Collected customer data can help retailers better understand consumer wants, predict purchasing trends, and make decisions that benefit both businesses and buyers.
The caveat? Customers aren’t convinced. According to the Cisco 2022 Consumer Privacy Survey, 81 percent of respondents agree that the way a company treats personal data is indicative of how they view customers. And in many cases, it’s not a great view: According to KPMG, while 70 percent of businesses increased their collection of customers’ personal data, 68 percent of consumers are concerned about the level of data being collected by businesses, and 4 in 10 don’t trust companies to ethically use their data.
This puts retailers in a tough spot: Data drives personalization, which is now a top priority for consumers. Without the right approach to privacy, however, customers won’t trust brands, leading to less data and a greater likelihood of customer churn.
Why Is Consumer Digital Trust Eroding?
There’s no doubt that shoppers are looking more skeptically at the retailers they patronize. In some ways, that was probably inevitable, given the evolving ways that brands engage with consumers, says Wyatt Meek, global retail industry director for Cisco.
“Over the past decade, we’ve witnessed an explosion of new business models that derived value in some capacity through the harvesting of consumer information,” Meek explains. “The problem is that a majority of consumers didn’t realize just how much data was being collected and how they were being monetized. As these business models were exposed through the media, consumers’ concerns went up and digital trust went down.”
That’s a function of some retailers’ failure to be as transparent as consumers expect them to be with how they collect and use personal data, Meek says. He adds, though, that even in cases where companies have a reasonable privacy policy and outstanding internal controls over data, “this ultimately won’t matter if a hacker gets their hands on the data.”
In other words, to mitigate the growing distrust of consumers, retailers must address both privacy and cybersecurity: That is, they must be transparent and fair about the way they collect and use data, and must also deploy the necessary security controls and policies that reduce the risk of accidental or malicious exposure.
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How Retailers Can Bolster Customer Confidence
The first step in winning over consumers is creating a privacy policy that clearly describes a company’s relationship with consumer data and defines what level of control consumers retain over it.
What does this look like in practice? According to Meek, two components are critical to a solid privacy policy:
- Transparency: The policy must clearly communicate what information is being collected, how that information could be used, and why that information is necessary, Meek explains. “Our survey found that 39 percent of consumers say getting clear information on how their data is being used is the most important thing an organization can do to build trust with customers.”
- Value: “Consumers are more willing to trust companies with their data when they receive high value in return, such as personalized advice or no-charge services,” says Meek. “Value is subjective, though, which is why transparency is key to building back trust and letting consumers choose.”
Yet Meek notes that even the best privacy policy, while a vital step, isn’t enough by itself because few people will take the time to read it.
That’s where cybersecurity comes in. If retailers really want to regain consumer trust, they have to think beyond their privacy practices, Meek says: “All retailers should adopt a security framework, follow cybersecurity guidelines to improve data protection, and routinely test their defenses and responses.”
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The Security Solutions Retailers Need
Plenty of technology solutions exist to limit access to data: Endpoint security solutions are especially useful to retailers who equip store employees with handheld devices to do their jobs. And advanced network security, such as secure access service edge, combine disparate solutions to protect the wide area networks that retail chains commonly deploy.
At same time, the customer-facing nature of retail naturally puts consumer data at risk, so retailers would be wise to ensure they’re conducting regular security assessments by a qualified third party.
But because this takes place behind the scenes, it won’t budge consumer confidence if consumers don’t see what’s happening. For Meek, this means retailers must actively communicate why they are collecting and using consumer data, the value customers should expect to receive in return for their data being used, and the steps the company is taking to protect data, such as investing in the same level of security controls that government agencies use.
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