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Ecommerce privacy compliance and effects of data privacy

The percentage of purchases made online continues to grow, as does the percentage of countries protected by data privacy laws. Learn how data privacy is shaping ecommerce and the best ways to gain a competitive advantage for both sales and user experience.
by Usercentrics
Mar 28, 2024
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Introduction

Data privacy is a fundamental part of modern business. In 2024, 75 percent of the world’s population are expected to be protected by modern data privacy regulations.

 

The United States saw five new data privacy laws in 2023 alone, while global data protection authorities like France’s National Commission on Informatics and Liberty (CNIL) ramped up compliance enforcement.

 

Data privacy is particularly important for ecommerce businesses. Global online retail sales are projected to grow 39% by 2027, increasing regulatory scrutiny of how companies protect their customers’ data.

 

The good news is that ecommerce data privacy compliance brings peace of mind, increases long-term customer engagement and unlocks revenue growth

 

In this article, we share how data privacy is shaping ecommerce and the future of data collection, and what your privacy policy should include to stay compliant.

What is ecommerce compliance?

Ecommerce compliance covers the various legal and regulatory requirements that online businesses must follow. This spans from consumer data protection to consumer rights and financial transactions.

 

These requirements protect consumers and ensure ecommerce companies do business ethically, securely, and in line with local and international laws.

 

This can include adhering to data privacy standards, such as the GDPR in the European Union, ensuring secure payment processing, and displaying contact information and return policies clearly on the website.

 

Ecommerce compliance is crucial to build customer trust, avoid legal penalties and grow a reputable brand.

5 ways data privacy is shaping ecommerce

1. Increased focus and pressures for ecommerce privacy and security

Privacy security

Rampant cybercrime has increased consumer concerns about the security and privacy of their activities and data online, especially when shopping. As such, they expect businesses to ensure the security of their websites, apps and ecommerce operations.

PMP Stats orange

A 2022 PwC report reveals some key insights:

  • 71% of consumers won’t buy from a company they don’t trust.
  • 73% of customers won’t recommend an ecommerce site to their friends if they feel its security is lacking.
  • Only 30% of consumers say they have a high level of trust in the online companies they do business with.

This shows that consumers are increasingly sensitive to the security, data collection and privacy measures taken by online businesses. This focus and pressure should be met with tangible action, which can then be communicated to site visitors to earn their trust.

2. Shift towards first-party data and away from third-party data

Shift towards first-party data

The ecommerce industry is seeing a major shift in the type and source of individual data that companies rely on, from third-party data to first-party or zero-party data.

 

Third-party data is gathered indirectly, from advertisers, aggregators and other sources. Third-party data often includes demographic information, buying signals and behavioral data from tracking tools.

 

Here are some of the key drawbacks of third-party data:

  • It’s not specific to interactions with one organization.
  • To be valuable, it typically needs to be aggregated with other first- and third-party data.
  • Sometimes multiple data sets are combined, which obscures their limitations.
  • It’s mainly applicable to larger-scale operations like modeling or lead generation.
  • It’s difficult to show proof of consent for third-party data.

As a result, the industry is shifting toward first-party or zero-party data. Zero-party data, for example, comes directly from customers who are intentionally sharing their personal information and relates to their expressed interests and preferences. This meets the requirements for valid consent under privacy laws like the GDPR.

 

First-party data, on the other hand, is collected by companies based on customer and visitor web activities on company channels — using 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.

 

To check which cookies and tracking technologies are collecting data, scan your website with our Data Privacy Audit tool.

Which cookies and tracking technologies are collecting data on your website?

Scan your website with our free data privacy audit tool and find out in seconds what cookies and third-party services access user data on your website.

3. The rise of ecommerce personalization

The rise of ecommerce personalization

Personalization is key to this data strategy shift as well. A reported 70% of consumers now expect personalized experiences and are frustrated if they don’t get them. Zero-party data, in particular, is all about personal preference, since it comes right from the consumer.

 

When implementing personalization best practices, centralize your data in a preference management platform (PMP). This enables you to collect, store and activate data harmoniously across tools and systems, and maximize its value. When combined with consent management, this data is then used according to the customer’s expressed consent preferences.

 

Companies need to thread the needle of meeting increasing ecommerce data privacy expectations, building and retaining trust, and delivering great, personalized experiences. Consent is the linchpin that makes this possible.

 

It ensures individual preferences are respected while giving customers control, freedom of choice and the personalized experiences they want.

4. Connecting and augmenting customer data across platforms

Connecting and augmenting customer data across platforms

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.

 

But at that point, only 15% of retailers had implemented it across all channels — despite the recognized value of personalization, which was identified as a top priority by nearly two-thirds of surveyed businesses (64%).

 

Fast forward to 2024, and 85% of businesses are using personalization. And the global market value for personalization software is predicted to hit $943 million by the end of this year.

 

Key to this personalization boom is increased access to personal information, which gives you the insights needed to deliver tailored shopping experiences. But this raises several important questions:

  • How do you navigate the challenges of ecommerce data privacy while managing customer preferences across various platforms?
  • Are you ensuring customer data privacy and allay privacy concerns?
  • Are you making use of AI tools responsibly to ensure privacy?
  • What measures are in place to guarantee compliance with privacy regulations?
  • Are you gaining customer consent, especially when data is shared or transferred between tools and systems?

5. The value of conversion rate optimization

The value of conversion rate optimization

Conversion rate optimization (CRO) is another crucial ecommerce practice that’s heavily influenced by changing attitudes to data privacy.

 

To give prospective and returning customers the best possible experience, ecommerce companies are using behavioral data to cater to their specific needs and preferences.

 

As such, preference management — and its various implications for gathering and using personal information — is critical for optimizing conversions, retaining customers and increasing spending. Here are CRO activities that are consistent with data privacy best practices:

  • Record specific communications preferences, so that you only contact visitors and customers when they want to hear from you.
  • Provide visitors with customized offers for products that interest them.
  • Make specialized offers at critical points of the buyer’s journey to obtain zero-party data and prevent abandoned purchases.
  • Provide an online experience that reflects customers’ consent choices for data use.

These activities demonstrate respect for privacy in ecommerce — while building a seamless customer experience and increasing conversion rates.

 

Using a preference manager for your data gives you more control over when and how that data is made available to other systems. In-depth analysis of data can also happen more regularly, leading to better and longer-term strategy and planning.

 

And with a consent management integration, you can rest assured that all preference management activities comply with relevant regulations.

Data privacy laws that affect online stores

Ecommerce companies must navigate a complex landscape of data privacy laws, depending on where their customers are from. These regional laws include:

Most of these laws provide consumers with the right to submit a data subject access request, to review all of the data you have on file for them.

Trust is the future of ecommerce

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

 

Companies that don’t prioritize security and consumer privacy in ecommerce are leaving money on the table — and risking fines.

 

While eight out of ten 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 becoming a competitive advantage. Transparency with consumers is a winning marketing strategy, especially when combined with personalization.

 

Many consumers are open to sharing their personal information — but only if they trust it’ll be stored securely, used only for the purposes they’ve consented to and 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.

Do you need an ecommerce privacy policy?

An ecommerce privacy policy isn’t just a formality — it’s a crucial part of any successful online business. Here are a few reasons you might need one:

  • Many regions require a privacy policy by law for any business that collects personal data.
  • A clear privacy policy shows transparency, builds a solid reputation and fosters trust with customers.
  • Many ecommerce platforms, like Shopify and Woocommerce, require a privacy policy to use their services.
  • A sound privacy policy safeguards against potential legal disputes related to customer data privacy.

What to include in an ecommerce privacy policy

While every business is unique, that’s rarely the case for their privacy policies. As legal documents, they need to cover all the bases to ensure users can provide informed consent. Here are essential elements to include in an ecommerce privacy policy:

  • What cookies and tracking technologies are in use, their purpose and how users can control them.
  • How analytics is used and what data is collected in log files.
  • How data is collected for advertising and how user information might be used to deliver targeted ads.
  • Which third-party services have access to user data and for what reasons.
  • How user data is used for marketing purposes and how users can opt out.
  • How user-generated content is handled and shared and the rights users have over their content.
  • How the privacy and consent of children in managed, including compliance with relevant laws like the Children’s Online Privacy Protection Act (COPPA).
  • A disclaimer about any external website links and the lack of control over their privacy practices.

Create an ecommerce privacy policy with a policy generator

Looking to create an ecommerce privacy policy? You could start from a template or draft one yourself, but this can be time-consuming and might not cover all legal requirements. For a more streamlined approach, consider using a policy generator.

 

Policy generators simplify the process while ensuring the policy is comprehensive and compliant with all relevant laws.

 

The Usercentrics policy generator creates a policy that’s tailored to your specific business needs, to support you as you navigate data privacy laws. The tool provides a customized privacy policy by asking you a series of questions about your business practices, ensuring that all relevant aspects are covered: cookies, analytics, third-party services, and more.

 

Find out more about our policy generator or speak to an expert to see how we can help you remain compliant.

Are your ecommerce platforms compliant with privacy regulations?

Connect with our team to find out what Usercentrics data privacy solutions can help.

FAQs

What should an ecommerce privacy policy include?

To achieve website privacy compliance, your privacy policy must include all the information required by relevant laws, and enable informed consent from your users. While this will differ based on the business and location, a privacy policy should include:

  1. all cookies and tracking technologies in use on the site, why they are in use and what the user’s options are regarding consenting to or rejecting their use
  2. how analytics are used and what data is collected
  3. how data collection takes place for advertising, how it’s used for targeted or personalized advertising and how users can opt out
  4. a list of any third parties (and/or categories of third parties) that may have access to data and for what purposes
  5. information on how user-generated content is managed
  6. Information about how children’s data and privacy rights are handled
  7. a disclaimer for the privacy policies of any external website links that may appear on an ecommerce site

How do I create a privacy policy for my webstore?

You can draft your own privacy policy — we strongly recommend getting support from a qualified legal professional — or make use of a policy generator. These tools can automate much of the work and also automate maintenance of the contents as business operations and regulations evolve. Usercentrics CMP integrates with the privacy policy to populate the cookies and other tracking services in use and the required information about them, and keep it up to day.

What are the privacy concerns for ecommerce sites?

Ecommerce sites need to ensure they collect and store data securely, as some of the information they hold is commonly classified as sensitive or personally identifying. They need to be careful how the data is used and shared throughout the company, and with third-party partners and their uses.

Ecommerce entities also need to be careful about offering incentives in exchange for personal data, e.g. a discount code at checkout in exchange for signing up for a newsletter. Incentives must be proportionate and appropriate to the offer and data exchanged. In addition to legal requirements, data security is a requirement for building customer trust, maintaining a good reputation and meeting rising consumer expectations.

Where ecommerce businesses need to manage customer preference data across multiple platforms, they need to ensure security and often explicit user consent. Depending on where their visitors or customers are located, they need to comply with various local and international data privacy laws, like the Digital Markets Act (DMA), EU–U.S. Data Privacy Framework, General Data Protection Regulation (GDPR), Lei Geral de Proteção de Dados (LGPD) and more.

What types of information do ecommerce sites need to protect?

Ecommerce sites need to protect numerous kinds of personal information, including, but not limited to:

  • name
  • age
  • email address
  • IP address
  • delivery address
  • credit card information
  • customer preferences
  • purchasing history
  • browsing habits
  • navigation patterns
  • time spent on page

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