In this era of internet privacy, business owners might find they know less and less about their online customers. And that’s a problem when they’re trying to customize the experience for loyal customers or reach new ones.
Alex Danco, Director of Blockchain and Systems Thinking at Shopify and his team are tackling that very challenge. Using Web3 technology, Alex and his team are building infrastructure for Shopify merchants to implement token-gated commerce—a new way for buyers to identify themselves on the internet and receive perks from their favorite stores.
“Online buyers walking around the internet are these relatively anonymous people,” Alex says. “Ideally, we believe shopping is actually better when you're not anonymous. Shopping is better when you're you.”
What is token-gated commerce?
In some ways, token-gated commerce is similar to a loyalty program. Customers collect “tokens” from their favorite retailers. These tokens can take many forms, but essentially, they are a digital record that a customer either bought something or completed a certain task. Then, customers use tokens in their favorite store and unlock rewards, such as exclusive discounts, products, access to in-person events, or online Discord groups.
The main difference between token-gated commerce and a loyalty program is that a customer’s wallet of tokens will follow them to every online store. Instead of earning rewards at just one store, customers can use tokens at other collaborating stores, getting a more customized experience because these stores know more about them.
The benefits of token-gated commerce
Token-gated commerce is a clear win-win for consumers and business owners. Even though the technology is still in its early stages, there are plenty of benefits to this new system. Here’s some of the reasons you should take a closer look at it.
1. Learn more about your customers in the age of privacy
“The internet is rapidly moving into this world where the actions that you take around the internet are becoming fairly private by default,” Alex says, citing developments like the release of iOS 14, which let more iPhone users prevent apps from tracking them on the Internet.
The changing norms and laws around Internet privacy has made online advertising more expensive, and in some cases, less effective. It also requires much more active consent from buyers to gather data and limits how much data can get passed from company to company.
Token-gated commerce gives consumers a way to opt-in for rewards across many stores. It also allows businesses to learn more about their customers and recognize them for activities with partner brands.
2. Turn the buyer journey into the hero’s journey
Another way businesses can use token-gated commerce to deepen their relationship with customers is to give a narrative structure to the buyer’s journey. Maybe customers will have to complete certain activities, like collecting several tokens to unlock one rare product. “This product will have a lot of meaning to them because of the journey they went on discovering this product,” Alex says.
Ultimately, that’s better for the bottom line as well. People are willing to pay more for things that have meaning to them, which in turn, will increase the business’ profit margins. “There's a lot more money in selling a story than in just selling a product for its usefulness,” Alex says. That’s why luxury brands have been some of the most successful early adopters in this space. ther retailers can borrow from this model, using token-gated commerce to create the same sense of exclusivity.
3. Expand the collaboration opportunities
“One of the things that's really funny about ecommerce is that it's very single-player,” Alex says. “The amount of collabs on the Internet in shopping is tiny, relative to how collaborative culture is.”
Alex is most excited about the collaboration opportunities that open up once businesses realize they can find adjacent segments of buyers that overlap their own. For example, Gucci and Superplastic teamed up to give Superplastic tokenholders access to an exclusive Gucci product.
4. Experiment with emerging tech
Alex predicts that one day, token-gated commerce will power most online stores, and you won’t have to know anything about Web3 or blockchain to participate. His team is currently working on making tokengating more accessible for Shopify merchants and their buyers.
But you don’t have to wait to start trying token-gating commerce out yourself. Check out some of the Shopify apps that can mint tokens, learn about how to build a token-gated storefronts yourself with Shopify’s tutorials, and listen to Alex’s full interview on Shopify Masters.