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10/14/2021

First-Party Data is Key to Long-term Retail Success

Privacy-driven changes have created a shift from third-party data to first-party data, as well as some evolution in how we think about data ownership.
Privacy-driven changes have created a shift from third-party data to first-party data, as well as some evolution in how we think about data ownership.

Since the turn of the century, we’ve watched internet usage explode to the point where almost anything can be done online to hardly being able to do anything without getting online.

All that activity has created an overabundance of data. Companies like Facebook, Google, Apple, Amazon and many more have made billions monetizing internet data, and a large part of that revenue has come from figuring out how to convert that data into insights that drive business decisions.

[See also: PepsiCo Launching Data Science Practice for Retailers]

Marketers and advertisers tuned in by leveraging consumer tracking such as credit card purchases and website browsing to identify and target current and potential customers with content to influence purchases. Retail brands that also figured out the data game benefited greatly.

A Backlash Against Data Collection

Over the past number of years, we’ve seen a backlash as consumers better understand how their online behavior is being monetized, their concerns about privacy pushed back against cookies and tracking tools. That outcry led to the coming demise of third-party cookies, changes to identifiers like Apple's Identifier for Advertisers (IDFA), and regulations including the EU's General Data Protection Regulation (GDPR), California Consumer Privacy Act (CCPA) and California's Prop 24.

Even amidst this pushback, consumers are continuing to share personal data with their devices. Back in those early days of the internet, consumers would have been really skeptical about providing my credit card number or any other personal information online. Now we do it almost daily. By 2025, it’s estimated that 463 exabytes of data will be created each day globally, which is the equivalent of 212,765,957 DVDs per day.

First-Party Data Takes Center Stage

These privacy-driven changes have created a shift from third-party data to first-party data, as well as some evolution in how we think about data ownership. Retailers have typically thought of this first-party data as owned data, but there is a shift happening there too.

As a consumer, I would argue that the data I provide is really mine. I should have ownership of it. Now, I might grant permission to a company to use it, but I want the opportunity to give that consent and even specify how it’s used or shared.

With this shift in how customers are thinking about their data and the decline in third-party data, retailers now need to rely more on the information they can control (with customer consent of course). First-party data might include web traffic stats, email marketing lists, loyalty program data, newsletter subscriber data and ecommerce data such as sales and customer behavior.

It seems marketers are ready for this change; 88% reported that collecting and storing first-party data was a high (58%) or their highest priority for 2021, according to a survey by customer experience management firm Merkle.

[Related: Retaining the New Consumer Through the Power of Technology]

First-party data is increasingly critical for retailers of all sizes, but especially for small and mid-sized brands with fewer resources to pay for more expensive external industry data. The key is being able to put it to use as long as the consumer allows it. That requires access to the data warehouses, BI tools, customer data platforms and personalization solutions to collect and analyze it to gain insight into your customer behaviors.

Ideally all of those tools would be integrated directly into whatever ecommerce platform the brand uses, but that hasn’t always been the case.

The Benefits of Your Data

Because first-party data is based on actual interactions with the brand across multiple touchpoints — social media, the website, purchases, etc. — it can be even more useful to understanding customers than outside data. Even the smallest brands can do things such as run product giveaways to collect survey data from customers about their preferences and interests. Retailers can then leverage the data to uncover customer signals about their interests and buying behaviors, and once they gain those insights, they can set content, marketing and merchandising strategies accordingly.

Take personalized marketing campaigns, for example. These types of campaigns retarget emails that encourage shoppers to make purchases based on previous sites they visited, helping retailers plan future product lines based on the popularity — or lack thereof — of previous sales.

An Opportunity, Not a Loss

Rather than wring our hands about the inevitable loss of third-party data, retailers would do better to think about the opportunities it creates. The move to first-party data gives brands a chance to show their customers that they respect their privacy and will only collect data on their customers’ terms with their consent. It also gives them a chance to connect with their customers directly rather than trying to draw conclusions from data sets collected from disparate sources.

While retailers and marketers understandably protested these shifts and viewed them as huge problems at first, now that they are becoming reality, the benefits are becoming clearer. Some will dwell on what has been lost, but others will embrace the changes and adapt to them.

There is an opportunity here that has not been considered since the earliest days of the modern internet to leverage data in a way that enables personalization, respects privacy and drives revenue all at the same time.

Derrek Pearson is senior manager of product management at BigCommerce.

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