by George Alam, Technical Product Manager at eddress
In a tech-savvy digital world, data is produced on a daily basis:
- 333,2 billion emails are sent every day as of 2022
- Over 41,000,000 million messages are generated and sent every day on Whatsapp
- By 2023, Statista estimate there will be around 1.3 billion IoT subscriptions
- Etc.
The trend for data creation shows constant growth, which means that more and more sensitive customer data is being generated through each interaction with an e-commerce business. Whether customers reach out via Facebook messenger, let their smart printer automatically order cartridges, or purchase directly via your marketplace, they are constantly generating data. This raises increasing concerns about managing data security and privacy in online retail.
Customer data privacy and security concerns in the online retail space
No business can collect customer data without explicitly following data privacy best practices.
Data privacy overlooks the way online businesses in the retail space handle customer data:
- Collection
- Use and sharing
- Retention
- Disposal
Customer data collected by online retail
Which set of customer data falls under the business responsibility to maintain privacy and security? The first step in addressing privacy concerns is defining which data is collected and why. Therefore, every e-commerce is legally obliged to inform customers of the following:
- The type of data they collect and its category (such as sensitive personal information, for example)
- Who has access to the data (service providers, etc.)
- How data is handled (including how customers can get in touch for further information or queries about their data)
- The measures were taken toward meeting data privacy and security responsibilities (including system updates, security protocols, etc.)
The legal side of data privacy and security in e-commerce
Data privacy regulations affect e-commerce businesses worldwide and dictate the obligations in the retail sector. Privacy regulations protect customers’ confidentiality and privacy rights, ensuring the information shared with e-commerce companies is managed appropriately. Yet legislation can differ depending on the location of your customers:
- Some US states already have data privacy laws. CCPA, California Consumer Privacy Act, gives customers the right to know which data is collected, sold, or disclosed and to whom, and to access them. Customers can also refuse the sale of their data and request the deletion of their information. The Federal Trade Commission also protects customers against deceptive data privacy practices in the US.
- GDPR, General Data Protection Regulation, is the EU legislation that inspired the CCPA.
- National data protection legislation in the UK, Australia, Canada, Japan, Singapore, and Brazil
The consequences of mishandling customer data
When data privacy becomes a legal affair, e-commerce businesses are at risk of facing severe complications in the event of non-compliance with the law. Financial penalties can be expected for companies that fail to comply. However, penalties will differ depending on the level of data mishandling:
- Intentional or negligent data breach
- The category of personal data affected by the breach/mishandling
- Whether it has happened before
- The gravity and duration of the breach/mishandling
- The impact on the privacy rights of the customers
But there’s a lot more than a legal debate at the heart of the data security problem.
How customers are affected
For customers, having their personal data exposed by no fault of their own can be stressful and frustrating. Digital users all around the world are reluctant to share confidential data with a business. Therefore, when a business fails to protect customer data, whether the data are shared without their permission or whether a breach occurs, customers have to take drastic measures to protect themselves. Instead, they can be highly exposed to fraud through revealed:
- Payment details such as bank cards becoming non-encrypted
- Phone numbers and email addresses (which can make them a target for phishing and scams)
- Postal addresses, which can be used by fraudsters too
Additionally, exposed confidentiality can also affect their everyday life, such as the 2015 extramarital affairs website Ashley Madison data breach putting millions of married users at risk, for example.
How businesses are affected
The consequences of data breaches or customer data mishaps in the online retail world can be devastating.
- Loss of customer trust: Customers who have been affected are less likely to want to buy again from the same business.
- Financial compensation: Customers may demand financial compensation for the damage caused, which can drive smaller businesses to bankruptcy.
- Loss of brand reputation: According to research, 81% of consumers choose against buying from a brand that has experienced a data breach, even if they have not been affected by it.
How can the retail space preserve data privacy and security?
Businesses can and must take strategic steps to put data privacy and security first when it comes to handling their customer information. It can be tough to determine precisely where customer data can be exposed to security threats in your process. Besides, the online retail sector is appealing to hackers, who are attracted by the high volume of data available.
Security audits
Consequently, the initial step in protecting customer confidential data is a security audit, which can highlight potential weaknesses within your IT infrastructure. Running regular audits is essential to keep your security up-to-date and upgraded.
Data privacy regulation(s) compliance
GDPR and CCPA are some of the most frequently mentioned legislations. However, as mentioned above, data privacy law is complex and diverse. A common mistake for e-commerce businesses is to focus only on their local privacy obligations. You must comply with the regulations that are local to your customers. In other words, a US digital retailer targeting EU customers must comply with GDPR requirements.
Implement website security sine qua non
Search engines such as Google favor HTTPS sites for their security protocols, including data encryption for transactions and contact forms. This protects data from being publicly accessible.
Strengthen your security systems
Using the latest technology provides the best protection for private data. At eddress, we ensure our clients’ marketplaces benefit from the most secure integrations at all levels of customer interactions: hosting, notifications, payments, logistics, ERP, etc. Indeed, following the complex e-commerce journey involves multiple operations run via a variety of services and systems. You want individual systems to be secure but also every point of connection where data can be transferred between systems.
Implement strict data access
It is essential to monitor who has access to customer data. As tempting as it is to provide access to all employees and suppliers, this could backfire and affect data security. Therefore, it makes sense to limit sensitive data access to a small group of trusted and vetted individuals/services.
Confidentiality drives confidence in the digital retail space
Confidentiality is a priority for customers. To purchase in the online retail space, customers must share sensitive personal data, including banking information, email address, other contact details, etc. But they expect in exchange full respect and protection of their privacy. Yet, in the crowded digital space, data mishaps are an all too frequent occurrence, affecting trust and reputation.
Therefore, by prioritizing customer data privacy and security, e-commerce businesses can become trustworthy interlocutors for customers, investors, and partners:
- Gain customer trust: Customers worry about maintaining confidentiality in a constantly changing digital environment. Therefore, they favor businesses that value their personal data privacy and security.
- Build a positive brand image: Data breaches and mishandling events can irremediably damage brands.
- Differentiate your brand in a crowded market: There are between 12 and 24 million online stores in the world, making it tough for small brands to stand up for themselves. That’s where a strategy focusing on customer data confidentiality and security can help brands stand out from the crowd and gain customers.
- Become a trustworthy supplier or partner: Protecting customer privacy means a business is less at risk of experiencing a debilitating data crisis, which, in turn, becomes a sign of sustainable growth and stability for potential partners.
- Maximize investment opportunities: Investors seek reliable businesses, such as e-commerce ventures with a strong data security strategy.
In conclusion, in a digital environment that relies solely on customer data at every step, it is a legal and moral requirement for the online retail space to comply with data privacy and security obligations. The repercussions of data mishandling can be destructive for both the customers and the business. Aside from protecting their brands and their customer data, e-commerce ventures can benefit from strategic data security protocols to establish their reputation and path for growth.
If you wish to find out more about how eddress can help maintain your marketplace security, do not hesitate to reach out to our expert team.
