Consumer data privacy laws: What retailers need to know

In today's digital age, consumer data has become a valuable asset for retailers.

However, with great power comes great responsibility. The landscape of consumer data privacy laws is rapidly evolving, and retailers must stay informed to ensure compliance and maintain customer trust. Let’s explore the current state of data privacy regulations and their impact on brick-and-mortar stores, focusing on handling sensitive health and biometric data. We'll also delve into the challenges faced by retailers with both physical and online presence.

In recent years, there has been a significant shift in how governments and consumers view data privacy. Landmark regulations such as the European Union’s General Data Protection Regulation (GDPR) and the California Consumer Privacy Act (CCPA) have set new data protection and consumer rights standards. These laws and others emerging in the U.S. and abroad are reshaping how retailers collect, use and protect customer information.

Key aspects of these regulations include:

• Transparency in data collection and usage;
• Consumer rights to access, delete, and port their data;
• Strict consent requirements for data collection and processing; and
• Hefty fines for non-compliance

For retailers, this means a fundamental shift in how they approach customer data management,
regardless of whether they operate solely in brick-and-mortar locations or have an omnichannel
presence.

Impact on brick-and-mortar retailers

While much of the focus on data privacy has been on digital platforms, brick-and-mortar retailers are not exempt from these regulations. Physical stores collect various types of customer data, including:

• Point-of-sale (POS) transaction data;
• Loyalty program information;
• Video surveillance footage;
• Wi-Fi tracking data; and
• In-store sensors and beacons

Retailers must ensure that all data collection practices comply with applicable privacy laws.
Compliance includes:

• Providing clear notices about data collection;
• Obtaining the necessary consent; and
• Implementing robust data security measures.

Personalized shopping experiences have become a cornerstone of modern retail — consumers expect a heightened experience, and it has been proven that personalization drives sales. In-store data collection, such as tracking customer movement and preferences, helps retailers tailor offerings to individual preferences. Consumer data privacy laws require retailers to ensure that data collected in-store is relevant, necessary and obtained with explicit consent or depending on the jurisdiction, an opt-out.

Handling sensitive health and biometric data

The collection and use of sensitive data, such as health information and biometric data, is subject to even stricter regulations. Retailers that deal with such data – for example, pharmacies or stores using facial recognition technology – must be particularly careful. Key considerations for handling sensitive data include:

• Enhanced consent: Explicit, informed consent is typically required for collecting and processing sensitive data.
• Knowledge: Know what you collect; conduct regular inventories throughout your enterprise.
• Data minimization: Only collect what is absolutely necessary for your business purposes.
• Heightened security measures: Implement stronger encryption and access controls for sensitive data.
• Special training: Ensure staff handling sensitive data are well-trained in privacy and security protocols.
• Compliance with specific regulations: Retailers must comply with health data regulations like HIPAA in the United States.
• Biometric information privacy laws: Some jurisdictions have specific laws governing the collection and use of biometric data, such as the Illinois Biometric Information Privacy Act (BIPA), the Capture or Use of Biometric Identifier Act in Texas (CUBI), Washington's Biometric Privacy Law and more.

Bridging physical and digital

Many retailers today operate both physical stores and e-commerce platforms. The COVID-19 pandemic pushed many businesses into e-commerce to survive, and such early adoption propelled those businesses to broader sales and success.

This omnichannel approach presents unique challenges in data privacy and security management:

• Data integration: Ensuring consistent data protection across all channels while maintaining a seamless customer experience.
• Cross-channel consent management: Managing customer consents and preferences across both online and offline touchpoints.
• Unified data governance: Implementing cohesive data governance policies that apply to all aspects of the business.
• Security across platforms: Maintaining robust security measures for both in-store systems and online platforms.
• Consistent privacy policies: Ensuring privacy policies and practices are uniform and clearly communicated across all channels.

Best practices for retailers

To navigate this complex landscape, retailers should consider the following best practices:

1. Conduct regular privacy audits: Regularly assess your data collection and usage practices across all channels.
2. Implement privacy by design: Incorporate privacy considerations into every aspect of your business operations and technology development.
3. Invest in employee training: Ensure all staff members understand the importance of data privacy and their role in maintaining it.
4. Enhance data security measures: Implement robust security protocols, including encryption, access controls and regular security audits.
5. Develop clear privacy policies: Create comprehensive, easy-to-understand privacy policies and make them readily accessible to customers.
6. Stay informed on regulatory changes: Keep abreast of new and evolving privacy laws that may affect your business.
7. Appoint a data protection officer: Consider designating a specific individual or team responsible for overseeing data privacy compliance.
8. Be transparent with customers: Clearly communicate your data practices and the steps you're taking to protect customer information. Have online and in-store privacy notices.

The importance of data security management

With online and mobile sales becoming increasingly ubiquitous, robust data security management is crucial. E-commerce components introduce additional vulnerabilities that retailers must address:

• Payment Card Industry Data Security Standard (PCI DSS) Compliance: Ensure all online payment
  processes adhere to these standards.
• Secure data transmission: Use SSL/TLS encryption for all data transmissions between customers and your servers.
• Regular security updates: Keep all systems and software up-to-date with the latest security patches.
• Multi-factor authentication: Implement strong authentication measures for customer accounts.
• Data breach response plan: Develop and regularly test a comprehensive plan for responding to potential data breaches.

Conclusion

The evolving landscape of consumer data privacy laws presents both challenges and opportunities for retailers. By prioritizing data privacy and security, retailers can ensure compliance and build trust with their customers. In an era where data breaches, misuse or lack of notice of use of a consumer's personal information can severely damage a brand's reputation, taking a proactive approach to data privacy is not just a legal requirement – it's a business imperative.

As the retail industry continues to evolve, embracing strong data privacy practices will be crucial to success in both the physical and digital realms. Retailers who can effectively navigate this complex landscape will be well-positioned to thrive in the privacy-conscious marketplace today.