this is no longer an excuse. We must fit the people, who gave rise to a trillion-dollar industry, back into the equation. It’s about time,” Cirus Foundation managing director Michael Luckhoo said.
With that said, shopping with cryptocurrency does not come without challenges. Recently, cryptocurrency has been at the centre of a money-laundering scheme in Thailand. With most new real-estate developments accepting crypto as payment, some high-profile individuals were caught using these properties as a way to hide money from the law. As a result, the Thai Securities and Exchange Commission banned crypto payments in March.
Crypto purchases of more liquid products, like luxury items, would make it even easier for criminals to launder money. In the US, a new regulation requires crypto purchases worth over US$10,000 to be filed and reported with FinCEN, which polices money laundering.
Should retailers choose an even lower threshold to avoid the paperwork, it will undoubtedly undermine the use of crypto, especially within the luxury market. Beyond crypto’s ties to the underworld, accepting digital currencies also means a massive change to the financial infrastructure and accounting systems of companies.
One of the biggest players in e-commerce, Shopify, has partnered with Strike to integrate Bitcoin as a payment method. The integration will allow Shopify’s merchants to accept the digital currency in the form of US dollars and save on processing fees through cash-final settlements.
Gucci, however, has taken things a step further, by developing a team dedicated to Web3 only and has purchased and is developing digital real estate on The Sandbox, a blockchain-based platform on which brands like Adidas are also developing real estate.
“Gucci is always looking to embrace new technologies when they can provide an enhanced experience for our customers,” Gucci president and CEO Marco Bizzarri said. “Now that we are able to integrate cryptocurrencies within our payment system, it is a natural evolution for those customers who would like to have this option available to them.”