E-commerce is bigger than it’s ever been, and it’s going to keep getting bigger.
With our increasingly interconnected economy, experts anticipate the global e-commerce market will be worth $5.55 trillion in 2022. And even as the hypergrowth e-commerce experienced during the pandemic starts to slow, e-commerce sales will still account for 20.4% of 2022’s global retail sales.
That’s more than double what it was just five years ago.
Many people are trying to capitalize on growing e-commerce profitability, and not all are good actors. The sprint to capture customers on mobile platforms and online storefronts is being matched by a shadowy race to obtain personal information from those same customers.
Hackers have developed increasingly sophisticated methods for obtaining this information—more than 22 billion records were exposed in 2021 data breaches alone. In addition to the danger posed by data breaches, a more crowded marketplace means e-commerce retailers must find novel ways to differentiate from their competitors.
When you combine these factors with a growing consumer expectation for control of personal information, there’s no question that compliance with data privacy laws is critical to the success of e-commerce ventures.
How data privacy laws work
In 2016, the European Union’s legislative bodies completely rewrote the existing rules for how businesses can collect, use, and share consumers’ personally identifiable information by passing the General Data Protection Regulation, or GDPR.
After years of un- or under-regulated data management practices where companies of all sizes across all industries could collect whatever information they wanted without getting permission from anyone, the GDPR modernized the rules governing how companies gather, process, and store information from EU residents.
The GDPR also gave consumers a slate of new rights designed to limit how businesses use their information.
While the GDPR is still the world’s most robust data privacy law, numerous countries and a handful of U.S. states are now passing similar statutes. The specifics of these laws vary by jurisdiction, but they’re all similarly based on seven principles:
Businesses are obligated to tell users exactly what types of information they’re
collecting, why they need it, how they’re using it, who they’re sharing it with, how
they’re protecting it, and how long they’re storing it.
- Limited purpose
Data can only be used for the original stated purpose, meaning businesses can’t collect data for one reason and use it for something else a few years later.
- Data minimization
Businesses should collect the smallest amount of data possible.
- Storage limitations
Data should be stored only for as long as it’s being used. Any information no longer being used should be deleted.
- Reasonable security measures
Data controllers need to take both technological and process-based measures to protect consumer information against exposure.
Businesses that don’t comply with their legal obligations are subject to fines, injunctions, and other adverse actions. Some laws provide a grace period that gives offenders time to cure adverse findings, some do not. Fines are specific to each statute but range from $2,500 for each unintentional violation and $7,500 per intentional violation all the way up to 4% of a company’s annual global revenues or $22.8M, whichever is greater.
- Consumer control
Rights vary by law, but most data privacy laws give consumers multiple rights regarding collecting and using their personal information. Examples include the right to:
- Know what data a company has collected and receive a copy of it in an easy-to-read format
- Correct or delete their personal information from a database
- Limit how data is processed, either by the collecting business or their third-party vendor
- Opt-out of having their information sold, shared, or used for marketing purposes
- Not have certain types of personally identifiable information (race, gender, political or religious affiliation, sexual identity, medical history, etc.) used in automated decision-making processes
Four tips for achieving compliance
For e-commerce companies, sometimes the hardest part of achieving compliance with data privacy laws is getting started.
Privacy laws are nuanced and new, which means most off-the-shelf compliance solutions can’t align the subtleties of each statute with your operational practices without input from a privacy expert. But there are immediate steps you can take to start your privacy compliance journey down the right path.
Map your data
A data map, also known as a data inventory, tracks a data record’s path through your system from collection through to deletion.
Data mapping will show you what information you’re collecting, how it’s being used, who has access to it, and how it’s stored. Data map results almost always reveal inconsistencies between your privacy policies and your day-to-day processes.
For example, a data inventory may reveal that you’re collecting more information than you need, sharing it with people who shouldn’t see it, or using inadequate security measures that unnecessarily increase the risk of exposure.
Once you know where your data management practices fall short of compliance goals, you can develop a plan to fix them.
Update your security measures
E-commerce companies cannot conduct business without the types of sensitive, personally identifiable information hackers love. With names, addresses (home and email), phone numbers, and credit card information part of nearly every e-commerce transaction, you must make sure all your security measures are up to snuff.
Make sure your site is PCI DSS compliant, the gold standard for card transactions worldwide. Automate the management of software updates and patch installation so your system is protected against known vulnerabilities. Utilize features like two-factor authentication, complex password standards, and permissions-based access control to reduce the possibility of introducing human error.
Rewrite your privacy notice
Once you know the nitty-gritty details of your data management program, you’re ready to draft your website privacy notice that accurately describes the data collection, use, and sharing of data. Under most privacy laws, you’re responsible for meeting the standards set out both legislatively and in your notice, so it’s essential to ensure it’s all accurate.
To stay in line with best practices, skip the legal jargon and write a notice that’s easy for your customers to find and understand.
Plan for individual rights requests
Your customers’ rights to their data aren’t theoretical—they are allowed to take very real steps to protect and control their data. Part of your role in this? It’s to honor those requests. You need a plan so you don’t get bogged down in those requests. Strategizing ahead of time for what you need to do when customers contact you can save you a lot of complications down the road.
What you need at a price you can afford
No matter where you are in your privacy compliance journey, Red Clover Advisors can help. Our experts offer various services and pricing tiers that make privacy consulting affordable. Call us today and let us show you what we can do.