Top 5 ways data privacy is shaping ecommerce

Data privacy has moved beyond being a trend to watch or even the “new” normal. Gartner now predicts that by the end of 2024, 75% of the world’s population will have their data and privacy protected by modern data privacy regulations. Only a year prior the number was 65%.

In 2023 alone, the United States will see five new data privacy laws come into effect, and multiple global data protection authorities, including France’s National Commission on Informatics and Liberty (CNIL) have announced that compliance enforcement is ramping up across platforms.

Ecommerce has only grown more ubiquitous in the last several years and it is projected to reach US$4.11 trillion in 2023. Despite bricks and mortar shopping options opening back up, ecommerce growth is expected to remain strong. Data privacy is necessary for ecommerce as much as for any other kind of website or app, and like everything else in the industry, it continues to evolve rapidly. Companies need to know where to invest, what data and marketing strategies to embrace, and how their relationships with their customers need to grow and change.

The good news is that data privacy compliance can bring not only peace of mind with regulatory compliance, but also build trust, increase long-term customer engagement, and unlock revenue growth.

Cyberattacks make big headlines, and it’s no surprise that ecommerce is a major target. A 2020 Trustwave study identified the ecommerce industry as the second most targeted by cyberattacks that year, and it has continued. A recent cyberattack on books, music, and home goods retailer Indigo in Canada was revealed to be a ransomware attack, and employee data was confirmed to be affected. The company’s website and ecommerce business were offline for nearly a week, and it’s still unclear to customers if their data was also affected.

Needless to say, such incidents only increase consumer concerns about the security and privacy of their activities and data online, especially when shopping. Expectations are on governments to legislate data privacy and protection requirements, and on businesses to take action to secure their websites, apps, and ecommerce operations.

Already back in 2018 Accenture found that 48% of consumers had left a company’s website and purchased an item elsewhere because of a poor experience. By 2022, PwC found that 71% of consumers won’t buy from a company they don’t trust, and 73% wouldn’t recommend the business to others. Failing to build and maintain consumer trust through respect for privacy and adequate security is a huge hit to brand reputation and the bottom line.

Combined with the financial risks of regulatory violations, which have reached hundreds of millions of dollars in some cases, and potential loss of data for advertising and marketing operations, data privacy will and should continue to be top of mind for ecommerce businesses of all sizes around the world.

Another major change in the ecommerce industry is the type and source of much of the data that companies rely on. For a long time, third-party data was the standard, and quantity tended to trump quality. That has been changing, however, in good part due to increased data privacy regulation.

Companies obtain third-party data indirectly, so not through their own channels. Sources include advertisers, aggregators, and others, and it can include data types like demographic information, buying signals, data from third-party tracking technologies, and more. It is not specific to interactions with one organization, and typically it needs to be aggregated with other first- and third-party data to be valuable. Sometimes multiple data sets are combined, and it’s more often used for larger-scale operations like modeling or lead generation. It’s harder, if even always possible, to consistently show proof of consent for third-party data.

As a result, the industry is shifting toward first-party or zero-party data. This takes care of privacy compliance issues, provides companies with greater control over how data is acquired, used, and shared with third parties like vendors, and results in much higher data quality. Zero-party data, for example, comes directly from customers and relates to their expressed interests and preferences. How it is obtained covers the requirements for valid consent under regulations like the European Union’s General Data Protection Regulation (GDPR).

First-party data provides more of the consumer data that companies rely on. This is data that companies collect from customers’ and visitors’ web activities via their own channels, like with browser cookies and other tracking technologies. These activities include ecommerce browsing, shopping and any other forms of site or app interaction. The resulting data can include IP addresses, navigation patterns, shopping preferences, time spent on page or on site, and much more.

Personalization is key to this data strategy shift as well. 70% of consumers now expect personalized experiences to encourage brand loyalty, and are frustrated if they don’t get them. Zero-party data, particularly, is all about personal preference, since it comes right from the consumer. When implementing best practices, this data is centralized in a Preference Management Platform (PMP). This enables collection, storage, and activation of data to be harmonized across tools and systems, maximizing its value. When combined with consent management, use of this data is done in accordance with the customer’s expressed consent preferences.

Consumers have increasing awareness and concerns about data privacy, but at the same time they want more personalized experiences. Companies need to thread this needle by meeting ever higher expectations, building and retaining trust, and delivering great, personalized experiences. This not only helps increase engagement and customer retention, it encourages recommendation as well. But now and in the future, preference and consent must go hand in hand, giving ecommerce customers control, freedom of choice, and the personalized experiences they want.

Back in 2020, McKinsey found that 76% of consumers changed stores, brands, or channels as brand loyalty weakened, though pandemic-driven ecommerce spending increased. Ecommerce businesses can’t expect or rely on brand loyalty. However, personalization, especially when supported by data, can be a powerful tool to strengthen brand loyalty and connection and build the customer base. But at that point, despite the already recognized value of personalization, and despite it having been identified as a top priority by nearly two-thirds of businesses surveyed (64%), only 15% of retailers had implemented it across all channels.

Fast forward to 2023, and 85% of businesses are using personalization. Which only makes sense, as the worldwide market value is predicted to hit US $943 million by the end of this year. But are companies doing preference management little-by-little and bumping into gaps and siloes, or are they fully integrating their operations? How well are ecommerce businesses performing centralization, targeting, and segmentation? What is the quality of their data? Do they have an auditable consent trail for that data usage?

Obviously ecommerce businesses want to attract new customers, retain their existing customers, and encourage higher spend. With the specter of economic uncertainty, consumer spending is starting to decline, so the visitor to customer conversion is more critical than ever. Companies need to provide prospects and returning customers with the best possible experience, every time. Preference management is a critical tool for customer retention and increased spending.

Record specific communications preferences to contact visitors and customers when they want to hear from you. Provide them with customized offers for the things that interest them, when they’re looking to buy. Make specialized offers at critical points of the buyer’s journey to obtain more zero-party data and prevent abandoned purchases. Demonstrate respect for privacy and trustworthiness with online experiences that reflect their expressed consent choices for data use.

These activities build seamless customer experience, help increase conversion rate, and continue to optimize it with ongoing data analysis. There is no greater strategy for optimizing conversion rate than developing a deep understanding of your customers. Use that understanding to give them what they want and need. The best way to develop a deep understanding of customers is to centralize acquired data from all channels to get the fullest picture. Ecommerce companies deal with staggering amounts of data, so the right tools and systems are increasingly important.

With a preference center managing data, when and how it’s made available to other systems is controlled. More in-depth analysis of data can happen regularly, which enables better and longer-term strategy and planning, also making it easier to control costs. Consent management integration ensures it’s all done compliantly with regulations and customers’ preferences, protecting customers and the company and building trust.

A 2022 report from DataGrail revealed that three out of four consumers will abandon their favorite retailer if they found out their personal data wasn’t safe with them. Also in the report, the consumer groups that feel the most strongly about buying from a brand they trust are also the groups with the most purchasing power.

Companies that don’t prioritize security and privacy are just leaving money on the table as well as risking fines. While 8 out of 10 Americans agree that there should be a federal data protection law, for the time being much of the responsibility for navigating data privacy remains with retailers.

Fortunately, data privacy is increasingly a competitive advantage. Transparency with consumers is a winning marketing strategy, especially combined with personalization. Many consumers are amenable to sharing their personal information: if they trust that it will be stored and used securely, if it’s used for the purposes to which they have consented, and if it’s used to provide them with the benefits they want.

The ecommerce industry is in an ideal position to deliver on all of these things, and when a business proves itself trustworthy, customers are more likely to consent to provide further data and do more shopping in the future. It’s a winning formula all around.

Join us to learn how preference management and consent management together can futureproof your marketing strategy, increase customer trust and boost revenue.