Cybersecurity in retail: Safeguarding the industry against modern threats

Cybersecurity in retail is growing in importance. Consumers enjoy the convenience and benefits of buying online. Data from the International Trade Administration indicates a 14.4% annual growth rate in the global business-to-consumer market will continue through 2027 when it reaches CAD 7.7 Trillion (USD 5.5 trillion). For retailers, this is a very good thing, as it enables more efficient sales processes and a global reach for products.

Yet, as online shopping and digital transactions grow to all-time highs, retail businesses have become prime targets for cybercriminals, those who seek the personal identification of consumers (or businesses) to use for corrupt reasons. Cybersecurity is more critical to "get right" than ever.

The retail industry maintains numerous types of high-risk and sensitive data that could expose its customers to financial loss. Credit card payment details, personal information, including addresses, and supply chain data are just some of the valuable data often sold in the Black Market. This data is highly valuable to those who use it for their own purposes or sell it to third parties worldwide.

Retail cybersecurity challenges are numerous, but the opportunities to enhance business growth are too high to ignore. For this reason, the retail industry must embrace cybersecurity resources and tools that mitigate these risks.

The role of cybersecurity in retail

To overcome these retail cybersecurity challenges, companies must be proactive in handling the entire process. Consider the following role of cybersecurity in retail:

1. Protecting payment information

All payment processing systems must be secure. This includes point-of-sale (POS) systems that capture data from consumer payment methods. The Payment Card Industry Security Standards (PCI-DSS) provide a framework for the steps retailers can take to minimize these risks.

This widely accepted set of policies enables credit card and debit transactions to be efficient while still being private. Following these strategies is critical to mitigate risks such as stolen payment information or identification.

2. Safeguarding customer data

Retailers have an incredible amount of sensitive data, and they are responsible for protecting that data from any third party.

Data such as purchasing habits and personal identification are highly targeted in cybersecurity threats. A breach of this data could lead to identity theft or fraud for the unsuspecting customer.

3. Securing e-commerce platforms

Another strategy cybercriminals use to capitalize on e-commerce transactions is infiltrating retailer websites and servers. Online retailers must protect e-commerce platforms from any type of invasion, including:

• SQL injections: A type of code injected into a database to render that database inaccessible or to interfere with queries.
• Cross-site scripting (XSS): These malicious scripts allow the attacker to compromise users' interactions with the site and bypass access controls.
• Denial-of-service (DoS) attacks: These attacks try to overload the network, degrading its performance or rendering it inaccessible. Each of these can take down the website, costing companies millions of dollars in losses, especially if data exposure occurs at the same time.

4. Ensuring supply chain security

Retailers must also look beyond their actions to consider the retail supply chain as a whole. Vendors and third-party providers must provide the same level of cybersecurity protection to ensure a cohesive, even level of protection.

Compromised supply chain data can introduce vulnerabilities in the retailer's network. This means cybersecurity in retail must be robust enough to look beyond the network itself.

The largest security breaches in retail

Retail payment security is not a new threat. It is not something that large or small companies can overlook either. Consider some of the largest cybersecurity breaches in retail.

1. Target data breach of 2013

In 2013, a data breach at US retailer Target led to 40 million customers having personal information accessed by hackers. Cybersecurity criminals managed to gain access to customer payment information during the holiday shopping season. For Target, this meant the retailer paying $18.5 million to settle claims.

Lessons learned:

The Target breach involved a compromised HVAC contractor, Fazio Mechanical Services, who was the victim of a spearphishing attack. To prevent such an occurrence within your retail organization, ensure that strong vendor management strategies are in place. More so, utilize the most advanced encryption practices, both of which would have eliminated this risk.

2. Home Depot breach of 2014

A year later, US retailer Home Depot suffered a data breach that exposed 56 million customers. The attack was the result of a cybercriminal gaining access to a third-party vendor's username and password, enabling them to enter the network directly.

Lessons learned:

The hacker was able to exploit vulnerabilities within the company's POS system. To avoid this type of threat, retailers must regularly patch and update POS software and hardware on a routine basis.

Additionally, the use of multi-factor authentication (MFA) would have made it impossible for the hacker to gain access to the POS system. Endpoint security could also have mitigated some of this threat for the retailer.

3. British Airways breach of 2018

British Airways may not seem like a direct retailer, but the theft of 380,000 customers' personal and financial data through the company's website and mobile app clearly indicates a similar risk. The company faced a significant General Data Protection Regulation (GDPR) fine for inadequate security practices, resulting in US$26 million in losses for the company.

Lessons learned:

Stronger encryption methods were necessary in this situation, along with website security protocols that would have limited the cybercriminals from gaining access to personal data, including login credentials, payment cards, and travel booking details.

Additional strategies in retail payment security in this area could include vulnerability testing that would have at least minimized the damage. This underscores, too, the importance of remaining compliant with GDPR.

4. Neiman Marcus breach of 2013

Retailer Neiman Marcus suffered an attack by hackers who gained access to 1.1 million customer payment cards. That exposed the personal and financial data of each of those parties. What's more, the hackers installed malware into the retailer's network, which allowed them to remain undetected within that payment system for several months.

Lessons learned:

Ongoing monitoring in this situation could have minimized at least some of the risk. With real-time monitoring, the detection of malware could minimize the risk of such a long-term undetected exposure.

Additionally, the company may have seen fewer risks with more advanced monitoring tools and AI-drive threat detection strategies if they had been available and applied. That could have minimized both the length of the threat and the impact.

5. Macy's breach of 2019

In 2019, US retailer Macy's suffered a data breach through its online payment system. Hackers managed to swipe some personal information and credit card data from customers while they shopped on the site.

Lessons learned:

Securing e-commerce platforms is a critical step to protecting consumer data. In this case, it is just as important as protecting in-store systems. This data breach may have been avoided with better encryption strategies.

More so, the proper implementation of security protocols such as HTTPS could have limited or eliminated the risk by preventing holes.

Challenges in retail cybersecurity

Consider some of the most significant retail cybersecurity challenges any company selling online faces, which makes retail payment security and personal information protection more complex.

1. High volumes of transactions and data

The sheer volume of transactions moving through e-commerce is so large that it can be challenging to monitor every one of them for potential vulnerabilities. This increases the risk of cyberattacks.

2. Distributed infrastructure and multiple entry points

Flexibility and convenience make e-commerce shopping desirable. However, the distributed nature of retail, with both physical stores and e-commerce platforms, along with mobile and third-party vendors, creates numerous opportunities for cybercriminals to exploit risks.

3. Rise of sophisticated cyber threats

Also notable is that the type and complexity of cyber threats continue to increase. More advanced techniques, such as ransomware, phishing, and social engineering, create numerous types of threats cybercriminals can leverage against retailers. From holding their platform hostage to mimicking customer transactions, detection of current and new threats is challenging.

4. Compliance with security standards

Retailers also face increasing and evolving security standards, including PCI-DSS, GDPR, and the Personal Information Protection and Electronic Documents Act (PIPEDA). To avoid legal penalties, companies must maintain compliance.

5. Balancing security with customer experience

There's also a great deal of pressure on retailers to maintain engagement with consumers while also maintaining a seamless, efficient, and fast process for transactions to navigate. At the same time, retailers must maintain robust cybersecurity measures.

Emerging technologies in retail cybersecurity

While the number and frequency of risks rise and the types of attacks become more complex, there are strategies available to retailers to alleviate at least some of those risks. Emergency technologies in retail cybersecurity are enhancing security faster, keeping up better with new threats while providing robust protections for retailers themselves and consumers. Consider the following.

1. Artificial intelligence (AI) and machine learning

At the heart of the most modernized strategies is the use of AI and machine learning. These technologies can detect and respond to cybersecurity threats in real-time.

They are specifically beneficial because they enable retailers and their IT teams to monitor in real-time, allowing for the identification of suspicious patterns early on. When data shows a particular risk, teams can interact or, in more elaborate situations, the system can simply thwart the potential attack long before it even gets started.

2. Blockchain for secure transactions

Many of the data breaches occurring today continue to be related to transactions. Capturing consumer payment and identity information is a highly valuable commodity on the Black Market. Blockchain technology offers an improved strategy.

Blockchain is a secure and decentralized transaction method. This makes it nearly impossible for hackers to manipulate or steal data. It's simply not there, and every transaction detail is logged to minimize any risk.

3. Multi-factor authentication (MFA) and zero trust security

The use of MFA is rolling out more aggressively because it is so effective at eliminating risks. MFA, along with zero trust architecture, provides another layer of security to the retail system, requiring additional input verification.

This specifically ensures that only authorized individuals can access sensitive information. It can protect, for example, POS systems from attack through vendor usernames. To be effective, retail employee cybersecurity training must incorporate the use of such methods.

4. Cloud security solutions

Retailers must also modernize and upgrade their cloud security to handle more robust risk factors. Security cloud-based e-commerce platforms and retail management systems allow fewer holes to prevent cybercriminals from gaining access to vulnerabilities.

As more organizations move to adopt cloud services, they must make security a vital component of that transformation. Cloud system efficiencies are too valuable to ignore, but the utilization of security is critical.

5. Internet of Things (IoT) security in retail

Connected devices in homes and businesses have spurred an incredible amount of online purchases in recent years. In 2024, 17 billion such devices will be in place, which is about twice the number of people on the planet. However, these smart systems also apply to retailers.

The utilization of smart shelves and mobile payment systems through connected devices can introduce new vulnerabilities, but protecting IoT devices from attacks ensures the benefits of such tools continue to be worth the risk.

The importance of training and awareness

Retail employee cybersecurity training must also be robust and efficient, not a secondary component to the process of minimizing risks. Consider these strategies.

1. Employees are a first line of defense

Employees are a target of cyberattacks. Both phishing and social engineering actions aim to exploit an employee's lack of knowledge and training, creating a serious risk of vulnerability for the company.

Train employees on how to identify risks and prevent attacks. This includes teaching employees about new threats as they emerge and ensuring they understand the risks of misstepping security protocols. Hiring well-trained cybersecurity-educated employees also mitigates risks.

See which companies are hiring in retail and other industries.

2. Regular cybersecurity training programs

Regular cybersecurity training programs are also critical, especially with the fast nature of ever-changing cyber threats. Employees must understand the latest threats and best practices for maintaining security.

One solution is the use of Lighthouse Labs Internal Talent Development training options, which are designed to facilitate efficient education and training in these critical areas.

3. Building a security-first culture

It is also critical to build a culture within your retail operation that focuses first on security. Shared responsibility across all levels within the organization can facilitate this. It means holding the employees at the register up to leadership accountable and equal in the importance of monitoring and preventing such threats.

4. Compliance and regulatory training

Also notable is that leadership should consistently monitor and train to meet all compliance requirements applicable to their industry. This includes PCI-DSS and GDPR regulations. These regulations will likely continue to change and expand over time, creating opportunities for improvement in security and making the investment in ongoing training critical.

Businesses that fail to meet these compliance requirements face significant financial risks. Ongoing training ensures the company adheres to regulatory standards.

A stronger, safer future for retail

Cybersecurity in retail is paramount to the financial stability of consumers and retailers alike. The robust cybersecurity role at the industry's cutting edge, maintained through employee and team training, cannot be underestimated.

Retail businesses benefit when they invest in both the technology necessary to protect operations, and the training employees and leadership need to mitigate risks and safeguard information and supply chain operations.

Explore Lighthouse Labs' Cybersecurity Bootcamp to gain the skills needed to protect retail businesses from evolving cyber threats, or explore our Internal Talent Development training solutions to upskill your team in cybersecurity.