With Consumers Wary of Sharing Data, How Can Retailers Connect?

First-party data is increasingly necessary for retailers to offer customers the kinds of personalized experiences they expect. Seventy-one percent of consumers say they expect personalized interactions with companies, according to McKinsey, but consumers are also increasingly wary of sharing their personal data with companies. One recent consumer survey found that only 10 percent fully trust organizations that manage their identity data.

As more consumers opt into stronger data privacy settings in their browsers, third-party cookies are becoming less available for delivering personalized experiences. To get the data they need, retailers have to cultivate enough trust around data privacy to encourage customers to share their data. That starts with understanding what consumers are worried about and the current data privacy compliance landscape that companies need to navigate. This foundation can inform strategies for building trust through clear communication and stringent data management practices.

Why Are Consumers Worried About Their Data?

Lack of transparency about how organizations use their personal data is a major pain point for consumers. A Pew Research Center survey of more than 5,000 U.S. adults conducted in May 2023 found that 81 percent are concerned about how companies use their data, and 67 percent don’t understand what companies do with the personal information they collect.

That lack of trust is costly for businesses. Besides not gathering the first-party data they need for better marketing, businesses can lose sales because of data privacy concerns. In ClearSale’s most recent survey of consumer attitudes on e-commerce, customer experience, and fraud, 11 percent said they had abandoned at least one online purchase in the past 12 months  because they didn't trust the site with their information.

The rapid emergence of artificial intelligence is adding to consumers’ worries about how their personal data might be used and misused. The Pew privacy survey found that “among those who have heard about AI, 70 percent have little to no trust in companies to make responsible decisions about how they use it in their products.”

A series of high-profile data privacy judgements against companies including Sephora, Google, and DoorDash may be adding to consumers’ reluctance to share data. Those rulings also illustrate the patchwork of increasingly complex data privacy regulations that many organizations have to comply with, depending on where they do business.

The decisions against the three companies mentioned above all took place in California, which was one of the earliest states to implement a digital data privacy law designed to protect consumers. However, Colorado, Connecticut, Utah, and Virginia have also enacted data regulations, and other states are likely to follow. Meanwhile, retailers with operations or customers within the European Union must also comply with GDPR or risk heavy financial penalties.

Strategies for Building Trust

If a lack of transparency is the main reason consumers worry about sharing data with businesses, then clarity is the solution. Retailers can start by ensuring that they’re compliant with all applicable privacy regulations and communicating that compliance on their website.

Shorter, easier-to-understand summaries of privacy policies can also help establish trust with customers. The Pew survey found that 61 percent think today’s long privacy policies, written in dense legalistic language, are “ineffective at explaining how companies use people’s data.” No one wants to read a contract to buy a pair of shoes or order dinner, but they might appreciate a concise statement about how their data will be used. The same principle applies to AI. Consider creating a short, easy-to-understand statement that explains how (or whether) a company uses AI in connection with customer data.

Retailers can also make it easier for customers to contact them with questions about their data or the validity of a message or site purporting to be from the brand. This can help build trust through conversations and by helping to identify brand impersonators running phishing scams to steal customer data.

Another simple way to establish trust is to display relevant security certificates on site. In the consumer attitudes survey, 73 percent of participants said that they feel more comfortable sharing their personal data with online retailers that display this kind of certificate.

Data Security Practices

Having a data security solution is an important part of building customer trust, but there are other best practices retailers should follow to reduce the risk of a data breach or leak. These include the following:

• Manage data access and privileges. Not every employee or vendor needs access to every database, and they may not need access to the entirety of even one database. Give access only to the employees who need that data to do their jobs and give them access only to the data they need.
• Only save data as long as necessary. Keeping data forever is expensive, and it also increases the odds that it will be leaked or stolen. Set up a schedule for reviewing and destroying customer data that’s no longer needed.
• Report suspected breaches within required time frames. Reporting is a regulatory compliance issue, but delays in reporting can also quickly become a PR and brand reputation issue. Act quickly when customer data is on the line.
• Keep device, website and network software current and patched. Many data breaches start with intrusions through vulnerabilities in software. Updating operating systems, apps, and site code can reduce the risk of successful attacks.
• Watch out for brand impersonation. Fake social media accounts, email and text messages, and websites are a growing problem for retailers and brands. These imposters are phishing for login credentials and payment data they can use to commit fraud — and customers will likely blame the brand if they get scammed.
• Respond quickly to customer inquiries. Be ready to answer questions about how customer data is used, how and whether AI is applied to customer data, and whether a site or message from the brand is legitimate. Ongoing communication with customers is a powerful way to gather insights into their concerns and to cultivate trust.

When your customers see that your business is actively working to protect their data, and when you explain clearly how you use that data, they’re more likely to do business with you and to share their data so you can personalize their experiences. As with any relationship, your customers will choose to share more information with your business if they understand the benefits to themselves and if you demonstrate trustworthiness with the data they share.

Rick Sunzeri serves as the client solutions director at ClearSale, a global pioneer and proven leader in ecommerce fraud protection solutions, chargeback protection guarantee for ecommerce merchants.