Crypto has had a chaotic year.
“I think after the market rout in the last week or two, I’m not sure any of us are truly ready for cryptocurrency,” said American Eagle Outfitter’s Chief Marketing Officer Craig Brommers at the CommerceNext 2022 conference last month. The retailer made the decision not to accept cryptocurrency as a form of payment when it was developing an NFT collection last year.
The crypto market crashed in May, with extremely volatile trading trends. Consumer Financial Protection Bureau Director Rohit Chopra even cautioned businesses, telling Bloomberg that stablecoins might not be ready for payment. Nonetheless, plenty of retailers have announced they are accepting crypto as payment. Brands such as Gucci, Balenciaga, Alo Yoga and Tag Heuer are some notable companies that entered the crypto game recently.
Even brands within the same arena are thinking about digital currencies differently. Pacsun and American Eagle Outfitters are both betting big on digital transformation as a way to attract and retain a youthful audience. Both brands have been involved in virtual shopping and gaming experiences by launching initiatives in Roblox. Pacsun released mall rat-themed non-fungible tokens this year and auctioned some off at the immersive virtual shopping event ComplexLand 3.0. American Eagle Outfitters also released an NFT collection last year, and recently created an apparel collection with designs from NFT creators.
The key difference in both brands’ NFT launches: Pacsun sold them in exchange for crypto and American Eagle Outfitters did not.
In October of last year, Pacsun started accepting crypto as payment through BitPay, dubbing itself as the first “youth fashion retailer” to do so.
“When we thought about our 15- to 25-year-old customer, the reality is they were not ready for cryptocurrency.”
Chief Marketing Officer, American Eagle Outfitters
"The Gen Z audience, our primary consumer, is very tech oriented, and we dedicate a lot of our efforts towards social media and ecommerce to align with their lifestyles and resonate with them on a more personal level,” Michael Relich, co-CEO at Pacsun, said in a statement at the time. “Seeing their increasing desire towards cryptocurrency, it was clear that we needed to adjust and offer BitPay as another payment option, to further instill their confidence in us as one of their go-to retailers that truly listens."
American Eagle Outfitters thinks otherwise.
“When we thought about our 15- to 25-year-old customer, the reality is they were not ready for cryptocurrency,” Brommers said at CommerceNext.
Who is using crypto?
Data paints the picture that usage of crypto, whether for investment purposes or as a form of payment, is very different across gender and age.
A survey released by the Pew Research Center in November 2021 showed that men are twice as likely to say they have used crypto compared to women. Looking at the age group of 18- to 29-year-olds, 43% of men said they’ve invested in, traded or used crypto. This compares to only 19% of women in the same age group.
Crypto currently attracts a younger audience for both men and women, which is likely of interest to Pacsun and American Eagle Outfitters. Thirty-one percent of 18- to 29-year-olds surveyed have used crypto in some capacity, compared to only 8% of those 50 to 64 years old.
Using crypto for investment purposes or through the purchase of an NFT is quite different then using it as a form of payment, though. A May 2022 report by the Federal Reserve Board says that crypto used for financial transactions or purchases is much less common than its usage for investment.
The report found that in 2021, only 2% of U.S. adults used crypto for payment over the prior 12 months. Those who used crypto only for investment purposes tended to have a higher average income, had a relationship with a traditional bank and had retirement savings compared to those who used crypto for payment purposes.
2% of U.S. adults used crypto for payment over the past year
"Economic Well-Being of U.S. Households in 2021" report
Federal Reserve Board
But this is the current demographic, and won’t necessarily stay the same over time.
“When we look at the totality of the research, no doubt that the group that has been more active in adoption of cryptocurrencies and stablecoins has skewed younger,” Deloitte U.S. Banking and Capital Markets Payments Leader Zachary Aron said in an interview with Retail Dive.
“And there's also a correlation that the younger demographic ... tends to have been more underbanked overall as well,” said Aron.
When asked about how retailers should consider that data in their decision making, Aron said, “I wouldn't necessarily evaluate it just on the premise of accepting crypto or not, but really on the premise of who's my customer base that I'm trying to attract.”
Deloitte recently released a report on its survey of 2,000 senior executives at U.S. retail companies to examine interest and investment into crypto as a form of payment. The report found that 64% of merchants surveyed indicated that their customers have a significant interest in crypto payment options, and 83% expect that interest to grow over the next year.
Based on this data, many companies are looking at the long-term role of crypto in retail transactions, perhaps expecting the current user demographic to grow and change over time.
Crypto users aren’t too swayed by market fluctuations, according to a study by Gartner’s Software Advice. Its 2022 Cryptocurrency in Ecommerce Survey, which surveyed 596 U.S. consumers who have used crypto as a payment type once per month in the past year, found that over half of respondents plan to spend more using crypto in the next year. Only 29% of respondents who intend to spend more with crypto in the coming year are deterred by its value fluctuations.
That said, the report cautioned small- and medium-sized businesses from jumping into crypto payment too soon, stating that some perceived consumer benefits for this payment type don’t necessarily help retailers. For example, the idea that crypto transactions are private isn’t completely true since businesses need to report any changes in crypto value as they are subject to capital gains taxes. Additionally, the idea that transaction fees are low doesn’t always remain true for merchants since the fees change over time, per the report.
American Eagle Outfitters’ Brommers appears to be taking the short-term view though, based on what is known about the current active crypto audience and how volatile the digital currency market has been this year. Pacsun, on the other hand, is likely looking at the long-term potential of widespread crypto adoption.
“We certainly think that there are attitudes around digital currencies that are obviously influenced by the investment side of the digital currencies space,” Deloitte’s Aron said. “Businesses are taking that longer-term view, they do recognize that there will always be short-term ups and downs. But the longer term aspect of digital currencies being a part of the payment space and how it can enhance the customer experience is something that likely is going to endure.”