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California Opens CRM Goldmine For All E-Tailers

Written by Evan Schuman
February 6th, 2013

The California Supreme Court on Monday (Feb. 4) ruled that online merchants have the right to ask for Zip code and other personal information about shoppers when purchases include downloadable content, but physical retailers do not. Given the clout of the highest court from the country’s largest state making such a ruling—which, in turn, makes it very likely that other states will follow—this decision could sharply change CRM and POS strategies.

Such changes are especially likely because the court did not impose any restrictions on how retailers could use this newly permitted data, despite the ruling saying that data is solely to give online shops a better chance of fighting digital download fraud.

With the explosion of mobile applications, digital content of this sort is available at a wide range of retailers. This goes beyond downloading songs, movies, television shows or ebooks to downloaded games, software applications and ringtones. How-to videos from Lowe’s (NYSE:LOW), jazz music sold by Starbucks (NASDAQ:SBUX) and recipe collections and videos from Williams-Sonoma (NYSE:WSM) could all play into this digital decision.

As a practical matter, this decision is likely to have little impact on traditional online versus online competition, as Amazon Amazon (NASDAQ:AMZN) and other major pure-play E-tailers have already been gathering plenty of such information—despite what had been potential legal challenges. No, the change will likely happen in-store, because in-store will find new ways to leverage all of the new online data that the court has now sanctioned.

Home Depot (NYSE:HD) is one of many chains that has been using creative techniques—in Home Depot’s case, it looks for shoppers using the same payment card online and in-store—to grab in-store activity and share it with the online operation. Now, that can be reversed, with online (which the court said could take this data without restriction) able to share it with in-store.

The court ruled that the nature of a downloadable purchase exposes the retailer to more fraud risk and that the ability to seek more information is necessary to reduce that risk. But, as StorefrontBacktalk Legal Columnist Mark Rasch points out, the ruling allows address and other information to be demanded from shoppers even when the goods are physical, but only if the product is being shipped to a different location.

The rationale is that when a physical product is being delivered, the retailer has an obvious need to ask for the address to which it will be sent. But for fraud purposes, the court’s Monday ruling now allows the site to demand the address of the customer, in addition to the delivery address.

(Related story: “Privacy Issues Galore Crop Up In California Supreme Court E-Commerce Ruling”)

What brought the case to the court was a consumer named David Krescent, who had purchased various digital products from Apple’s iTunes and objected to having to give his telephone number and address. “He further alleged that Apple records each customer’s personal information, is not contractually or legally obligated to collect a customer’s telephone number or address in order to complete the credit card transaction, and does not require a customer’s telephone number or address for any special purpose incidental but related to the individual credit card transaction, such as shipping or delivery,” the court wrote. “Krescent also contended that ‘even if the credit card processing company or companies required a valid billing address and [credit-card identification number], under no circumstance would [plaintiff’s] telephone number be required to complete his transaction, that is, under no circumstance does [Apple] need [plaintiff’s] phone number in order to complete a [media] download transaction.'”

The court was interpreting a California law well-known throughout retail: the Song-Beverly Credit Card Act of 1971. That law has already racked lawyer hours for many chains, including Crate & Barrel and Children’s Place, who were abandoned by their insurer, Hartford Insurance, on these cases, and told they were on their own when being sued for supposedly violating Song-Beverly.

Williams-Sonoma was at the heart of several challenges of Song-Beverly, as it fought the battle through federal courts. This led to various pieces of retail advice on how to avoid the letter of the law, while the California Supreme Court debated its options.


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