The BitcoinStore, a very popular electronics retailer in the Bitcoin community, has announced that has managed to keep its contract with its wholesaler, and so will continue be able to continue selling goods at its current low prices. The store first launched in November 2012 with a simple proposition: hundreds of thousands of electronics products for sale for bitcoin, all cheaper than anywhere else on the internet – major retailers like Amazon and NewEgg included. Because the BitcoinStore is Bitcoin-only, it would not have to pay any of the costs associated with accepting credit cards, including the standard 2.9% fee, PCI compliance, identifying potentially fraudulent purchases and handling chargebacks, and the key attraction of the store is that it would pass these savings on directly to the consumer. On top of this, Bitcoin entrepreneur Roger Ver secured for the BitcoinStore another advantage: a contract with Ingram Micro, which describes itself as “the world’s largest distributor of computer and technology products”, at the highest possible tier of discounting. That is, despite being a less than six month old startup, the BitcoinStore has been able to buy its products from Ingram at the same prices available to the largest eletronics retailers in the world.

However, the contract came with a string attached: the BitcoinStore had to reach a sales volume of $850,000 in the first quarter of 2013 to maintain it. In the first three months of operation from mid-November to February, the store saw some attention, but by Feruary it became clear that they were simply not getting enough – with little over a month left, the BitcoinStore still had over $800,000 to go. At that point, Jon Holmquist and Roger Ver were desperate, and sought to save their business with a bold move. On February 27, the store officially launched, a step that the two were delaying until then due to issues with the website, and offered its customers the ultimate discount: a 0% markup on all purchases. The pair also launched a massive marketing campaign, and pleaded with the Bitcoin community to support them during this critical time. Orders came rolling in; the BitcoinStore earned nearly $300,000 by mid-March, and by the end of the month the figure was up to $500,000.

Thus, the BitcoinStore did not quite live up to the original conditions of the deal, but since, as Jon Homlquist has just announced, the contract has been renewed, Ingram was clearly sufficiently impressed by the last month’s performance – or by the rapid growth of the Bitcoin community as a whole – to give the store another chance. The BitcoinStore now has to earn another $850,000 of revenue by June 30 to keep its contract once again – a goal that is still not that easy to reach, as it must now continue to earn $283,000 per month even though many of its potential customers have already bought everything that they needed in March, but Holmquist is confident that they will succeed. “We’ll be pushing ads heavily and will be launching some new programs to introduce new people to Bitcoin,” Holmquist writes.

The success of the BitcoinStore, together with the success of so many other BitPay merchants in the month of March, makes a strong case for the strength of the Bitcoin economy; although over the past thirty days the currency has been massively deflationary, with its value rising nearly 200% from $31.25 to $93.03 over the month of March, at the same time sales are higher than ever. Of course, this is very far from a solid empirical argument that deflationary economies are superior, or even work, in the context of a full-scale society, but does deliver a strong blow to concerns that the Bitcoin economy will somehow asphyxiate itself as the price goes up due to lack of spending.

The BitcoinStore will, for now, be keeping its 0% markup, and Ver is okay with taking a small loss to keep the store running. To him, the BitcoinStore is not intended so much to be a profit-making business, but rather a proof of concept, a business that shows just what becomes possible in the world of e-commerce once all of the inefficiencies of legacy payment systems are stripped away. The intended audience of Ver’s performance? The very same mainstream electronics retailers that the BitcoinStore’s prices are now crushing. “You all are a huge part of that global marketplace. You all have been approached about accepting Bitcoin and yet not one of you has started accepting Bitcoin payments. Our sales show that there are consumers out there that want to purchase electronics with Bitcoin… And our prices show that Bitcoin can dramatically lower prices.”

With today’s announcement, however, Ver has upgraded the message to a warning: accept Bitcoin, or accept our wrath. “So here’s the deal I want to make with each of you,” Ver writes, “accept Bitcoin payments by the end of 2013 and we’ll gladly close down our website. But if you don’t accept Bitcoin… we’ll keep rolling. We have already made over a half million in sales and we have only been open a month! If you don’t listen to your consumers, we’ll continue taking them from you. I assure you, Bitcoin is geeky enough to appeal to many of your consumers, and the savings we provide is convincing enough for many others. We’re a startup and we’re already regularly beating your prices, imagine what will happen as we grow bigger.”