Beat Bitcoin Blues With Your Own Electronic Currency

As I have previously expressed in this column, I am a Bitcoin skeptic. The recent news that major global Bitcoin exchange Mt. Gox suddenly disappeared, possibly due to losing as much as $350 million to fraud allowed by a computer glitch, reinforced my reservations about Bitcoin and similar electronic currencies. In theory, independent electronic currencies are promising, but in practice, relying on third-party payment methods which are not backed by the full faith and credit of a stable government is a risky proposition.

However, retailers who are intrigued by the notion of alternate electronic currency but spooked by the uncertainties of third-party platforms have another option: creating their own electronic currency. Many retailers already have some sort of proprietary electronic currency, such as loyalty points or electronic discounts, but these common digital mechanisms are only the beginning of what is possible. Let’s look at a few other options.

Social Currency
Favorable social media postings from customers can provide tremendous value in terms of branding and consumer awareness. So why not turn those postings into a form of digital cash? During the recent Fashion Week, the fragrance division of Marc Jacobs opened a pop-up in New York City’s SoHo neighborhood that traded in social currency instead of money. The Daisy Marc Jacobs Tweet Shop conducted all transactions based on customers’ use of the hashtag #MJDaisyChain across Twitter and other social media platforms. Shoppers were able to exchange each tweet, Instagram post, or Facebook update for a single item.

While you probably don’t want to make unlimited amounts of your entire inventory available for the price of a tweet, with reasonable limitations social media posts can make a very effective form of electronic currency. Consider the monetary value of the goods you trade for social posts as an investment in marketing.

Playing the Game
Gamification is a hot topic in retail, and an increasing number of retailers are using online games as an inducement for consumers to visit their e-commerce sites. But points and prizes won in games can also be converted into digital currency customers use for tangible products.

To maximize the benefit they receive from what I’ll call “gamified” currency, retailers should tie games closely to actual shopping and marketing activities. For example, customers could earn electronic currency by identifying brands and products the retailer sells, recruiting the most new customers, checking in the most at different stores, etc. Games should be legitimately fun for the consumer, but any currency they generate needs to generate some type of real value for the retailer.

Be Your Own Mint
Another option for retailers to consider is “minting” their own electronic currency and selling it for actual money. Thus retailers can avoid problems such as uncontrolled exchange rates and platforms suddenly closing down. To avoid angering customers, retailers cannot ever set the value of their proprietary electronic currency at anything less than the going value of the dollar. What they can do is offer special discounts and sales for customers who use it.

For instance, a retailer might run an electronic currency special on out-of-season merchandise, or provide customers an electronic currency discount to help push a cross- or upsell. They can bank money ahead of purchase similar to a gift card purchase, and then stretch the value of that advance purchase further by steering it in a favorable direction. The consumer obtains convenience and value. Sounds like a profitable equation.


More Tech Bytes

Recommended stories

Login or Register to post a comment.