Dutyfree.io is an online service which provides cigarettes at a very cheap price. With cigarette prices and taxes soaring, the company claims you pay an average of $3.90 a pack by buying from them. Founded in 2009 the company so far has sold over 76,000 cartons online. The company accepts Bitcoin and is “thankful” the currency was born around the same time they were.
“Sales continued to rise until Big Tobacco and credit card companies took notice and froze our bank accounts. After many months of fighting, we had to give up. Fast forward to 2014, we don’t have to ask anyone’s permission anymore thanks to the first decentralised currency, Bitcoin.”
When the company really started picking up from a one man operation, Dutyfree was told it could not process cigarette sales from credit cards and bank transfers. The business switched to Bitcoin and has been selling its cartons ever since. Cross-border cigarette sales have been an issue for tobacco company to try and survive. The economy of smoking is a fairly inelastic constant force, “Big Tobacco” and governments have been reaping the revenue off the common people for many years. The cost of production of a pack cigarettes is a few cents and these entities charge $10+ for a pack in some countries.
Bitcoin.com chatted with the founder of Dutyfree.io about how he started this company and how Bitcoin has changed its online business model.
Bitcoin.com: Can you tell our readers about your business?
Dutyfree: There’s 10 of us in total (incl. customer support & shipping/handling team). It started as a one-man operation in 2009 and we’ve grown gradually since then. At first, we were processing credit card payments but eventually our bank accounts got frozen/seized due to Big Tobacco fighting cross-border cigarette sales which caused loss of profit for them (they can’t afford to keep prices high in every country of this world since the quality of life, and thus buying power, is so different). Thankfully, Bitcoin surfaced around that time which enabled us to process payments without asking for anyone’s permission and we moved onto the Darknet and started vending on the original Silk Road in 2011, being one of its first vendors.
BC: How does your company’s services save its customers money concerning tobacco sales?
DF: We can afford to sell cigarettes at a fraction of their cost ($3.99 per pack on Dutyfree.io instead of $12.48 per pack in the UK or $16.88 per pack in Australia, for example) because we purchase them in a developing Eastern European country where cigarettes are still cheap.
“Thankfully, Bitcoin surfaced around that time which enabled us to process payments without asking for anyone’s permission.”
BC: How did you get into Bitcoin?
DF: By searching for an alternative payment channel – PayPal, Western Union, credit cards and bank transfers were banned for us.
BC: When did you apply Bitcoin to your company model and how has it worked out?
DF: Shortly after getting the bank accounts seized, though our volume wasn’t as big back then – very few people knew about Bitcoin. It is very different nowadays – we’re processing more orders paid for in Bitcoin than we ever did via credit cards or PayPal. We wouldn’t go back even if we had the chance to.
“I just hate to see the small guy getting extorted and I do my best to help.”
BC: Do you think regulation and taxation hurts the tobacco consumer?
DF: I do believe taxation hurts the consumer in the West enormously and here is why. Governments increase tax and hope this will lead to a fall in demand, although in reality this only has a small effect because demand for cigarettes is very price inelastic. People are addicted and there are no close substitutes, so they will and actually are paying whatever the government is telling them to pay. So instead of de-motivating smokers, they are simply stealing their money.
Also, smokers pay taxes just like everyone else, but they do not cost the government as much because on average – they die earlier and save pension and health care spending. Higher taxes are also increasing inequality because the poor will pay a higher % of cigarette tax than the rich who are more likely to have given up. All in all, the small guy is getting screwed, as always! And it just feels like they’re fighting smoking (which is bad, I agree) with the wrong tools. I just hate to see the small guy getting extorted (I was myself in that position a couple of years ago) and I do my best to help.
Do you think regulation hurts consumers? Let us know in the comments below.
Images courtesy of Shutterstock, Dutyfree & Redmemes