What does a jewelry company have to do with Bitcoin? If you think about the industry – a store in the early days looks the same as it does today. Precious metals and gems, display cases and a person to assist you in selecting an item.
Technology and innovation is how a jeweler must differentiate itself, and evolve to meet the needs of customers.
Executives at Wilmington-based REEDS Jewelers Bradley Zimmer and Mitch Kahn gave us a handful of examples of this in practice, and with context over time. It all helps to explain why in June it became the first fine jeweler in the country to accept Bitcoin as payment.
The context of the retail industry provides an interesting backdrop for cryptocurrency. Even the Internet is relatively new from the perspective of retail. The first jewelry was created in 100,000 B.C. and in 4400 B.C. was the introduction of precious metals.
The ability to keep time with any degree of precision only came about recently. The first challenge was to find a way to determine longitude and latitude – that happened with the first version of the modern watch, the Harrison H1 Chronometer in 1730.
Fast forward to 1946 when REEDS was founded. It hired technicians who are experts in Swiss watch-making – it takes years and years of apprenticeship to do this type of work. Same holds true for precious stones and metals – making brilliant cuts to maximize intensity and sparkle.
Technicians there embed a laser serial number only visible under magnification that tells where the metal was mined, when it was mined, the cut, size, and so forth. Reeds uses technologies to enhance the photon path and make a metal more shiny, by cutting it at slightly different angles. It now uses 108 facets when cutting diamonds.
In recent years, they’ve updated their website to appeal to customers, loading tens of thousands of diamonds onto the site so that people can see many options and pair them with settings to create a custom, unique ring online (and hopefully to purchase).
To improve communication with customers, they started an experiment with vendor Pandora – maker of the highly stylized and customized charms and bracelets and the second most recognized brand in the world. An HTML5 builder lets customers build and customize their bracelet online, and prompts them to tell the story behind the creation and share it on social sites. To buy, they can simply click a link and move directly to checkout.
REEDS tries to be cutting edge to enhance the product or service, in a way that’s transparent and seamless – not for the sake of technology.
So why Bitcoin? Zimmer and Kahn say they were responding to requests from savvy customers for speed and security in the purchase process. Bitcoin solved those problems, and let them use technology to connect with and serve the needs of customers.
It was enthusiastically supported by all directors, executives and managers – so they decided to adopt it within their organization (600 employees). Figuring out how to account for something that wasn’t being treated as a currency was the biggest concern. They worked closely with auditors at Ernst & Young and Deloitte to figure out how to treat it on the books. They strongly recommend this approach.
A merchant processor like BitPay or Coinbase was the answer to many of the problems their staff had internally. Using Coinbase, they had Bitcoin processing live and integrated with mobile point-of-sale systems across their platform in 45 days they got it live and integrated across their platform. The last step was educating their 500 store employees on how to accept and transact in Bitcoin.
They went live June 10th as the first fine jeweler, the first legacy bricks & mortar retailer, and the largest multi-store retailer to accept Bitcoin to date (to the best of their research).
The first transaction happened in Huntsville, Ala. the very same day. They didn’t expect it to happen in store or in Alabama�the buyer’s girlfriend worked for Bitpay. People have been enthusiastic about the offering since. The second Bitcoin purchase was in Baltimore, also in store. The buyer posted on Facebook that she loves that they accept Bitcoin. A REEDS employee then posted on Reddit how much he appreciated the company’s decision to accept Bitcoin and train everyone on how to use it.
Excerpts from a Q&A session with the men.
Q: Do you cash out or hold currency in bitcoin?
Our assets are already fluctuating in value (diamonds, silver, etc.) so we felt it was too much risk to also hold Bitcoin. We immediately transact and cash Bitcoin payments into dollars. For refunds, we convert cash into Bitcoin and then return the items as Bitcoin. The controller also preferred this approach due to GAAP (accounting) concerns.
Q: How do you handle transaction times?
We use traditional POS equipment and iPads (they call it a mobile POS)�and then during checkout we can scan a QR code associated with each transaction. REEDS uses Coinbase, which provides immediate confirmation and apparently they assume the risk.
Q: Do you have an estimate of the per store cost of the roll-out? How do you handle sales tax? Do you think that this influences wealthy people to buy your high-end products?
A1: Obviously, there is cost with the project, but we view it as a long term decision and benefit.
A2: If the transaction occurs in a store, the sales tax is charged as part of the ticket and therefore included in the Bitcoin charge.
A3: That was a consideration�research indicated that people who prefer customization (one of Reeds’ focal points) would also be a Bitcoin customer.
Q: Have you approached any back-end business partners for gold and jewelry (suppliers) about using Bitcoin?
Our partners are very savvy in that area but they aren’t using it yet. We foresee it happening in the future.
Q: Revenue goals? Did it meet your expectations?
Exceeded goals. The average ticket is significantly higher than a non-Bitcoin purchase.
Q: How did you pick Coinbase?
We did an internal assessment based on our technologies�it worked well with our mobile POS system. Over time, we want to work with other register setups as well, but Coinbase was the best solution at the time although a couple of alternative options were also solid.