Data Privacy in the Retail Industry
Data privacy for consumers is a key competitive differentiator in the retail sector. Three emerging trends pointing to this are:
Increasing regulations around data privacy
Data Privacy roles gaining more influence in organizations
A rise in a customer-centric approach to build trust
Pandemic-driven lockdowns boosted online retail sales, projected to reach $6.33 trillion in 2024 and $7.96 trillion by 2027 (Global Ecommerce Sales Growth Report (2024) - Shopify). This growth has led to increased data collection and personalized marketing, raising privacy and security concerns. Retailers use AI to analyze data from chatbots, reviews, and social media, and offer discounts and loyalty programs to incentivize data sharing. Major companies like Facebook, Amazon, Shopify, and Zoom are adopting stricter privacy practices amid growing scrutiny and regulatory penalties. In May 2023, Meta was fined €1.2 billion by the Irish Data Protection Commission for violating GDPR by transferring European user data to the U.S. This has intensified the push for greater privacy measures, leading companies like Google to reconsider privacy-impacting technologies.
Safeguarding consumer privacy has always been a priority but has taken on more urgency in contemporary online shopping and marketing that is driven mainly by data. To gain a competitive edge in the market, retailers need to be ahead of the rapidly evolving data privacy landscape and fully adapt to changing trends.
Increasing Regulations around Data Privacy
Since the General Data Protection Regulation (GDPR) went into effect in 2018, consumers have become more empowered regarding how their data should be protected. This landmark regulation has inspired a wave of similar laws worldwide. In the US, California led the way with the California Consumer Privacy Act (CCPA) and later the California Privacy Rights Act (CPRA). Following California’s lead, states like Virginia, Colorado, Utah, Texas, Connecticut, New Jersey, Iowa, Nebraska and many other U.S. states have enacted their own privacy regulations, adding layers of complexity for retailers. U.S. State Privacy Laws (Updated) | 29th May 2024 | Infographics
As of 2024, an additional 5 states have enacted comprehensive privacy laws, with more 15 considering similar legislation.
Since the implementation of the GDPR, companies under EU jurisdiction have collectively faced fines totaling over €4 billion, reflecting a significant increase in enforcement actions. In 2023, Sephora was fined $1.2 million by the California Department of Justice for failing to comply with the California Consumer Privacy Act (CCPA), highlighting ongoing scrutiny and enforcement of state-level privacy regulations.
As more data privacy laws emerge globally, retailers should prepare to provide greater transparency about their data collection and usage. This means clearly stating their intent for using personal data acquired from consumers and ensuring compliance with various regulations.
Get ahead of upcoming regulations with best practices such as:
1. Empowering Consumers
Transparent and explicit cookie consent collection
Right to retract, de-identify, or delete their data
2. Increasing Accountability
Mandatory notification of breaches
Expanded audits and compliance checks
3. Enhancing Data Security
Increasing anonymization of datasets to secure individual identities and address reidentification risks
4. Implementing Strategic Practices
Appointment of privacy officers
Adoption of a more robust security and privacy mindset
Regular assessments of privacy impact
Retailers operating across multiple jurisdictions face the additional challenge of navigating the nuance between different laws. Implementing comprehensive data governance programs and investing in Privacy-Enhancing Technologies (PETs) can help retailers meet these evolving requirements, ensuring they remain compliant and maintain consumer trust.
However, technology alone doesn't solve everything. It is also essential to have expert knowledge and a robust understanding of the legal landscape to effectively manage and adapt to these regulations. This combination of advanced technology and specialized expertise is crucial for successfully navigating the complex and ever-changing world of data privacy. By proactively adapting to these changes, retailers can turn compliance into a competitive advantage and fostering a loyal customer base.
Data Privacy Roles Gaining More Influence in Organizations
The responsibilities of a Data Privacy Officer are increasingly critical as organizations face an explosion of data, with global volumes expected to reach 175 zettabytes by 2025. While not every company has a Chief Privacy Officer (CPO) by title, the essential tasks of data governance, analytics, and ethical data management are often distributed across various C-level roles, such as CIOs or CMOs. Similarly, the growth of the CPO role highlights the importance of privacy, though in many smaller organizations, these responsibilities are managed by different executives or teams. Regardless of formal titles, the functions of any data-privacy-oriented role are crucial for maintaining compliance, customer trust, and leveraging data for business success.
EXECUTIVE-LEVEL RESPONSIBILITIES AND IMPACT
Formulating Strategy: C-level data and privacy officers are tasked with developing and implementing data strategies that align with the organization’s goals. They lead integrations, maximize data utility, and ensure robust data governance.
Ensuring Proper Data Governance: They work cross-functionally to implement privacy and data protection laws, collaborating with General Counsels, Chief Risk Officers, and Chief Information Security Officers. This collaboration ensures comprehensive data governance and compliance with regulations.
Expanding Roles: Retailers are expanding these roles beyond risk and compliance management to assist data and privacy officers with timely and efficient audit responses. This expansion is crucial for framing solutions that address consumer data protection trends and regulatory requirements.
Increased Focus on AI and Privacy
Retailers are increasingly leveraging artificial intelligence (AI) to enhance customer experience, optimize operations, and personalize marketing efforts. The McKinsey 2023 AI survey reports a significant rise in AI adoption, particularly generative AI. One-third of respondents say their organizations regularly use generative AI, with 40% planning to increase AI investments due to its potential.
This surge highlights the need for enhanced privacy measures as businesses integrate these advanced technologies to improve customer experiences and operational efficiencies. (The state of AI in 2023: Generative AI’s breakout year | McKinsey)
AI's ability to analyze vast amounts of personal data to predict consumer behavior requires robust data protection measures to comply with privacy regulations. CPOs work cross-functionally with General Counsels, Chief Risk Officers, and Chief Information Security Officers to ensure comprehensive data governance and adherence to privacy laws. This collaboration helps in crafting strategies that address the evolving landscape of data privacy and AI's role within it.
A survey by Dataversity in 2024 predicts that 62% of organizations will conduct audits of their existing data governance programs and explore new approaches to corporate data governance. This reflects a growing trend toward enhancing data governance frameworks to ensure data quality, security, and regulatory compliance. (Data Governance Trends in 2024 - DATAVERSITY)
Rise in customer-centric approach
In the new era of data privacy, retailers must be cautious with Personal Information (PI), which includes email addresses, IP addresses, physical locations, credit card numbers, names, clothing details, web cookies, and surveillance footage. Retailers must be transparent about their intent to acquire PII, allowing consumers to control their information sharing.
Consumers now reject intrusive requests but favour transparency and convenience. A Deloitte report shows 90% of consumers find personalized ads appealing, and 80% are more likely to purchase from companies offering personalized experiences. Retailers must provide extensive personal data controls to meet these preferences responsibly.
The Value of Consumer Trust
Maintaining consumer trust is critical for business success. Consumers are more likely to engage with brands that demonstrate a strong commitment to privacy and data protection. By prioritizing transparency and ethical data practices, retailers can build lasting relationships with their customers, ultimately leading to increased loyalty and a competitive edge in the market.
Data privacy practices directly impact consumer trust and business success. 84% of consumers care about data privacy and 48% have already switched companies or providers over data privacy concerns (Cisco 2023 Consumer Privacy Survey Report)
Global Retail Considerations
In the global e-commerce arena, compliance with international data transfer regulations has become increasingly crucial. Retailers must navigate complex laws like the EU's General Data Protection Regulation (GDPR) when transferring data across borders.
To address these challenges, retailers are investing in data transfer mechanisms such as Standard Contractual Clauses (SCCs) and Binding Corporate Rules (BCRs). Additionally, data localization strategies— storing data within specific jurisdictions— are being implemented to mitigate legal risks and maintain consumer trust. For retailers, evolving privacy regulations emphasize the need for stringent data protection. New state laws in Oregon and Texas, along with COPPA revisions and California's updates, mandate robust consent protocols, transparency, and effective consumer data management.
In Ad Tech, compliance is crucial as personalized ads rely heavily on data. Despite earlier plans, Google has reconsidered the removal of third-party cookies, continuing the debate on privacy and personalized advertising, making it even more critical for retailers to align with privacy laws when using third-party data.
Regulatory scrutiny around geolocation data, highlighted by the FTC’s settlement with X-Mode Social, and rising pixel-related litigation underscore the importance of clear consent and safeguards. The IAB’s MSPA certification offers a way for retailers to ensure compliance. Adopting these practices not only prevents penalties but also builds consumer trust.
To align with these privacy expectations, retailers should implement the following strategies:
1. Customer-Centric Data Management:
Streamlined UX- Develop a seamless user experience that integrates opt-in/opt-out options, data access, and permissions management in one place.
Customer Data Platforms (CDPs)- Upgrade to CDPs to aggregate information holistically and monitor ongoing data storage and access.
2. Integrating Privacy into Design:
Privacy-by-Design- Incorporate privacy considerations from the outset to significantly enhance security and compliance. Utilize AI to ensure applications meet regulatory standards.
Data-Discovery AI Tools- Employ tools that provide a comprehensive view of collected data and streamline handling of Data Subject Access Requests (DSARs).
Evergreen Data Maps- Maintain updated data maps from various sources to identify and manage risks and enhance security features.
Keeping pace with the evolving data privacy environment is a challenge, but a thorough risk assessment of existing and upcoming laws, along with necessary technical updates, will help retailers stay competitive. By ensuring robust privacy practices, retailers can foster long-term customer relationships and trust, and secure future growth.
About Us
Meru Data designs, implements, and maintains data strategy across several industries, based on their specific requirements. Our combination of best-inclass data mapping and automated reporting technology, along with decades of expertise around best practices in AdTech, cookies, training, data management, AI governance, and law gives Meru Data the unique advantage of being able to help retail organizations secure, manage, and monetize their data while preserving customer trust and regulatory compliance.
