How retailers can balance shopper privacy in a data-driven world

However, with new capabilities come new challenges, and balancing data privacy and consumer personalization is chief among them.

Retailers receive mixed messages about data privacy

Shoppers undoubtedly enjoy the outcomes of data-driven initiatives within retail. With consumer loyalty and attention harder to capture and with shopper expectations at an all-time high, first-party consumer data has helped retailers reconnect with shoppers and deliver satisfying, engaging retail experiences. 

In fact, the retail sector’s score for consumer satisfaction rose in the first quarter of 2025, despite a decrease in overall U.S. consumer satisfaction, according to the American Consumer Satisfaction Index. Still, concerns over how consumer data is collected, stored and used remain prevalent.

Governing bodies around the world are taking action by introducing privacy-focused legislation intended to protect consumers. The European Union’s General Data Protection Regulation (GDPR) — which outlines consent, storage, processing and other requirements — has been the most discussed due to its broad scope.

Several U.S. state governments have also taken action, with 16 state-level consumer privacy laws going into effect since 2023. Retailers whose operations are not subject to these and other similar mandates may be safe from legal repercussions, but lenient data policies can still put businesses at risk.

News reports about data breaches and bad actors accessing customer data have made shoppers acutely aware of the potential for their information to fall into the wrong hands. Cisco’s 2024 Consumer Privacy Survey found that while shoppers recognize the potential benefits of data collection and use, they also realize sharing information comes with risks. 

Seventy percent of survey respondents said they believe the U.S. should enact a federal privacy law, and 75% said they avoid doing business with organizations they deem to be untrustworthy. An even greater percentage of respondents (83%) said they are willing to spend more to protect their data, and that security factors into their buying decisions.

For most businesses, putting data initiatives on hold is not an option because customers expect a level of personalization, while competitors will continue to refine their own data practices. Retailers who want to remain competitive must value consumers’ data privacy as highly as they value precise analytics when making decisions about the future of their data-driven programs.

How retailers can take a holistic approach to data personalization

To compete in the current data-driven retail environment, retailers must find ways to personalize data practices without prying, innovate without identifying and build databases without betraying trust. Retailers can achieve these goals by embracing the following:

• New technologies: Novel applications of AI can empower retailers to learn about shoppers without overstepping compliance guidance, ethical lines and customers’ comfort zones. For example, computer vision — which uses specially-trained AI models to monitor video feeds — can be programmed to interpret and record shoppers’ movements and other key metrics from live video.

These systems can also use reidentification technology to monitor individuals on the retail floor, using non-identifying details, like clothing color or hairstyle, that allow retailers to see shopping patterns and dive deeper into consumers’ behaviors without collecting their personal identifying information (PII). Solutions that take this approach not only mitigate the risk associated with storing personal data, but are GDPR compliant. They can enhance the accuracy of other key performance indicators by enabling differentiation between repeat visitors, passersby, associates and other groups that may have muddied traffic counts.

• Adjusted data storage techniques: Data masking practices — which replace elements of sensitive information with placeholder characters, similar to asterisks that replace letters in an email address — help to ensure that PII remains obscured in the event of a breach. Pseudonymization and generalization serve similar functions, rendering records only as specific as needed for retailers’ analytics and thus less valuable to bad actors. These measures also demonstrate to customers a retailer’s commitment to securing their data.

• A culture of transparency: Although adopting new data tools and security tactics can help retailers align with privacy regulations and safeguard against data breaches or leaks, these actions alone will not address customers’ concerns about how their data is used. Retailers also must change how they communicate with consumers about data-driven personalization and optimization by embracing an ethos of constant transparency.

Shoppers’ continued willingness to share their personal information, or to visit retailers who collect in-store shopper data, is contingent upon shoppers trusting that retailers are using their data ethically, to their benefit and, critically, only in ways that they are aware of and consent to. Retailers that clearly explain how and where data collection tools are being used and how they benefit shoppers will be better able to maintain consumer trust and be better positioned to recover should a data incident occur.

There is no time like the present to implement data privacy practices

This multipronged framework for data personalization helps retailers rethink and refine their data collection, use and storage, whether they are subject to privacy legislation or not. Proactively addressing shoppers’ privacy concerns can help set retailers apart, sending the message that a business is as interested in consumer protection as it is in profit. 

The era of data-driven retail is here to stay, and the retailers that will lead the industry tomorrow will be the ones who act today — taking careful steps to get ahead of regulations, customer concerns and market trends.

Sponsored by Sensormatic Solutions