How AI and Privacy Pressures Are Reshaping Retail Cybersecurity
AI and customer privacy concerns are rewriting the rules of retail cybersecurity. Discover how retailers can turn these hidden risks into a proactive strategy for resilience.
September 23, 2025

Retailers have always faced risks: shoplifting, supply chain disruptions, and seasonal swings in demand. But newer, sometimes less visible, cyber risks are creeping into both physical and digital stores.
“Add the rise of artificial intelligence (AI) and the growing concern over customer privacy, and retailers find themselves juggling challenges that do not show up on the sales floor but can have just as much impact on revenue and reputation,” said Steven Anderson, Director of Cyber Underwriting at Safety National.
Here, we explore how AI and privacy exposures are fueling cyber risks in retail, what that really means for business owners, and how stores can turn hidden dangers into a manageable strategy.
What Does Cyber Risk Include in Retail?
Cyber risk describes digital risks that are not always obvious. Often, these exposures lurk in day-to-day systems without clear warnings. For retailers, this can include everything from unpatched point-of-sale (POS) software to vulnerabilities in loyalty program databases. Unlike a stolen handbag or damaged stock, cyber threats do not always leave a visible trail until customer data is gone, systems are locked, or your organization incurs unexpected fines.
AI in Retail: A Double-Edged Sword
Retailers are increasingly using AI to improve customer experience and operations. From chatbots that answer questions online, to algorithms that recommend products, to smart inventory systems that restock shelves, AI is reshaping how retail works. But with every new digital tool comes new exposures. Each AI system creates an additional entry point for bad actors. If compromised, these systems can accelerate errors or spread misinformation at a scale far faster than a human employee ever could.
Customer Privacy on the Line
Retailers thrive on data. Every loyalty card swipe, online purchase, and email subscription adds to a treasure trove of customer information, but with that opportunity comes responsibility. Customers increasingly expect transparency regarding how their data is collected and used. A breach not only risks potential fines under privacy laws like the General Data Protection Regulation (GDPR) or the California Consumer Privacy Act (CCPA) but also damages trust, which is difficult to regain in a competitive retail landscape. Imagine loyal shoppers switching to a competitor simply because they no longer trust you with their information.
Hidden Risks in Everyday Operations
The challenge for many retailers is that risks do not always come from inside their own store. Third-party vendors, like payment processors, delivery services, or even in-store Wi-Fi providers, can be weak links. If a partner system fails, your business may still bear the blame in the eyes of customers.
As retailers blend physical and digital experiences, like in-store kiosks or mobile apps, the number of cyber risks grows. Each new touchpoint is another doorway into your store’s ecosystem.
AI as a Risk Multiplier and Protector
AI is not just a source of risk. It also has the potential to help retailers spot and prevent problems early. For example, fraud detection systems can flag suspicious transactions, while AI-driven monitoring tools can alert managers to unusual activity in their networks. The challenge is using AI responsibly: knowing where it helps, where it introduces new exposures, and how to keep both in balance.
Real-World Scenarios That Threaten Retailers
Consider a clothing store with both an online shop and a physical presence. If the e-commerce site has an unnoticed vulnerability, hackers could siphon off customer credit card numbers. Meanwhile, an in-store self-checkout kiosk that has not been updated might serve as an entry point for malware. Both scenarios highlight cyber risks in action, risks that remain invisible until they cause financial damage, reputational harm, and a negative impact on customer trust.
Regulations Retailers Should Not Ignore
Laws around privacy are no longer something just for tech companies. Retailers are squarely in the crosshairs. Whether it is GDPR in Europe, CCPA in California, or similar rules popping up elsewhere, the obligations are clear: protect customer data, use it responsibly, and be transparent about practices. Failure to comply can bring hefty penalties, not to mention headlines that no retailer wants.
Best Practices for Retailers
The good news is that retailers can take practical steps to guard against cyber risks:
- Be transparent with customers about how you collect and use their information.
- Train employees to recognize common cyber threats like phishing.
- Review vendor contracts to ensure partners are also meeting security standards.
- Ask insurance providers directly about cyber coverage and what it entails.
- Use AI wisely, balancing the benefits of automation with the safeguards to control risk.
Turning Silence Into Strategy
Cyber risk may sound abstract, but for retailers, it is very real. Think of it like shoplifting: invisible at times but damaging if ignored. Just as stores invest in cameras, tags, and employee training to deter theft, retailers need to invest in cyber protections, policies, and proactive strategies to keep risks under control.
By acknowledging AI’s role, safeguarding customer privacy, and strengthening policies in digital operations, retailers can transform threats into managed risks.