How Data Privacy Will Reshape the Future of E-Commerce

Digital disruption is built into e-commerce’s business model. However, amid mounting scrutiny of big data, which has fueled the industry’s rapid growth, are the disruptors about to be disrupted themselves?

With the tech industry battered by a series of privacy-related scandals — from Cambridge Analytica to the high-profile data breaches in recent months, such as the one impacting thousands of British Airways customers — stricter data security and privacy standards will be critical in shaping e-commerce’s evolution over the coming years, particularly around issues like customer insights and personalization.

Here are three ways the privacy debate is set to impact the industry’s future.

Personalization is Here to Stay, But Not ‘as is’

While measures like the European Union’s General Data Protection Regulation (GDPR) and the California Consumer Privacy Act (CCPA) could make personalization more challenging for e-commerce companies, the facts tell a more complicated story.

These regulations make it easier for consumers to opt out of having their data collected, however, there’s abundant evidence that most consumers actually like the personalized service that data collection makes possible. An Accenture survey found that 91 percent of consumers are more likely to shop with brands that provide relevant, targeted communications. Furthermore, Deloitte finds that 79 percent are willing to share their data with companies, provided they get a clear benefit.

The takeaway for successful personalization in the long term? Make it easy for consumers to understand what type of information they're sharing and what benefit they can expect. If that's done correctly, most will gladly agree.

Better Monitoring of External Services

The e-commerce market is under constant development as online retailers compete to provide the best seamless digital experience. To accomplish this, e-commerce sites are relying on a variety of third-party vendors to provide certain key functionalities, such as checkout, payment processing, reviews and more. While third-party vendors help websites to expand their capabilities, they also pose a significant threat to consumer privacy.

This ecosystem poses several challenges for online retailers, including the lack of visibility and control into which external services are running on the website and what kind of customer data they're collecting. Third-party service behavior is constantly changing, and most third-party vendors bring in a fourth party, which has no contractual agreement or visibility into the native brand. These fourth-party services have the same level of data access, but operate without the oversight or even the knowledge of the retailer that they're operating, collecting and transferring customer data on their sites, posing a substantial risk to consumer privacy.

This lack of visibility and understanding around these blind spots is the cause of many high-profile data breaches. While most sites have privacy measures in place, sensitive customer data is still being collected by outside parties, putting the native site at risk of a major data breach. With 63 percent of data breaches linked directly or indirectly to third-party access, retailers will have to find a balance between creating seamless experiences and consumers’ privacy.

Rethinking Voice Search

Voice search may not be the next big thing after all. The market is saturated with voice assistants, but they’ve had far less impact on e-commerce than predicted.

Among respondents to a recent PwC survey, 38 percent said they wouldn’t purchase a smart assistant due to fear that the devices would eavesdrop on them, while 28 percent worried the devices lacked sufficient privacy protections.

Even among those who own smart assistants, few people use them for shopping. The Information reported that only 2 percent of owners of Alexa-equipped devices made a voice-driven purchase in 2018, and 90 percent said they wouldn’t do so again.

As e-commerce retailers plan for a future in which data privacy remains at the forefront, they’ll need to rethink old assumptions and adapt to a dynamic landscape where treasured tactics like personalization and segmentation will continue to play a big — but evolving — role. Innovation and adapting to change has always been at the heart of e-commerce — a track record that will see the industry through the challenges ahead.

Chemi Katz is the CEO and co-founder of Namogoo, a customer journey hijacking prevention platform that wins back stolen online revenue by blocking unauthorized ads that are diverting your customers.