Retailers are steadily moving away from collecting Personally Identifiable Information (PII) such as names, email addresses, and phone numbers. Such a shift is driven by heightened privacy concerns and regulatory requirements, which have made it less practical for companies to rely on identifiable data. Instead, retailers now focus on collecting personal data that is less directly tied to an individual’s identity.
Personal data, unlike PII, includes “pseudonymized identifiers” such as mobile IDs, platform IDs, or cookie IDs.
These pseudonymized elements can still provide valuable insights into consumer behavior without directly linking back to a person’s identity. This transition is key as it helps mitigate privacy risks while enabling retailers to gather actionable intelligence.
Pseudonymized data offers a middle ground, allowing businesses to continue personalizing customer experiences without exposing sensitive personal details that are heavily regulated under most privacy laws.
Understanding privacy laws is now essential for every retailer
Privacy laws have evolved to prioritize personal data instead of focusing solely on PII. This shift requires retailers to understand the intricacies of data collection, storage, and usage far more deeply than before.
It’s no longer enough to avoid collecting names or emails; companies must be keenly aware of how all personal data is handled, particularly with the rise of technologies like tracking pixels, cookies, and mobile IDs.
Global regulations, such as the EU’s General Data Protection Regulation (GDPR) and the California Consumer Privacy Act (CCPA), now encompass a broader spectrum of data categories.
For instance, even anonymized data can become subject to regulation if it can be combined with other datasets to re-identify individuals. Retailers must regularly review their data practices to stay compliant and anticipate potential shifts in regulations as consumer privacy continues to gain traction as a societal priority.
What every retailer must know about service providers
Under current privacy laws, contracts with service providers, processors, or third-party companies must include explicit terms that clearly define what these third parties can and cannot do with the personal data they handle.
Legal obligations are non-negotiable, particularly in countries or regions governed by stringent data protection regulations like the GDPR or CCPA. Failure to include these terms can expose retailers to hefty fines and lawsuits.
Retailers must carefully scrutinize every aspect of their data-sharing agreements. These contracts need to account for pseudonymized identifiers, giving transparency regarding data usage, and impose clear limits on how data is processed and shared.
Companies also need to enforce comprehensive security measures to protect this data from breaches or unauthorized access. The stakes are high, violating data privacy laws can result in fines of up to 4% of annual global turnover under the GDPR, not to mention reputational damage.
Consumer trust and legal compliance, how to balance both
Retailers need to align their data practices not only with legal obligations but also with evolving consumer expectations. Even if a piece of data is not categorized as sensitive by law, consumers may perceive it as highly personal, especially in a market where data breaches and misuse have eroded trust.
For instance, location data may not be classified as sensitive under certain privacy laws, but a consumer might feel uncomfortable knowing their physical movements are being tracked and utilized for targeted advertising.
Retailers must go beyond legal compliance by considering the ethical use of personal data. Transparency about how data is used, stored, and shared will be key in fostering customer loyalty and trust.
Accessing personal and sensitive data for smarter marketing
The definition of personal data now extends beyond traditional identifiers to include pseudonymized and sensitive data. Sensitive personal data, such as a person’s location, ethnicity, or nationality, can be invaluable for precision in marketing campaigns but must be handled with care. Regulations often impose stricter rules on how this type of data is collected, processed, and stored.
Location data, for example, helps retailers to deliver hyper-localized advertisements and promotions, tailoring their offers based on a customer’s geographical area. Ethnicity and nationality can be used to target specific demographics more effectively, making sure ads resonate with the cultural or social preferences of different audience groups.
While data points offer high marketing value, their use demands rigorous consent processes, as well as transparent disclosure to customers on how their data will be used.
The three types of personal data every retailer must understand
Direct data
Direct data is information that retailers collect straight from the consumer, often during in-store or online transactions, surveys, or interactions. This type of data is highly valuable because it provides direct insights into consumer preferences and behavior, making it easier to tailor marketing efforts. It helps in creating personalized shopping experiences that resonate more deeply with customers, ultimately driving higher engagement and sales.
Supplied data
Supplied data, on the other hand, is acquired from third-party sources, often as part of audience segmentation or identity graphing services. Retailers purchase this data to enhance their ability to target specific consumer groups or behaviors.
However, this comes with its own set of challenges. Privacy laws require that supplied data be used only for the purposes for which it was acquired, and consumers may not always be aware of how their data is being repurposed. It can lead to legal issues and consumer trust concerns if the data is used in ways that were not initially disclosed.
Derived data
Derived data refers to insights generated from analyzing consumer behavior. Retailers use algorithms and machine learning to predict future behaviors based on past purchases, browsing habits, or interactions with marketing campaigns.
Although this type of data can yield highly personalized and effective marketing strategies, it is also subject to privacy laws, particularly around consent. As regulations evolve, retailers may face stricter requirements to inform customers about how their data is used to make these predictions.
Winning with privacy
Data clean rooms are an emerging solution that helps retailers to collaborate with partners, including CPG companies and advertisers, in a controlled environment. These spaces ensure that data is anonymized and analyzed in a secure manner, reducing the risks associated with sharing personal data across organizations.
For example, two companies can pool their data within a clean room to perform joint analysis, gaining insights without exposing the raw data itself.
While this method offers a more privacy-conscious way to work with consumer data, it’s not entirely foolproof. Clean rooms still require adherence to privacy laws, and retailers must ensure that the tools they use within these environments are fully compliant with all relevant regulations.
Data clean room myths busted
One of the misconceptions about data clean rooms is that they offer complete protection from privacy concerns. In reality, they are not a one-size-fits-all solution to data privacy challenges.
While clean rooms offer improved privacy protections by anonymizing data, they do not eliminate the need for legal compliance. Retailers must still make sure that all data processed within these environments complies with regulatory requirements and that the results of any joint analysis do not inadvertently re-identify individuals.
How to exceed customer expectations while staying privacy compliant
The relationship between retailers and their customers hinges on trust, especially in how data is collected, used, and protected. Consumers are becoming more aware of their rights and more sensitive to how their personal information is handled. Therefore, retailers must go beyond basic legal compliance and adopt transparent, ethical data practices.
This includes being upfront about data collection practices, securing explicit consent for sensitive data, and clearly explaining how that data will be used to improve their shopping experience.
Failing to align privacy practices with consumer expectations could lead to a loss of trust, resulting in a drop in brand loyalty and, potentially, legal consequences under growing data protection regulations.
Retail media and personal data are shaping the future of shopping
Retail media is becoming a driving force in how retailers engage with customers, and personal data plays a key role in this transformation. With personal and sensitive data, retailers can offer more personalized advertising, promotions, and shopping experiences. Such a shift is particularly important for targeting the right audiences with the right message, at the right time.
Personalized ads can be more effective because they resonate with the consumer’s needs and preferences, leading to higher conversion rates and better overall engagement. When using personal data responsibly, retailers can ensure their marketing efforts are both compliant with privacy laws and aligned with consumer expectations, positioning them for long-term success in an increasingly data-driven world.
