How do you solve for the customer in the cyber security equation?
Why should retailers and brands be focused on cyber security? What are the impacts to consumers? How does this impact marketing strategy?
The digitisation of the retail industry has transformed consumer experience, business models and supply chains in terms of both sophistication and complexity. According to the UK Office for National Statistics, April 2020 recorded the highest level of retail online sales at 30% of total retail sales, a drastic increase largely accelerated by Covid-19 panic buying. As a percentage of all retail sales, online sales in January and February 2020 were 20% and 18.9% respectively, a meaningful increase compared to 2.8% in November 2006 when the records began.
As consumers become more comfortable shopping online, their cyber footprint grows, and so does the amount of data they generate about their behaviours. Equipped with more data, retailers have the opportunity to understand their consumers better hence gaining a competitive advantage that leads to more tailored and refined products. Rising levels of consumer data also leads to greater risks. This stimulates a need for heightened security and regulatory scrutiny, as cyber criminals mastermind attacks that could cripple retailers through financial loss, reputational damage and regulatory fines up to €20 million (GDPR) per consumer, per incident.
Cyber security breaches leave consumers vulnerable as their credit card details, email and home addresses, date of birth and other critical data fall in the hands of criminals. Retailers, on the other hand, seem to sacrifice robust security measures that can lead to a more time-consuming purchase in favour of a seamless and more enhanced shopping experience, thus making for a more attractive cyberattack target. The challenge intensifies as advancements in IoT, AI and robotics continue to unlock greater consumer convenience by adding levels of complexity to business models and their supply chains, compelling retailers to constantly adapt. The success or failure of this evolution is heavily reliant on the weakest link, often their cyber security systems and practices.
A white paper released by Axis Communicationsshows that retailers are presented with boundless opportunities owing to the growth of IoT devices and cloud technologies, however they must fully understand the risks of unsecure systems to their business as well as the implications of failing to secure the customer data and repercusions of non-compliance with GDPR.
In an industry where brand reputation and loyalty are vital to success, the impact of cyber breaches can be significant in the longer run. According to the 2018 Cost of a Data Breach study conducted by Ponemon Institute for IBM, the estimated average cost of a data breach globally is a staggering $3.86 million per incident, an increase of 6.4% compared to 2017. The report also analysed the loss of customers as a result of a data breach and reported that losses of less than 1% of customers resulted in an average total cos of $2.8 million, increasing to an average total cost of $6 million if 4% of customers are lost.
Looking at the US alone, the Deloitte 2019 US Consumer Privacy in Retailshows that an alarming one third of Americans have been exposed to data compromise with the volume of breached records from 2016 to 2018 growing twelve-fold.In addition, the FIS US Consumer Report 2020 found that 63% of US consumers are either extremely or very concerned about their private/ personal data being compromised while over one third think that it is very likely that their data will be stolen by a hacker in the near future. For retailers that had suffered a data breach, 28% of customers were unlikely or very unlikely to revisit.
As cyberattacks continue to escalate, consumers are increasingly conscious of their privacy. The correlation between privacy and trust has been put to the test and it is clear that consumers will place their trust in retailers where they feel more secure. Building customer trust through robust cyber security must therefore be a key agenda item in executive meetings. Trust and privacy have become very powerful tools for client retention and lead generation strategies; therefore, marketing efforts should be oriented towards leveraging the strength of the retailers’ cyber security systems in order to increase brand loyalty and gain competitive advantage in a crowded marketplace. A concerted effort to invest in cyber security and comprehensive data breach prevention planning is critical, just as critical as reassuring the consumer of the robustness of your security systems.
Cyber security is an issue for all industries and one that all senior executives should be prepared for. The Oxford Cyber Security for Business Leaders Programme will breakdown topics, normally left to information technology specialists, so that business executives leave feeling confident they can apply these learnings within their current and future roles. These topic areas can sometimes appear mystifying to a busy corporate executive, but have profound implications in terms of both risk and opportunity. Register today - course begins 14 October.