One area that has seen a lot of competition by way of use of the blockchain is the reward and loyalty program industry. One of the early entrants in the space is a company called BitRewards, which focuses primarily on servicing e-commerce businesses and not as much serving as a B2C business.
I recently spoke with BitRewards CEO Alex Egorov to learn more about how blockchain can positively affect the rewards type of business, what the competitive landscape looks like and more.
Why do you believe that blockchain is a smart solution in the loyalty software market?
Egorov: Traditional loyalty schemes are difficult to set-up. Customers need to be encouraged and reminded to keep using them, especially when they involve remembering a separate card at the point of sale. Besides, they have the following problems: Account inactivity, low redemption rates, high customer service costs and more.
BitRewards is a blockchain loyalty platform and ecosystem that enables retailers to reward their customers' purchases with cryptocurrency tokens, known as BIT. Thus, we offer merchants to reward their customers with a liquid, non-expirable asset, that can be redeemed or exchanged to crypto or fiat money. Besides, we give them AI-powered loyalty platform based on our current working business GIFTD (motivational marketing tools) for free.
Why have you targeted small and medium businesses as the best market and which can best benefit from using crypto-based loyalty programs?
Egorov: Good question. Many small businesses don't have the resources to implement loyalty schemes and perilously push them to the bottom of their priorities, but looking at the statistics, it's clear that rewards systems are massively influential in securing longevity for your business. As a result of not having enough resources to innovate, new businesses continue to implement traditional methods of reward with no real tangible benefit, such as loyalty cards or points systems.
Therefore, there is a clear indication that small businesses should begin to evolve their reward systems, to appeal to customers through providing a simple, efficient system with real benefits, subsequently developing a symbiotic relationship between consumer and retailer.
Who are your biggest competitors in the space and what differentiates your offering from theirs?
Egorov: We have in mind several projects: PlusCoin, Loyalcoin, GatCoin, Loyyal.
The majority of the competition use a B2C model: they connect CPA networks (such as ClickBooth, MaxBounty, Admitad), which give cash back in fiat and convert fiat into cryptocurrency. The problem of such model is that it's extremely expensive to acquire customers.
The business model is highly risky; it's very hard and expensive to convince the users to use a new product, and the margins are extremely slim. The cost of validation of the assumption is very high at that -- they will spend millions before they get the feasible unit economics.
The other type of competitors are creating tools for B2B, though there's no one who focuses purely on the e-commerce market. They go after the offline retailers -- the market, which is 10 times larger, but scaling in this market is a lengthy and costly process.
What have been your biggest accomplishments and challenges since creating the platform in 2012?
Egorov: The main problem we faced was the translation of traditional "card" offline loyalty systems to online rails. We built a market from scratch. It was necessary to train the company, and to tell and explain to them the benefits. Since then, we attracted lots of partners and clients -- for instance, TUI, WarnerMusic Russia, GoPro and more.
Another problem was to move from a niche product to automation. As we saw the direction of the market, we needed to adapt quickly or cease to exist. That's why we created a set of 30+ products (gift cards, loyalty programs, referral and motivational tools) to test. As a result, now we have 7 tools that have proved the efficiency and now they are the main source of income for GIFTD.