Ecommerce privacy compliance and effects of data privacy

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.

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.

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.

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.

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.

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.

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?

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.

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

• Digital Markets Act (DMA): Targets large online platforms operating in the EU to ensure fair competition.
• General Data Protection Regulation (GDPR): The gold standard of data protection legislation, setting strict rules that affect any business with EU customers.
• California Consumer Privacy Act (CCPA): Gives Californians the right to know what personal data is collected and to request its deletion.
• Virginia Consumer Data Protection Act (VCDPA): Allows Virginians to opt out of data processing for targeted advertising and sales.
• Lei Geral de Proteção de Dados (LGPD): Brazil’s framework that regulates the use of personal data.
• Protection of Personal Information Act (POPIA): South Africa’s law that protects personal information by regulating how it can be processed.
• Federal Act on Data Protection (FADP): Switzerland’s data privacy law, which requires transparency and a lawful basis for processing personal data.
• The EU–U.S. Data Privacy Framework: This international framework covers the exchange of personal data between countries in the EU and the U.S., ensuring certain measures are assured.

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.

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.

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.

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.

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.