Impact of Data Privacy Laws on Retail and eCommerce Operations

Are you a retail and eCommerce business suddenly witnessing a drop in conversion rates, ad efficiency, customer trust, and your marketing ROI? A not-so-obvious, but important factor that needs your attention–the ever-changing data privacy regulations!

Data privacy norms are becoming more stringent, curbing how much data you collect, how and how long you store it, and how it’s used and shared. This will impact the effectiveness of your marketing efforts.

Additionally, you have to constantly keep yourself updated regarding regulatory changes to protect your company from hefty fines, lawsuits, and reputational damage. For example, India’s passed but yet-to-be-implemented Digital Personal Data Protection (DPDP) Act imposes a fine of up to INR 250 crores on companies for data privacy violations.

If this sounds familiar, keep reading to get a deeper understanding of data privacy laws and how they will impact retail and eCommerce businesses, and their omnichannel marketing strategies.

What is Omnichannel Retail?

Understanding Global and Regional Data Privacy Regulations

Each country has different data privacy laws and regulations guiding businesses operating in that region–the EU’s General Data Protection Regulations (GDPR), the USA’s California Consumer Privacy Act (CCPA), and India’s DPDP Act.

These regulations direct companies to collect, store, process, and use consumer data. Retail and eCommerce companies, especially international businesses with omnichannel marketing, should relook into their data privacy policies. Companies operating in multiple regions should adhere to the regulations of all the respective countries to stay compliant.

Here’s a comprehensive view of global regulations and their requirements.

In addition to the DPDP Act, there are other laws that regulate data privacy in India, like Information Technology (IT) Act 2000, IT (Reasonable Security Practices and Procedures) Act 2011, and Consumer Protection Act 2019.  

The principles behind these regulations are:

• Clear and informed consent before data collection
• Limiting the purpose for which data is used
• Minimizing the amount of data collected and stored
• Transparency in how data is collected, stored, used, and shared
• Companies are held responsible for data privacy
• Consumer rights to data access, corrections, and deletions
• Lawful data processing practices
• Addressing consumer grievances  

These laws put pressure on global retail and eCommerce firms to implement stricter data privacy policies, increasing their operational costs. Companies must employ local legal teams and technological solutions to help them stay compliant, avoiding legal and financial repercussions.

The Shift Toward Customer Data Transparency 

A few decades ago, websites and applications were the only sources of customer data. But today, with a surge of smart and connected devices, information about customers’ whereabouts, their preferences, and online behavior are readily available to companies.

Based on research data, around 67% of Indian consumers are aware of data privacy laws which is the highest worldwide. This means that data privacy and transparency is a deal-breaker.

Companies that choose transparency in their data collection and management policies gain customer trust and loyalty. They are choosing long-term and sustainable growth instead of limited, short-term growth.

Companies are mandated to get explicit customer consent, disclose how, why, and for how long they store their data, easy opt-out options, and ask for data deletion.

For example, companies cannot automatically subscribe buyers for their marketing emails. They should clearly ask if they would like to receive exclusive offers and personalized recommendations via email, and get their consent.

Compliance Challenges for Retail and eCommerce Brands

In retail and eCommerce businesses, compliance usually takes a back seat compared to improving the user experience, improving sales, having an SEO-optimized site, etc. But non-compliance is a costly affair–financially and otherwise.

According to IBM, the average cost of non-compliance is $4.88 million, whereas the cost of compliance is $2.22 million less. Making sure that you tick every checkbox in the compliance checklist is not just necessary but will also offer a competitive advantage.

Here are some of the key compliance challenges that retail and eCommerce companies should look into:

1. Data Governance Issues

Retail and eCommerce companies collect sensitive customer data like personal details, payment details, and purchase history. These companies should have a solid framework that advises them how they must collect, store, use, access, and share customer data. They should implement strategies like role-based data access authorizations, encrypting sensitive data, etc.

Ginesys One Omnichannel Software Helps Maintain a Single View of the Customer

2. Third-Party Data Sharing Risks

Businesses depend on various third-party service providers, like payment processors, logistics partners, and marketing platforms. Before partnering with any vendor, you must check their compliance policies and sign a strict Data Processing Agreement (DPA) with them. Regularly auditing external vendors for compliance is required to avoid any non-compliance issues.

3. Balancing Compliance and Omnichannel Customer Experience

Explicit customer consent is mandated by almost all data privacy regulations. But if the consent mechanisms are complex, it might lead to difficulties for the consumers at the checkout. Constantly popping consent acknowledgement forms frustrate customers and reduce conversion rates.

Brands must invest in technologies to automate compliance, monitor data flows, and adhere to local data privacy regulations.

The Role of Data Security in Privacy Compliance

The responsibility of data security lies with the company collecting them, and hence, implementing robust data security measures is significant for compliance. Here are some key measures that retail and eCommerce companies can adopt:

Encryption at Rest and Transit
Businesses collect Personally Identifiable Information (PII), like name, address, phone numbers, payment details, and transaction history. Companies should encrypt such information when it’s being transferred and stored to avoid breaches.

Multi-Factor Authorization and Role-Based Access Controls
Different teams handle customer data–marketing, finance, customer support, and logistics. Each department needs access only to a part of the information to serve the customers. So, role-based authentication can prevent unauthorized internal access.

Data Minimization
Collect and store only information that’s absolutely necessary. Implement automated data retention and deletion policies to reduce potential security risks.

Security and Compliance Audits
Regularly auditing your systems can help you identify snags before the hackers do. Also, implement real time system tracking to monitor and flag unusual activity.

Data Breach Response Plan
No system is 100% secure, so a fast response plan helps minimize the damage. Data Protection laws mandate notifying customers and regulatory authorities immediately when there is an attack. Also, training employees on security best practices is critical to contain the damage.

The Growing Importance of First-Party Data

With the growing restrictions on customer data collection and online behavior tracking, how can you maximize your marketing ROI? It is high time companies stop depending on collecting customer data repositories from third-party sources like advertisers, aggregators, tracking tools, etc. 

Now, third-party data needs explicit individual consent which is difficult to acquire from these sources. Instead, companies should shift to first-party data that is collected directly from the customers through their own sources.

First-Party Data Sources:

• Existing customers or prospects performing some action on your website or apps (For example, downloading an ebook).
• Personal information collected for loyalty programs.
• Social media followers (likes, comments, shares).
• Prospects subscribing to your email newsletters.
• Prospects clicking the CTAs on your ads.
• People answering your customer surveys.

Companies can use data analytics tools built into their websites, email marketing platforms, CRMs, social media platforms, etc. First-party data is far higher in quality than third-party data. They are your readers, followers, visitors, prospects, or current customers. This creates a win-win situation–companies get customer data while customer’s choices are being respected and offered personalized promotions. In addition to maintaining compliance, it also improves trust among consumers.  

Impact on Digital Marketing and Personalization

Traditional marketers relied mostly on behavioral data from users’ online browsing patterns and third-party cookies to target them with personalised ads. But with data privacy laws becoming sticker, they have to formulate alternative marketing and personalization strategies.

1. Transparency is non-negotiable

Companies now have to get the consent of the consumers before collecting their data and inform them about how this data will be used and shared. With consumers becoming increasingly aware and concerned about data privacy, there are high chances that they might not opt-in.

This translates into reduced customer data, making it difficult for companies to personalize their marketing efforts. Also, they have to invest in consent management platforms, like OneTrust, Usercentrics, Cookiebot, etc.  

2. Contextual Marketing

Instead of using behavioral data to target marketing efforts, companies should implement contextual advertising–placing ads based on the context of the content. This helps advertisers target their ads based on the content their target audience is consuming rather than relying on their personal data.

3. Invest in a Robust Security Infrastructure

Companies have to make sure that the data they collect are rigorously safeguarded from breaches, theft, and unauthorized access. This makes sure that you align with compliance requirements and improves customer trust.

4. Privacy-Centric Data Policy

Companies have to revisit their entire data policy to make it more privacy-centric. They should also be cautious about where the data is stored, as some countries restrict the movement of their data outside their jurisdiction.

Companies that put data privacy and compliance first will not only escape hefty fines and legal actions but also forge long-term trust-based customer relationships.

Adapting to an Evolving Regulatory Environment

Retailers and eCommerce companies need to stay updated about changing data privacy laws in India and other markets where they are operating. Companies should implement proactive measures to avoid legal action and improve customer trust.

Here are some key trends shaping how retail and eCommerce companies can manage compliance.  

• AI-Driven Compliance and Automation: With ever-changing regulations, manual compliance management is no longer viable. Automated risk assessments, real time monitoring, and automated data deletions for regulatory mandates are some solutions to reduce compliance risks.
• Ethical Data Handling is a Strategic Imperative: Modern, educated consumers are more privacy-conscious than ever, and companies need to up their transparency game to appeal to this audience.
• Prioritize customers: Being transparent, explicitly asking for consent, and giving full control of their personal data put customers and their privacy first. This helps companies establish a high level of trust and retain their omnichannel customers for a longer duration.

How Ginesys Empowers Retailers in Privacy-First Era

Governments across the globe are increasingly stressing the need for stricter implementation of data privacy regulations. With stricter norms and increasing costs of non-compliance, it’s inevitable for retail and eCommerce brands to balance compliance and user experience.  

Ginesys offers an integrated ERP, POS and e-commerce OMS system that follows a privacy-first approach to help businesses manage customer data repositories securely and transparently. The built-in analytical tools help segment and target customers without violating customer privacy.

Ginesys offers:

• Data encryption and secured data storage: Robust, in-built security measures that keeps your customer data hack-proof.
• Role-based access control to sensitive data: Enables role-based access controls and multifactor authentication to secure sensitive information. (coming soon)
• Seamless omnichannel integration: Ginesys One integrates seamlessly with major ERP and other retail systems for smooth order processing (Online and offline).
• Personalized marketing based on anonymized data: Offers a powerful promotion engine that analyzes anonymized data for personalized marketing.
• AI-powered compliance management: Automates regulatory adherence and protects against non-compliance risks. (coming soon)
• Audit logs for tracking customer consent: Provides transparency with proof of consent for customer data usage. (coming soon)

With these privacy-first policies, Ginesys helps retailers and eCommerce businesses balance data privacy and personalized marketing and stay compliant.

Protect Customer Data and Grow Your Brand With Ginesys!

Final Thoughts: Turn Compliance into a Competitive Advantage

Data privacy is no longer just a legal requirement–it’s an opportunity to build customer trust. Retail and eCommerce companies should formulate customer-centric policies, prioritize data privacy, and invest in technological solutions to make the compliance process easier and uneventful.

Future-proof your retail and eCommerce businesses with technology that balances compliance with omnichannel customer experience and profitability.