Ethical data use in retail: how to stay above board

As shoppers entrust ever more data to brands, how can retailers ensure they’re using their customers’ information ethically?

The ethical use of data has been a debate across industry sectors for years, and it’s only getting more important – and controversial – as companies collect more information from the public.

Consumers are increasingly aware of what’s being collected, and they’re naturally getting more curious about what it’s being used for. Historically, this growing appetite for transparency has been more of a concern for electronics and digital services – the fitness trackers and streaming platforms of the world – but now every industry is reliant on data, and that means everyone has to approach data ethics carefully.

Retail is a relatively recent addition to these data-reliant industries, particularly as technologies for bricks-and-mortar stores mature. In our recent industry white paper, Regaining loyalty: How to use data to bring shoppers back to brick-and-mortar retail, we explored some of the new technologies that are revitalising physical retail – and that prompted us to consider how ethics factors into retail data use.

With such an array of data gathering and analytics tools now available, retailers need to think critically about how they can ensure they’re collecting, storing and using their customers’ information in an ethical way.

Three paths to ethical data use in retail

Point-of-sale systems are more sophisticated than ever, video analytics can prompt demographic assumptions from something as simple as a logo on a piece of clothing, and loyalty schemes are tailored to an increasingly granular level. All this is contributing to a major data boom in retail – and that’s just for physical stores. Online retail has a whole further level of data collection that requires careful consideration, from basic cookie data to stored personal information such as credit card details and addresses.

So how should retail businesses go about doing the right thing by their shoppers’ data? We see three paths to ethical data use in retail:

  1. Establish a framework

There’s no single agreement for how data ethics should work in practice – for example, though the EU’s GDPR has rules around ‘personally identifiable information’, the US has no legal definition for what constitutes ‘personal data’, which makes it difficult to formalise rules about data use across the board. That means it’s up to retailers to form their own framework for how they use their customers’ information.

That’s best achieved with a committee within the business that’s dedicated to governing data use throughout the organisation, from the way it’s collected to how it’s used for marketing, promotions and merchandising.

This is particularly important as more retailers start working with AI for predictive analytics , personalised shopping, and other data-heavy use cases. There’s very little legal oversight of AI, and the opacity of its algorithms and underlying technology can make it difficult to be transparent about how customer data factors in – so committees need to be prepared to build ethics into an AI strategy from adoption.

  1. Ensure transparency

Research has shown that almost two-thirds of consumers are more likely to be loyal to a brand if they’re viewed as trustworthy in the way they handle data. And the secret to building trust with shoppers is honesty.

If shoppers know exactly what data is being collected, and how it’s going to be used, they’re more likely to trust the brand. This transparency also serves as a helpful barometer when it comes to data ethics – if the ethics committee isn’t comfortable telling consumers how the brand is using their information, it might not be a fair way to use it.

Being upfront can even lead to more accurate data. With research showing that 67% of customers admit to sharing false information with brands when it’s unclear what their data will be used for, honesty is the best policy for collecting usable data.

  1. Focus on ethical sourcing

Not all data comes straight from customers themselves – and this opens up a whole new set of ethical considerations.

If retailers (particularly those in the marketing department) are buying in data from third parties, they need to be sure they’re sourcing from reliable partners. Whether it’s to target new potential customers, or personalise experiences for existing shoppers more effectively, any extra data needs to align with the ethical standards set for the organisation.

Capturing and keeping loyalty with smart data use

It’s vital that retailers don’t let ethical concerns dampen their appetite for innovation or technology adoption in their organisation (it’s one of the key reasons governments are holding off on establishing strict regulations for AI use, in particular). But if they want to maintain trust between themselves and their customers, data ethics should be at the top of the agenda.

Discover more in our new white paper

We explore more of these technologies – and the impact they could have on physical retail’s future – in our new white paper, Regaining loyalty: How to use data to bring shoppers back to brick-and-mortar retail.

Get your copy today to explore how retailers can rebuild loyalty in an increasingly diverse and tech-focused market.

Get the white paper

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