LONDON — Europe’s new privacy law has thrust marketing strategies under the spotlight, with some companies hailing the more restrictive rules as a boon for business, and others worried about losing precious intelligence about current — and potential — customers.
The GDPR, or General Data Protection Regulation, applies to businesses of all sizes but companies with fewer than 250 employees face less stringent record-keeping regulations. According to data collected by Euromonitor, larger retailers will experience more of a blow than luxury ones, not only due to their size but also to the way they use customers’ personal data to spur future sales.
Florence Allday, beauty and fashion analyst at Euromonitor International, said companies with loyalty schemes, such as Asos, Boots and Superdrug, can no longer blast out personalized ads that dictate what a customer’s points can be spent on.
“Online retailers must find ways of leveraging their loyalty schemes and other forms of advertising without creating a retail space in which legal consent is required from the consumer,” Allday said.
For the past decade, companies have relied on personalization as a marketing tool to fuel customer growth. Businesses have invested heavily in creating a unique consumer experience, especially after the introduction of artificial intelligence.
Walmart recently launched Jetblack, a conversational personal shopping service that uses artificial intelligence to glean customers’ expected needs based on past orders. Last year, John Lewis launched Monetate, a marketing platform that uses previous purchasing behavior to increase consumer engagement and to personalize the online shopping experience.
Earlier this year, L’Oréal acquired ModiFace, an augmented reality and AI service aimed at digitizing the beauty experience. It allows customers to virtually try on different hair and makeup products and offers skin diagnosis services. The company has said it wants customers to “discover our brands and our products through these experiences,” said Lubomira Rochet, chief digital officer at L’Oréal.
For companies who have invested in AI technology and personalization services, the new GDPR will likely slow their attempts to control future purchasing.
All analytics collected prior to GDPR must be re-permissioned and to continue using old data, companies must prove that it was obtained following the new rules.
In a recent speech, EU commissioner for competition Margrethe Vestager warned about the dangers of new technologies breaching consumer data and said there are plans in the works for new restrictions on artificial intelligence.
Businesses will need to regroup, rethink and restrategize, even after they get customers’ permission to use their personal data.
Michael Jais, chief executive officer of Launchmetrics, the data insight company that helps build brand and influencer relationships, said that “opting in” or “opting out” of mailing lists or loyalty schemes is just the first step. He thinks that the second stage will focus on what data businesses will be able to use after consumers choose to opt-in – and how brands can use it.
“It’s a question of building legitimacy and replacing the business aspect of direct marketing, and it may be a question of utilizing micro-influencers, because with them it’s about activating their existing community of loyal followers,” he said.
Sid Mehta, vice president of marketing at Lyst, the global fashion search platform, said the new privacy rules will push businesses to come up with creative solutions, but the first step is to identify the reasons why consumers have chosen to opt out. “Segmenting the type of opt-outs will allow you to put together the most relevant re-engagement marketing strategy so that it resonates positively with the audience you are targeting,” he said.
Being genuine will save companies, he emphasized. “Regardless if you are trying to win back a customer or are reaching a new audience, the most important thing is to deliver on the promise of the ad,” Mehta added. “It’s an uphill battle to earn that second chance.”
So far, large-scale retailers and brands have been unusually tight-lipped about the new regulation, and how they see it impacting their businesses.
Asos, Missguided and Topshop all declined to comment on the impact of GDPR on their businesses, while H&M spokeswoman Anna Eriksson said: “H&M complies with the requirements of GDPR and other data protection laws applicable to us; however, we don’t see that the new regulations differ from the already strict rules we have had in place before.”
Luxury retailers won’t be as exposed as mass market ones: The former spend much money and time cultivating customers and using one-to-one services before and after the sale takes place.
“GDPR will reinforce the luxury industry’s efforts to ensure it has the confidence of its customers. Ultimately this is about increasing the trust of customers in e-distribution,” said a spokesperson for Yoox Net-a-porter Group. Other luxury retailers such as Farfetch, Matchesfashion, Mytheresa and 24 Sèvres all declined to comment.
Mehta said companies may be reluctant to speak right now because they’ve been preparing for it for a while and GDPR is already old news. “Many of the larger e-tailers have been putting together specialist GDPR taskforces to take the necessary steps to be compliant. Regardless of GDPR the majority of e-tailers have spent vast sums in improving satisfaction through more transparency,” he said.
George Wallace, ceo of MHE Retail, a Europe-wide consultancy, predicted the GDPR regulations would be positive for both retailers and consumers. “It’s going to make customers feel more positive about online brand communication and online shopping, rather than just thinking it’s such a hassle and a nuisance,” he said.
He added that retailers that rely on spam don’t deserve to survive in the retail environment. “I think sometimes with the online brand marketing we’ve had in the last five to 10 years has focused more on volume than quality. With new regulations, the data that you’re getting will be richer and of higher quality,” added Wallace.
Shaeren McKenzie, chief brand officer of McArthurGlen Group, which operates designer outlets across Europe and in North America, said GDPR has had a positive impact on business. “GDPR has been a very useful sense check for us to ensure that we are being really transparent with our customers about how we are capturing data and what we are using it for. Fortunately McArthurGlen introduced ‘opt-in’ several years ago to ensure that only people who genuinely want to join our database are added.
“Overall, GDPR has led us to reduce our consumer database by about 20 percent in terms of size, but that reduction comes predominantly from our least active subscriber segment and so, in terms of quality, we have a more engaged and higher quality customer database now. I would say that, overall, the effect has been a positive for us,” she said regarding GDPR’s outcomes.
Sofie Willmott, a senior retail analyst at GlobalData, said GDPR certainly won’t make life easy for anyone, but the benefits for retailers will be rich.
“As well as the setback of additional costs, retailers must also be prepared to lose a sizable proportion of their customer database. But they will be left with their most loyal and engaged shoppers. That will lead to better conversion rates and a clearer indication of good and bad performing content,” she said.