February 17th, 2022 | 7 MIN READ

How Cookie Laws Impact Commerce

Written by Pranav Bahadur

Pranav Bahadur is a Product Marketing Manager at Elastic Path living in the Boston area.

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Over the past three years, you've no doubt had one of the experiences: heard about changes in privacy laws, seen a GDPR compliance pop-up (the 'accept all cookies' buttons that marketers hope you click), or maybe even tapped the "ask app not to track" on your iPhone.

What's all the fuss about? Third-party cookies are due to be phased out. This is a significant change in how the internet and digital commerce operate. With 76% of online consumers now more concerned about their privacy than ever before, it's no surprise that companies have recognized it's time for a change

Where this will end, who will win, and how customers will react is still very much up in the air. This post will talk about what cookies are, how the upcoming changes might impact your eCommerce brand, and what you can do to be best prepared for the inevitable future.

What are Cookies?

A cookie is a small piece of data (usually a text file) that websites place on your device when browsing the web. There are three kinds of cookies, each with specific functions.

First Party: It can help set preferences, store your account details, remain logged in, or keep items in your card. These are not shared with other third-party sites; this is important and the key to preparing yourself for the cookie-less future. Read on to the end of this post to learn how.

Second Party: information is exchanged between parties, much like attending a conference, and a marketer gets the list of attendees to target their advertising to relevant users better.

Third-Party Cookies: These are cookies from a domain that track usage elsewhere on the internet. They are tremendously valuable for advertising & retargeting. When you get the ads on Instagram for something you just looked up in your browser, third-party cookies are what make that possible.

There are two main buckets where these third-party cookies are relevant to commerce.

For advertising: think of an extension of what you already see when you browse for something on your tablet and get an Instagram ad on your phone. They have the link in the system to identify the same user, which makes a lot of ad-tech companies valuable in terms of their targeting. Increasingly, there are clever ways around this to build a system-wide id for a user that isn't cookie-based.

For Personalization: Cookies power things like the suggestions on amazon of 'what customers also bought' or your recently viewed items. The majority of those are cookie-based, with some obvious moves away in preparation for the end of cookies.

So, what's changed now? Simple, new cookie laws like the EU Cookie Law or California Privacy Law (CCPA) are outlawing some practices and standardizing the rest have driven companies to recognize they need to give some privacy back to their users.

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The End is Near: The End of Third-Party Cookies

Third-party cookies are going away in 2023. Google announced that it would no longer use or support third-party cookies for tracking. Some companies, like Firefox, have already built-in these 'don't track' flags to their browsers.

In addition, we now have Apple's IDFA, the iPhone update that allows users to tap 'ask app not to track' pop-up you've undoubtedly seen if you use an iPhone. The rest are likely to follow suit in a bid to gain back the trust of their users and comply with privacy laws. They have also committed to not building a system that mimics the identification capabilities of a third-party cookie.

The Wisdom of the Crowd - FLoC

There are numerous companies already making solutions for the end of third-party cookies. While no customer data platform has emerged as clear dominant force yet, they effectively offer the same promise. An anonymized, centralized data store that can model what a customer's interests are and what they might do next.

Let's look at an example, Google's FLoC (Federated Learning of Cohorts), an API that Google intends to use as a Chrome extension. Chrome has an anonymized database of browsing habits but does not tie back to an individual. However, they do know you may have visited cooking blogs, for example.

When you visit cooking blogs, you might be likely to follow that up with buying new set of pans. These intent signals are gathered together to create a 'cohort.' People in a particular cohort are likely to have similar interests, leaving a relatively good bet on what type of advertisements may be most relevant.

So, your inbound marketing funnel will remain active, although somewhat stymied as this transition is in full effect. There will likely be a significant shift in what technology powers the most popular ad platforms and thereby how much targeted advertising will cost. The likely scenario is a fragmentation of advertising capabilities with a few more prominent platforms emerging as the dominant players to create products like FloC.

GDPR compliance was likely only the beginning. With new cookies laws being drafted up by the world's governments, compliance is a crucial problem to solve in the evolution of the internet. FLoC and similar solutions will not be the end; there will be more innovation and improvements in how digital advertising will work in the future. Being prepared for the change is half the battle. Learn how you can future-proof your eCommerce store here.

Interested in Learning More About Elastic Path Commerce Cloud?

Launch and optimize innovative experiences fast, with a modern, headless, SaaS, API-first, & microservices-based commerce platform.

See the Future of eCommerce

What Can You Do to Prepare Your Commerce Platform?

1. Focus on building your brand identity and audience. Some key areas include social, giving exclusive discounts, communicating with your audience, building a community of users or customers. Zero-party data: ask your customers.

2. From what they are looking for to what they read or are concerned about. Your brand can leverage this data to approximate an intent signal. Numerous companies are starting to focus on this as a personalization engine for eCommerce websites.

Being able to test and leverage these capabilities will become increasingly important. Don't settle for what Salesforce or other commerce platforms deem 'good enough'; equip your eCommerce stack with the flexibility needed through a Composable Commerce solution.

3. First-party data, you will still be able to identify and personalize a website if you have anonymized first-party data. Delivering value for the exchange of users' data is critical here. It is crucial to have a strategy around what can build value for your customers while keeping trust intact to encourage them to opt-in to first-party data. This will also be a valuable source for cohort matching; the better you know your customers from first-party data, the better match you will likely get on ad platforms like Google or Facebook.

4. Opt-in data sharing: returning value to your customers by offering one-time cart discounts, first-time visitor discounts, loyalty bonuses, subscriptions, members-only stores, etc., are all going to become increasingly important to the performance of your eCommerce store.

These strategies can be tiresome to execute with rigid antiquated eCommerce solutions, for an easier, more flexible, and quicker way, check out our Catalog Composer, which allows you to create specifically tailored, unlimited catalogs with ease. Also, check out our latest release of merchandising capabilities that make it easy to set up these offers and prepare yourself for the cookie-less future.

5. Having a trusted partner for your brand to guide you through this evolution and ensure your eCommerce stack is ready for the change. The flexibility of a Composable Commerce solution is the best bet to leverage the latest and greatest in technical capabilities. Learn more here

6. Click attribution is still viable. You may not be able to advertise directly to someone who visited your competitor or showed interest in a category of products your brand manufactures. But, you can still tell how people are using your website, their path to purchase, and generally what they did on your website.

Being able to change and optimize the experience for your customers rapidly is paramount. A Headless microservices solution like Elastic Path is more valuable now than ever before when compared to a traditional monolith that will slow your ability to optimize and innovate.

Prepare Now for Your Brands Future Success

In summary, third-party cookies are going away, and you need to be prepared. Remarkably, only 8% of markets said they were ready for the cookieless future.

With the inevitableness of the eCommerce world-shifting with the end of third-party cookies, your brand's best move is to prepare to make drastic changes if you are running an old eCommerce solution. A Composable Commerce offering is an excellent option to be in a position to innovate and experiment as new technologies become available.

Equally important is your brand's strategy for telling a compelling story, building a unique brand identity, developing an engaged customer base, and having a strategy of how you can leverage the data available to you to continue to grow revenue.

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