Why should a luxury brand take crypto payments?
As crypto winter continues, we've strayed from this topic, but it floated to my consciousness again recently
Recently, I’ve seen a few start-ups helping consumer companies take crypto as a form of payment. While some brands and industries seem in perfect alignment with accepting cryptocurrency, it made me wonder, should all consumer companies, from Louis Vuitton to Walmart, be taking crypto, and if so, why?
There are market and marketing-related reasons to accept crypto and financial reasons to accept crypto. But the market is small and the hassle is considerable. Thus I’m asking, what’s the first mover advantage and why would a luxury brand want to start taking crypto now?
PR
Luxury brands understand the importance of staying relevant and appealing to a tech-savvy audience. This halo effect of tech acumen hopefully implies the brand is looking to the future in other ways. Taking crypto is a statement that a brand has an eye to the future and is willing to invest in “fringe” technology.
And if you’re a believer, giving more consumers more ways to pay with crypto seems like a good mission.
Accessing a new customer segment: younger, tech-savvy male customers
By accepting crypto, brands tap into the growing community of cryptocurrency enthusiasts who value innovation, cutting-edge technology, and making loads of money. These individuals, really men, are early adopters and trendsetters of a type that, to stereotype, have not traditionally been courted by luxury brands. Accepting cryptocurrency as payment offers a unique opportunity to connect with a new generation of affluent customers who value convenience, security, and digital transactions. And who are often rich. Early enthusiasts, as we all know, may have made a killing. Always an attractive customer segment.
Additionally, crypto gains might not be considered a part of a person or family’s income, from an emotional perspective, as wages. Individuals might be more inclined to splurge with the excesses of an Ethereum or Bitcoin jump in value, seeing it more as a windfall than income. This is ripe discretionary spending for a luxury brand.
Currency Hedging/Expanding Global Reach/Ease of Transactions:
I’m no CFO, so I can’t really comment if the juice is worth the squeeze here. But most, if not all, luxury brands work across currencies and borders, and perhaps working with a decentralized financial tool would help smooth those efforts.
Cryptocurrency offers a convenient solution for cross-border transactions, eliminating the complexities and delays associated with traditional banking systems. By accepting cryptocurrency, luxury brands can provide a seamless and secure payment experience for their international clientele. Additionally, cryptocurrency transactions can bypass currency exchange fees and hopefully reduce the risk of fraud, further enhancing the customer experience. However, given all of the excitement in the crypto world, some fears here about money laundering and fraud need to be addressed. (to note, Farfetch said returns that have been accepted will be processed in the original cryptocurrency at the current exchange rate, according to the marketplace. Seems tricky)
Preserving Anonymity and Exclusivity:
Luxury brands have long been associated with exclusivity and privacy. Cryptocurrency aligns with these values by offering a level of anonymity and discretion in transactions. Some high-net-worth individuals may prefer using cryptocurrency as a form of payment to maintain their privacy and protect their financial information. And not let their wives/husbands/sugar daddies see what’s on the credit card bill? By accepting cryptocurrency, luxury brands cater to this desire for discretion, fostering a sense of trust and discretion with their clientele.
As we’ve discussed many times here at metaXmoda, digital identifiers can be a robust identifier within a CRM system, and so using crypto would allow a brand to understand their VIP clientele and develop a pattern around their taste and spending without adding them to their email list like the common-folk.
In short, there is a specific type of luxury brand that should be wading first into these waters.
-Brands that need to leap into the modern age. (though I’d argue crypto is no silver bullet and might look a little silly on some heritage brands, a savvy PR team should be able to craft the right narrative)
-Brands who want to reach young men. Crypto is a young man’s game, by and large.
-Brands with an adept CFO and an appetite or need for currency hedging/doomsday financial scenarios/diverse currency instruments
-Brands with a clientele they already know are crypto enthusiasts who value privacy or who might spend more if they could spend out of that discretionary income
So perhaps Walmart is not a candidate. But this is an exciting way to reach a unique segment, and the brands that have already jumped in will be reaping the rewards of capturing the brand affinity of these young, rich men.
Thus far, the following brands have announced plans to accept crypto:
Tag Heuer (and other watch brands, unsurprisingly, given the currency-like collectibility and liquidity of watches and their male customer base) BUT “BitPay, the crypto payment processor that handles transactions for TAG Heuer, actually converts the sale price into dollars for payment to the brand. “We are not paid in cryptocurrency,” Mr. Arnault said.”