Why does Data Privacy Matter? Understanding Data Privacy in eCommerce

| Malcolm Adams Last updated 18 Aug, 2022

The privacy obligations of small businesses in the United States, and other nations, are severe. Every small business that gathers customer data is subject to the global data privacy regulatory system, and it is therefore crucial to understand data privacy in eCommerce.

Businesses with a website or contact form can be affected by this regulation. However, physical records are also subject to it. This article will help you navigate the web.

On this page:

What is Data Privacy?
Why does Data Privacy Matter for eCommerce Businesses?
What Data Privacy Legislation applies to eCommerce businesses?
Industry-Specific Privacy Regulations
What should eCommerce businesses do to prioritize Data Privacy?

What is Data Privacy?

Privacy refers to the way you use and gather data. This includes:

Obtaining the consent of your customers to collect, use, or sell their data
Notifying customers in a timely manner if you change your privacy practices
Individuals have the right to access and erase their data

Why does Data Privacy Matter for eCommerce Businesses?

Data privacy refers to the responsible and ethical collection, creation, sharing, retention, and disposal of personal information. This includes making decisions about whether to collect, not create, not share, and not permit certain uses of data to protect a person’s privacy rights.

In many places, privacy is seen as a fundamental human right, and there are laws in place to protect that right. Data privacy is also important because people have to trust that their information will be handled carefully if they want to do things online.

Organizations show their customers and users that they can be trusted with their personal information by using data protection practices. Personal data can be misused in several ways if it is not kept private or if people can’t control how their information is used:

Criminals might utilize personal data to swindle or harass users
Entities may sell personal data without user authorization, resulting in unwelcome marketing or advertising
When a person’s activities are followed and monitored, it may limit their freedom of expression, especially under authoritarian governments

Any of these things can be harmful to an individual. For a business, these things can damage its reputation in a way that can’t be fixed and lead to fines, sanctions, and other legal problems.

Small businesses are often subject to legal action for data privacy violations. These actions can be attributed to a failure to respect the legitimate privacy rights of a person.

Data privacy and data security are treated legally differently. While data security is the protection of data from unauthorized access and misuse, data security is a term that includes hacks, privacy breaches, and ransomware. Both can have legal consequences if not appropriately managed despite the differences.

What Data Privacy Legislation applies to eCommerce businesses?

The growth of data collection has resulted in national governments passing laws regulating the type of user data collected and how it can be used, stored, and protected. Some essential regulatory privacy frameworks to know include:

California Consumer Privacy Act (CCPA): Requires that consumers be made aware of what personal data is collected and gives consumers control over their personal data, including a right to tell organizations not to sell their personal data

Federal-level data privacy or security laws: Although there is no federal-level comprehensive data privacy or security law, the Federal Trade Commission (FTC), however, may take enforcement action to protect consumers from “unfair and deceptive acts of or practices.” The FTC has used this power for enforcement actions against companies that fail to adhere to privacy promises over the past 20 years

National data protection laws: Many nations, such as Australia, Brazil, Canada, Japan, Singapore, and the U.K., have some form of data protection laws

Does my eCommerce site have to comply with Data Privacy laws in other countries?

Privacy laws are designed to protect individuals within a particular geographic area. It doesn’t matter if your business is there. It doesn’t matter where your customers are.

Many states are currently moving privacy bills through the legislative system. California, Maine, and Nevada are the only states with comprehensive data privacy laws.

Globally, the General Data Protection Regulation is the most widely-known privacy act. However, you should be aware of national laws if your business collects personal data from people residing in the U.S. or other countries with data privacy laws.

Industry-Specific Privacy Regulations

Businesses that work in certain industries or gather data from certain populations are subject to more stringent federal regulations. For example:

HIPPA: The Health Insurance Portability and Accountability Act establishes standards for protecting medical information
COPPA: The Children’s Online Privacy Protection Act governs data collection from children under 13
GLB Act or GLBA: The Gramm-Leach-Bliley Act and the Fair Credit Reporting Act govern certain financial privacy laws

Some jurisdictions and U.S. states have their own laws, which may be more comprehensive than the federal regulations. It is advisable that you consult a privacy expert to determine if national, federal, or state laws cover your industry

What should eCommerce businesses do to prioritize Data Privacy?

Strong business reasons exist to embed a culture of data protection in your small business beyond your legal obligations.

Companies that place data privacy first have an advantage over businesses that don’t. A strong culture of data privacy has other benefits:

Greater business agility
Business decisions that are informed
Less data breaches-related losses
Improved business reputation
Optimized data processing
More efficient operations

Next, we look at 4 steps to help you achieve a strong data privacy culture in your eCommerce business to ensure compliance with data privacy regulations.

1: Understand the data your eCommerce site collects

Small businesses should start by understanding the data they collect. You should take inventory of all business devices, including laptops, mobile devices, computers, flash drives, digital printers, fax machines, and other data storage devices. Also, check for personal devices that employees may use for business purposes. Review your physical records, including file cabinets, record storage areas, and address books.

Take stock of all personal data that your business has from anyone you interact with during the inventory. This includes customers, suppliers, contractors, and advisors. Keep track of the data you have and where it is stored.

Personal data can include names, telephone numbers, and credit card details. It also includes number plates, addresses, phone numbers, customer numbers, and information on an individual’s appearance. It is easiest to group the data under headings such as these in your inventory.

You should be aware that some data categories may be classified as “sensitive” or “special” and may be subjected to more stringent obligations. Under the California Consumer Privacy Act, biometric data can be classified as “sensitive personal information.”

It’s not enough to say that you collect “personal information.” You need to categorize data at a higher level to meet your obligations.

2: Establish the purpose of eCommerce data collection

Data can be collected, transferred, processed, stored, accessed, and sold. Data privacy laws will apply to your small business depending on the information you collect.

eCommerce businesses may opt to outsource a portion of their operations, with many business process outsourcing (BPO) providers located abroad, such as India and the Philippines. This may include bookkeeping, sales order processing, customer engagement (such as newsletter creation and distribution), and customer contact data acquisition (from online opt-in forms).

While your customer data may be collected in the U.S, your service providers may be based outside your business’s jurisdiction. As a service provider, they will have, and are likely to need, access to your customer data (names, addresses, financial data, and so forth) to fulfill their services for your business.

You can easily understand how quickly your customer data can be replicated in multiple locations globally.

Many regulations cover data privacy in such circumstances. These regulations can govern everything from how residents’ data should be handled to how data should not be disclosed to whether data transfers are legal.

It is also simple to see how data privacy hygiene could help your company make better business decisions. The cost of privacy compliance may make business process outsourcing prohibitive.

Learn the laws of the relevant jurisdictions

You must understand and adhere to the laws governing personal data, regardless of where it is stored, transferred, or coming from. A privacy attorney is a best and fastest way to handle this.

It may seem overwhelming, but failing to comply can significantly impact your reputation and bottom line.

3. Establish Adequate Protection for collected Data

Organizations that process data must comply with all applicable laws when they collect or use data. In addition, they have a legal obligation as well to protect it. These privacy best practices will help you achieve this.

Begin with data minimization strategies

Your business should not have any personal data. This is the best way to protect it from unauthorized access.

Your business should have policies and procedures to ensure that you routinely delete information that isn’t necessary for your business operations.

Please share as few personal details as possible.

If you are required to give access to data to any third party, please provide as little detail as possible.

Access control measures should ensure that personal data and records are only accessible to employees and third parties who need to see or use them.

Create a secure cyber environment

Cybersecurity is achieved by utilizing strong privacy practices and robust technical measures to protect data.

Although cybersecurity may seem daunting for small business owners, the costs of fixing it are much less than the potential consequences.

Here are 10 cost-effective and practical ways your small business can improve cybersecurity:

Business Grade Anti-malware software
Email encryption
Backups and encrypted data storage
Robust information Security policies and processes
Training for employees
Two-factor authentication requirements
Secure Wi-Fi
Regular updates to software and hardware
SSL Certificates to secure your website
Firewalls

4: Plan for data breaches

You should also have plans for data breaches or security incidents. Stress testing them should be a regular part of your routine. You must have plans that address both your legal obligations and business continuity.

Most countries have regulations that govern the notification process following a business data breach. You make an effort to become familiar with all your obligations, including their timelines.

Ideally, it would help if you prepared template notifications before a data breach occurs.

Conclusion

Small businesses can decrease compliance expenses by reducing the volume of personal information flowing through them. In data acquisition, less is more.

Prevention is better than treatment for compliance. Qualified help is always cheaper than an enforcement action or data incident.