Retailers need data, but shoppers have privacy concerns: Deloitte
Two competing trends in the world of retail are set to collide this Christmas, according to Deloitte’s 2023 Report Holiday Report, with retailers’ growing need for data clashing with shoppers’ reluctance to hand it over.
The pandemic boom in e-commerce has subsided somewhat, with customers returning to brick-and-mortar stores, especially for their holiday season shopping.
But although online sales for Australian retailers have declined over the past two years, they remain higher than pre-COVID, with 42% of retailers making at least 10% of sales through online channels. Significantly, only 5% of retailers surveyed in the Deloitte survey have no online sales channel at all.
As Deloitte’s report explains: “The fact that consumers aren’t making online purchases doesn’t diminish the critical role that digital and social platforms play in achieving success. Just 5% of respondents don’t offer digitally enabled sales, and most retailers highlight 20% of sales through digitally enabled channels.
“To entice customers to the store, 38% of retailers are focusing on personalising the retail experience to strengthen relationships.”
And how to personalise these retail experiences? Data.
“With almost all retailers making online sales (and collecting associated data) they are using increasingly sophisticated methods to understand consumer interests and target sales accordingly.”
One side-effect for retailers is the cost of all this data crunching. 81% of retail respondents have seen a rise in customer acquisition costs. This, along with heavy marketing is biting into profit margins, with 52% of retailers expecting a decline in margins this holiday season.
But perhaps a bigger concern is the growing reticence of customers to hand over this data.
Deloitte surveyed over 1,000 consumers across Australia for a heat check about data privacy.
“Firstly, we can confirm there’s been a shift in consumer sentiment that impacts all industries, including retail,” explains Kate Monckton, partner in Deloitte’s Risk Advisory team.
“People are feeling more cautious than ever about sharing personal information and more anxious about the type of information organisations are requesting from them.
“Data privacy remains a complex problem in an environment where it’s expensive to engage customers. Whilst there are fewer high-profile data breaches being reported this year than 2022, retailers should remain vigilant.”
The above graph shows how retailers are increasingly worried about a data breach; as Deloitte puts it: “Retailers should understand they are only one data breach away from having their reputation challenged.”
In the wake of the Medicare and Optus breaches, 83% of Australian consumers say their privacy awareness has increased, and 90% of consumers want more done to protect their data. Also highlighted is the growing awareness that it’s just as important for retailers to remove unnecessary data as it is to protect what’s held.
Especially seeing that customers are now giving more and more of it. 56% of respondents say they’ve needed to provide more personal information than necessary in the past year, while 74% express a “strong preference against organisations collecting or retaining” identification documents.
“As a result,” the report notes, “consumers are increasingly restricting the personal information they share.”
52% have chosen not to complete non-mandatory form fields, while 35% have chosen not to buy a product or service because “an organisation asked to collect personal information they weren’t comfortable sharing.”
While retail is the focus of this survey, Deloitte notes that the retail sector has a negative reputation for customer data handling, despite in reality collecting far less than the education, employment, travel, and transport sector. When Australian consumers were asked which industries they trust most to responsibly handle their data, retail came in third last place.
“Just as consumers are rethinking the data transaction, retailers must also review and rethink their side of the data deal,” the report explains.
“They have everything to gain by listening to consumers’ concerns: by understanding how people are feeling, looking at key stats and putting strategies in place to minimise data breaches, organisations can build trust and loyalty.
“The alternative is loss of trust, reputational damage, and potential legal and financial repercussions.”
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Nathan Jolly is the Deputy Editor of Mumbrella. He joined the team in July, 2023.
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