Prague University of Economics and Business
Faculty of Informatics and Statistics
SOCIAL NETWORKS AND THEIR IMAPCT ON ONLINE RETAIL AND CONSUMERS
BEHAVIOUR
MASTER THESIS
Study programme: Faculty of Informatics and Statistics Field of study: Information System Management
Author: Karielina Kateryna
Supervisor: Ing. PhDr. Antonín Pavlíček, Ph.D.
Declaration
I hereby declare that I am the sole author of the thesis entitled “Social networks and their impact on online retail and consumers behaviour”. I duly marked out all quotations. The used literature and sources are stated in the attached list of references.
Prague 6th of December 2021 Karielina Kateryna
Acknowledgement
I hereby wish to express my appreciation and gratitude to the supervisor of my thesis, Ing.
PhDr. Antonín Pavlíček, Ph.D.
Abstract
Modern society is very changeable, technologies are evolving rapidly, thus accompanying their implementation in various spheres of human life. Modern digital technologies contribute to the emergence of new aspects of consumer behavior, which actively use modern information and communication tools in the decision-making process for the purchase of goods and services. Most of them create content platforms and use social interactive means of communication with other potential buyers, which, in fact, are called social media.
Social networks are one of the modern channels of marketing communication with consumers, which has gained great popularity in many countries around the world. At the same time, social networks have become catalysts for changes in consumer behavior and accelerated the transition from outbound to inbound marketing.
The paper also examines the impact of social networks on consumer behavior depending on their generation, buzzers and millennials are more likely to shop through digital marketplaces and use social networks more often in the shopping process than generation X and baby boomers.
Keywords
Social media, consumer behavior, generation, e-commerce, inbound marketing
Content
Introduction... 8
1 Theoretical part ... 11
1.1 The era of the Internet and social networks ... 11
1.1.1 The Use of Social Media before the COVID-19 Pandemic ...13
1.1.2 The Use of Social Media during the COVID-19 Pandemic... 14
1.2 The changes that retail is experiencing ... 18
1.2.1 The transition of retail to an online platform ... 23
1.2.2 Transition from outbound to inbound marketing ... 25
1.3 The role of social networks in making a purchase decision ... 27
1.3.1 Factors influencing buyers ... 30
1.3.2 Consumer behavior according to generation ... 32
1.3.3 The process of making a purchase through social networks ... 34
2 Methodology ... 36
3 Analysis ... 38
3.1 Analysis of secondary surveys and statistical data ... 38
3.1.1 Analysis in the Russian market ... 38
3.1.2 Analysis in the Poland market ... 42
3.1.3 Analysis in the Italian market ... 44
3.2 Analysis of primary survey... 46
3.3 Discussion ... 59
Conclusion ... 62
List of references ... 64
List of figures
Figure 1. Smartphone usage increase, % who say they are spending more time on their smartphones since the start of the coronavirus outbreak
Figure 2. Role of Social Media, % who say social media companies should be doing the following during the coronavirus / COVID-19 outbreak
Figure 3. Growth of monthly active users of selected social media platforms worldwide from 2019 to 2021
Figure 4. Consumer behavior on the Internet depending on age, in 2020
Figure 5. Triggers of successful transformation of business model of retail enterprises in the conditions of digitalization
Figure 6. Retail Ecommerce Sales Growth Worldwide, by Region, 2020, % change Figure 7. E-commerce revenue by category, 2018-2020
Figure 8. Reasons for using social media
Figure 9. The process of making purchases on social networks Figure 10. Key sources of information in Russia
Figure 11. The popularity of subscriptions among Russian youth on social networks
Figure 12. Categories of goods when buying social networks have the greatest impact on buyers, by age groups, in% 2019
Figure 13. Age-related digital influence indicator
Figure 14. Digital impact indicator depending on the age of customers and the category of goods
Figure 15. The preferred medium for seeking information Figure 16. Use of social networks in Poland, 2021
Figure 17. The most effective social networks for online shopping in Italy, 2020 Figure 18. Shopping in Italy by product category and social network, 2020 Figure 19. Specify the year of your birth
Figure 20. Which purchases do you prefer? The ratio of those by the dominant type of shopping according to age
Figure 21. Has the frequency of buying goods online during quarantine increased? The ratio of respondents according to the change in the type of purchases by age
Figure 22. From what sources do you most often receive information about the product?
Figure 23. Sources of information for consumers according to generation Figure 24. What categories of goods do you mostly buy online?
Figure 25. Buying goods online by age
Figure 26. What social networks do you use most often?
Figure 27. Use of social networks according to the generation of consumers
Figure 28. Do you shop through social media? The ratio of the use of social networks in the process of buying by generations
Figure 29. How often do you shop on social media? Frequency of purchases through social networks by generations
Figure 30. What has the biggest impact on purchasing decisions on social media?
Figure 31. Key factors when making a purchase through social networks
Figure 32. The ratio of consumer confidence to the types of advertising on social networks by age
Figure 33. Do you follow the link of influencers? The ratio of the frequency of transitions on the links of influencers by age
Figure 34. Do you buy products on the recommendation of influencers? The ratio of the frequency of purchase on the recommendations of influencers
Introduction
With the development of the information society, the Internet is becoming an integral part of the economic processes of market participants. The Internet is transformed from a communication channel into an environment of interaction between market participants, characterized by its own characteristics and infrastructure. Consumers have access to a significant amount of information about goods and services, have the opportunity to share their own consumer experiences and choose suppliers of goods based on a variety of technical conditions of purchase. Under the influence of these factors changes the behavior of consumers on the Internet in general, and in the process of making purchasing decisions in particular. Modern digital technologies contribute to the emergence of new aspects of consumer behavior, which actively use modern information and communication tools in the decision-making process for the purchase of goods and services. Most of them create content platforms and use social interactive means of communication with other potential buyers, which, in fact, are called social media. The use of social media is becoming increasingly popular, as their tools are perceived by consumers as a source of information about goods in the process of making a purchase decision, especially through the Internet.
In this case, social media play a particularly important role. In general, social media marketing is interpreted as a process that allows businesses to present their products and services to consumers through social media and in this direction to implement marketing activities.
In foreign and domestic scientific literature and in practice, much attention is paid to the problems of implementation of Internet technologies in the system of enterprise management, marketing management. Scientists study both the practical experience of introducing information technology and the impact of these processes on the formation of social relations, investigate, identify and summarize theoretical and methodological problems, their consideration in the theory and practice of marketing management of enterprises. Such scientists as Boychuk I.V., Bushuyeva L.I., Golubkov E.P., Daynekin T.V., Danko T.P., Ilyashenko S.M. dealt with the study of the peculiarities of marketing activities on the Internet in general, and the peculiarities of consumer behavior in particular.
Litovchenko I.L., Oklander M.A., Pylypchuk V.P., Siphoni J. and others considered social networks as a platform for e-commerce. However, researchers look at the Internet and social media from the point of view of the channel of communication with the consumer, without taking into account the peculiarities of consumer behavior, which differs from the real environment in the virtual environment, and are manifested more and more every year.
Important factors on which this work is based are the age groups of consumers and the changes provoked by the coronavirus pandemic. The heterogeneity of values of people who grew up and live in the same country, but grew up at historically different times, was a prerequisite for the analysis of N. Howe and W. Strauss, who put forward as a factor determining consumption, belonging to a particular generation. This hypothesis of theirs later became widespread and called "generation theory". Based on the study of historical processes and facts that have taken place in the United States and England since the late
16th century, Hove and Strauss have identified some patterns that underlie the alternation of generations. According to the authors, the interval allotted for the formation of each individual generation is twenty years, after four generations (ie eighty years) the cycle is repeated. Depending on the key events characteristic of a particular historical period, living conditions, a person's ideas about happiness and its value are formed. The popularity of the theory was facilitated by the fact that the authors gave each of the generations living in the twentieth century a bright and memorable name that most fully reflects its key features.
Then the periodization was supplemented by generations living in the 21st century.
Therefore, the thesis assumes that there is a big difference between the generation from which consumers come and their behavior in the purchase process. The influence of social networks on consumer behavior, according to their age group, not only increases or decreases, but also changes the nature of the impact. Consumers from one generation use social networks in everyday life, but in the process of making a purchase decision they turn to other sources of information. At the same time, representatives of the other generation use social networks only indirectly as a platform on which they find information about goods and services. Other generations of consumers use social networks for e-commerce in both ways directly and indirectly. It is assumed that the Internet and social networks have not only become platforms for online commerce, but also change the nature of marketing. In the era of traditional media, there was source marketing, information moved unilaterally from producer or seller to consumer. Customers received only the information offered by the market. However, the intensive development of the Internet has given consumers the opportunity to receive the desired information at any time. And social networks have allowed consumers to actively communicate with sellers and with each other. That is, there was a transition to inbound marketing, when consumers independently dictate the terms of advertising.
The last key moment that influenced the growing role of social networks in the purchase process was the coronavirus pandemic. The beginning of 2020 has radically changed lives in most countries. Unexpectedly, the usual opportunities for offline shopping have become unavailable. Strict restrictions led to prolonged store closures. Only grocery supermarkets, pharmacies and gas stations worked. That is, the categories of goods that can be purchased offline has declined sharply. On the one hand, people also remained locked in their own homes and needed nothing but food and goods for personal care. On the other hand, many consumers have used lockdown time to rethink their interests and goals. People began to devote more time to their hobbies, some began repairs in homes, and some lacked the equipment to watch their favorite series. That is, the need for goods of other categories has not disappeared, but only decreased. That is why sellers were forced to switch to online shopping, set up websites, create profiles on social networks and organize quality delivery.
The advantages of creating online stores on social networks was that consumers spent a lot of time flipping through the news feed or creating their own content. Advertising on social networks has great success and greater conversion compared to other online means.
The first section of the work reveals the theoretical aspects of the functioning of social networks. An analysis of the use of social networks before and after the pandemic is conducted. The changes that have taken place in the field of trade due to the development of the Internet and social networks are characterized. Describes the transition to e-
what factors affect consumers are revealed. And also the behavior of consumers in social networks according to their age group is studied. The practical part of the work is based on secondary research and primary research. The works of other scholars and reliable publications in European countries were selected as secondary research. All studies addressed the impact of social networks on consumer behavior according to their generation. The results from Russia, Poland and Italy were compared. The initial survey was conducted on the Internet among Ukrainians. The last part of the work focuses on the comparisons and conclusions that were obtained in the third section.
1 Theoretical part
The theoretical part of the thesis is written based on analysis of secondary information obtained from various sources, such as scientific literature, scientific articles, conference proceedings, as well as information from electronic sources. This section examines the era of the Internet, in particular social networks, the impact of the pandemic on the development of electronic resources. The following describes the changes that retail has undergone with the development of digital technologies. Finally, the role of social networks in making purchasing decisions and the factors that influence it will be determined.
1.1 The era of the Internet and social networks
The Internet environment has a multicomponent structure, which is an important factor in shaping the information model of social order, social, economic, legal components that ensure the existence, formation and operation of individual and group users who make up the Internet audience. Information society - a society in which most workers are engaged in the production, storage, processing and sale of information, especially its highest form - knowledge.
The Internet, which once served exclusively to research and study groups whose interests extended to access to supercomputers, is becoming increasingly popular in the business world. Companies are tempting speed, cheap global communication, convenience for joint work, available programs, a unique database of the Internet. They see the global network as a complement to their own local area networks. At a low cost of services, users can access commercial and non-commercial information services in the United States, Canada, Australia and many European countries (Shyyka, 2014). In the archives of free access to the Internet can find information on almost all areas of human activity, from new scientific discoveries to the weather forecast for tomorrow. In addition, the Internet provides unique opportunities for cheap, reliable and confidential global communications around the world.
This is very convenient for companies that have branches around the world. Typically, using the Internet infrastructure for international communications is much cheaper than direct computer communication via satellite or telephone (Kalenikov, 2017).
Mankind in its development has approached the fact that the Internet has become the main generator of global macro-trends. Lately, people can't imagine their lives without the Internet. He is firmly entrenched in their daily lives. The Internet are actively used at home, at work, with the development of new technologies, the Internet has migrated to mobile phones and smartphones. Which gave consumers the opportunity to be on-line almost all the time.
In the 1980s and 1990s, according to the History of Social Networks (Shah, 2016) on the Digital Trends news website, the rise of the Internet led to the introduction of Internet
introduced users to digital communication via email, messaging and online chat in real time.
This gave rise to the oldest social media networks, starting with the short-term download service of the Six Degrees profile in 1997. This service was used in 2001 by Friendster. These basic platforms have attracted millions of users and allowed the registration of e-mail addresses and major networks on the network.
Weblogs, or blogs, another early form of digital social communication, began to gain popularity with the launch in 1999 of the LiveJournal publishing sites. This coincided with the launch of the Blogger publishing platform by technical company Pyra Labs, which was acquired by Google in 2003.
LinkedIn was founded in 2002 as a networking site for career-oriented professionals. By 2020, it has grown to more than 675 million users worldwide. It remains a place of choice for social media for job seekers as well as human resource managers looking for qualified candidates.
Two more serious raids on social media failed after an outbreak of initial success. In 2003, Myspace was launched. Until 2006, it was the most visited website on the planet, thanks to the fact that users could share new music directly on their profile pages. Until 2008, it was overshadowed by Facebook. In 2011, musician Justin Timberlake bought Myspace for $ 35 million, but it has since become a social network.
Google's attempt to break into the social media landscape, Google+, began in 2012. The Rockies ceased to exist in 2018 after the private information of nearly 500,000 Google+
users was compromised due to data security breaches.
Since its inception and popularity, social networks have taken a prominent place in everyday life. After all, they provide communication between people, regardless of their location.
Also, with the introduction of new features such as music, video, photo and document distribution, social networks have finally become one of the five most visited pages on the Internet. However, along with a number of positive consequences of the functioning of social networks can be identified and negative (Kovalevych, 2014)e. In particular, they increasingly affect the language and consciousness of users.
In total, humanity has spent more than 1.3 billion years on the Internet in the past year alone. This is the data of the annual report Global Digital 2021 (We are Social, 2021.) . Most of this time - on social networks. The evolution of social media has been driven by the human drive to communicate and achieve digital technology. It's a story about establishing and developing personal relationships on a large scale (Maryville, n.d.).
According to Merriam-Webster, social media is defined as forms of electronic communication (such as websites for social networks and microblogs) through which users create online communities to share information, ideas, personal messages, and other content (such as videos). The Pew Research Center's 2019 report on the use of social media in the United States showed that 72% of American adults use some form of social media. In 2005, a year after the launch of Facebook, this figure was 5% Of course, now social networks
have become the main tool for communication and development of social contacts, joint search, storage and classification of information, creative activities of the network type, individual and collective planning (schedule, meetings).
According to K. Dubnyak (2014), a social network is aimed at building communities on the Internet with people with similar interests and / or activities, as communication is carried out through an internal mail service or instant messaging. In practice, social networks perform all the functions that correspond to the media - informational, regulatory and cultural.
At the same time, as noted by L. Chupryna (2015), the multifunctionality of social networks, opportunities for structuring the communicative space and objective assistance in the development of civil society make them a specific source of information.
With the development of technology and the emergence of social networks, modern youth began to live only by promoting their account on the Internet. The whole society of the 21st century wants to keep up with successful and famous users and, looking at them, tries to gain prestige and popularity through global social networks. In fact, various Internet portals have captured the minds of modern people, imposed on them their notions of fashion and style. Social networks dictate what we need to be now, what we need to read and how to look to be worthy of popularity in our social circle and in society as a whole.
1.1.1 The Use of Social Media before the COVID-19 Pandemic
A new challenge facing the entire planet at the end of 2019 was the spread of the previously unknown Covid-19 virus. And since the beginning of 2020, one of the most relevant terms has been the term "Covid-19 pandemic". Over the past 2 years, it has affected all spheres of human life and changed the vector of work of any institution.
Prior to the pandemic, social networks were mostly used for their intended purpose, for communication between users, for exchanging photos or documents, for reading news and more. Despite the active use of social media for business purposes, many companies have realized that it is a great tool to influence their target audience. Social networks have changed the structure of marketing, there has been a transition from outbound to inbound marketing. That is, companies began to use social networks not only for advertising, but also for feedback (Semeniuk & Falovich, 2020). Social networks are gradually becoming a tool for transforming society, disseminating scientific and technical knowledge, forming teams and social movements, used for communication, marketing research and promotion of products and services (Onyshchenko et al., n.d.).
The term "inbound marketing" appeared in 2005. It was introduced by one of the creators of the HubSpot site Brian Halligan (2019). He decided that it was time to rethink the concept of marketing, its classic interpretation ("cold" calls, advertising on television, distribution of flyers, etc.). B. Halligan contrasted a new way of conducting advertising campaigns: a potential customer gets acquainted with the company's activities, monitors it and begins to trust it even before the need for a product or service.
Today it is becoming more obvious that social media in all its diversity can be seen as a tool for transforming society, because the latter are aimed at a wide audience not only territorially but also in areas of interest.
As the American researchers D. K. R. Licklider and R. W. Taylor noted in their publication on the prospects for the development of social networks, “… in most industries they will consist of geographically remote elements, which sometimes accumulate in small arrays, and sometimes work separately. These will be communities united not by geography but by interests. "
In general, it can be stated that in recent decades the beginnings of a society in which the Internet has become the main means of communication, leisure, communication between society and the state, a source of intellectual growth, learning and often - the main work.
1.1.2 The Use of Social Media during the COVID-19 Pandemic
From year to year there is a growing audience of the Internet, but it was COVID-19 that stimulated the transition to the era of online services and digital consumer technologies.
Forced isolation has radically changed the way of life of the population of almost half of the planet (Mikhailenko, 2020). In connection with the transition to teleworking, people have a lot of free time, which was previously spent on trips to the office.
Social networking platforms are a fast-growing part of a law firm's marketing toolkit. Their use requires sensitivity and prudence, which are based on a clear understanding of the current and potential audience at both local and global levels. Social networks have become really important during the crisis caused by the COVID-19 pandemic.
After the World Health Organization declared the COVID-19 outbreak a global pandemic in mid-March, the conversation on social media quickly shifted to the effects of the virus. As businesses and jobs began to limit their working hours and insignificant businesses closed, brands and consumers quickly turned to sites such as Facebook, Twitter, and Instagram to communicate with each other, often sharing positive feelings. The general mood increased by 9% in general, and the positive volume of conversations increased by 1001% since February.
It is noteworthy that brands have used this opportunity to reach the audience and share feelings in these difficult times. Because 86% of consumers believe that transparency is more important now than ever before, and 85% of people are likely to show loyalty because of it, honesty and a unifying message can help brands penetrate their consumer base and calm their emotions. From the beginning of 2020 to the beginning of 2021, the Ukrainian audience of social networks has increased by seven million people (Global Logic, 2021). At the beginning of 2020, there were 19 million users from Ukraine, in 2021 the figure reached 26 million. At the same time, the penetration of social networks has halved: now 60% of the country's population is registered in them, while in January 2020 it was a little more than 40%. This is according to a study by GlobalLogic based on open data.
Since 2019, the number of Ukrainians on Instagram has grown by 22%, and on Facebook - by 7%. Now they are used by 14 and 16 million Ukrainians, respectively. Over the last year, the new social network TikTok has reached 16% of users from Ukraine, its growth was 500%.
YouTube remains the most popular social network, reaching 96% of users in Ukraine. On average, they spend about 40 minutes a day on the site. The number of Ukrainian Internet users also increased by 2 million, which is 33% more than in 2019 and at the beginning of 2021 amounted to almost 30 million, ie about 67% of the country's population.
“During the quarantine, more and more users began to register on social networks, not only for communication, but also for work and creativity. Modern technologies developed for our clients by GlobalLogic engineers allow not only to consume multimedia content, but also to create it remotely. For example, with the help of our client's technology Avid Technology, musicians can simultaneously work on recording a new album from around the world, as if they were all together in the same studio”, - comments J. Shtukaturova, Vice President, Engineering, GlobalLogic (2021).
There are more and more Internet users not only in Ukraine, but also in the world. Since 2019, their number has increased by 280 million. For analysis, GlobalLogic used data from open sources, such as Data Report, the State Statistics Service of Ukraine, Kantar and PlusOne, as well as internal statistics.
According to research conducted by GlobalWebIndex (2020) in 13 countries, after the introduction of quarantine restrictions in most countries around the world, users began to spend much more time in their phones. The highest growth was observed in countries such as the Philippines and China, with 86% of people saying they started spending more time on smartphones. In Brazil, this percentage is 77, in South Africa - 72%, the same number of users in Italy. In Singapore and Spain, about 64% of the population began to spend more time on smartphones.
Figure 1. Smartphone usage increase, % who say they are spending more time on their smartphones since the start of the coronavirus outbreak (GlobalWebIndex, 2020)
86.00% 86.00%
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Such changes have led to an increase in the use of social networks. At the same time, users of social networks stated that these media platforms should take an active part in helping local communities to maintain communication (43%), conduct online streams of various events (30%), generate fast content to help people live in lockdown. (68%) and filter fake news (66%). So, as we can see, users believe that social networks have a great influence on society and on the formation of public opinion. It is through social networks that the population should learn all the important news that is generated in real time, and is also a great way to broadcast online broadcasts of events that were held without viewers due to the threat of infection with an unknown infection.
According to Statista (2021), the number of active users of social networks has greatly increased during the coronavirus pandemic. The biggest growth can be seen in such a social platform as Tik Tok, namely 38% more active users. Tik Tok is followed by Pinterest, where growth was 32%, Reddit by 30%. Leaders among social networks have slightly lower growth rates, but they are also significant. Facebook by 19%, Snapchat by 17%, Instagram by 16%, LinkedIn by 13% and Twitter by only 8%.
Figure 2. Role of Social Media, % who say social media companies should be doing the following during the coronavirus / COVID-19 outbreak (Statista, 2021)
As can be seen with the general increase in active users during quarantine measures and restrictions, more and more users have not only become more active in social networks, but also changed their perspective. Visual media came to the fore, where the main content is photos and videos. Users not only browsed the content offered by other people, but also tried to create their own publications or repeat fashion trends.
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Helping neighbors and local communities to connect with each other Provide live-streams of events
Providing fact-checked content to help people cope with the outbreak Screening "fake news"
Figure 3. Growth of monthly active users of selected social media platforms worldwide from 2019 to 2021 (Statista, 2021)
As can be seen with the general increase in active users during quarantine measures and restrictions, more and more users have not only become more active in social networks, but also changed their perspective. Visual media came to the fore, where the main content is photos and videos. Users not only browsed the content offered by other people, but also tried to create their own publications or repeat fashion trends.
During the pandemic, 95% of consumers said they spent more time-consuming media at home (GlobalWebIndex, 2020). Not surprisingly, the biggest leap is to watch more news; 2 out of 3 spend more time on it (half of them say they spend much more time on it).
Age can have a big impact on behavior in digital networks. Generation Z is seven times more likely than boomers to report increased use of music streaming services, and ten times more likely to create and upload videos. Conversely, boomers are more likely to watch more TV.
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Twitter LinkedIn Instagram Snapchat Facebook Reddit Pinterest TikTok
Growth
Figure 4. Consumer behavior on the Internet depending on age, in 2020
In general, the use of social networks has become more diverse than before. If earlier the priority was interpersonal communication, then in the days of the coronavirus networks have become very necessary for business - for their own promotion. In general, last year about 40% of users used social networks to work.
In addition, the researchers noted that life on social networks has become more realistic.
Everyone was at home in self-isolation, so the perfect pictures on Instagram (which were often annoying) were no longer in demand.
Thus, the pandemic has become a new impetus for the development of social networks, thanks to it people have switched to distance learning and work, live communication has been replaced by video calls and correspondence. The lack of full opportunity for consumers to leave home and the closure of most businesses to lockdown forced company executives to decide to move to the online sector, online commerce.
1.2 The changes that retail is experiencing
In the context of globalization, the development of the digital economy and increased competition, trade, like many other sectors of the economy are in a state of dynamic search and introduction of new ways to gain an advantage over competitors.
Even before the advent of COVID-19, it became increasingly clear that the zenith of retail on the basis of stores had already passed. Although many physical stores will certainly grow again, it is clear that the days when growth could be achieved through physical stores are long gone. Many are looking for platform companies that could help realize the opportunities (KPMG International, 2020).
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Creating/uploading videos (e. g. on YouTube, TikTok, Instagram, etc) Listening to more streaming services (e.g. Spotify, Apple Music, ets) Watching more TV on broadcast channels
Retail is also undergoing fundamental changes due to innovative processes related to the introduction of the latest digital technologies. As a result of digitalization processes, the functions of retail trade are being transformed, communication channels are being diversified, sales methods are being developed, and new opportunities for interaction with customers are being created. In this regard, the issues of search and implementation of tools, methods, technologies to ensure the innovative transformation of business models of retail enterprises in the context of informatization and development of information and communication technologies.
It is obvious that the pace of development of information and communication technologies and scientific and technological progress in general will increase, as a result of which changes will occur faster and the transformation will become deeper. To ensure sustainable development, managers and marketers of retail enterprises must respond adequately and ensure timely transformation of the business model, increase its competitiveness. It is a competitive business model that allows to form a solid foundation for business restructuring in order to open new opportunities for its development and provides a high level of resistance to the negative effects of the external environment (Hrosul & Zubkov, 2017).
Based on this, was identified the main triggers for the successful transformation of the business model of the retail business in the context of digitalization (Fig. 5), the provision of which will quickly adapt and increase its competitiveness. Among these triggers, special attention needs to be paid to the formation of new competencies in retail enterprises related to the readiness for digitalization at this stage (introduction of information and communication technologies in business processes) and digital transformation in the near future (updating the business thinking paradigm). Retail efforts now need to be focused on modern Big Data information technologies, namely, accelerating the search, collection, analysis and processing of information, increasing its volume and types, clear structuring and preparation for management decisions that should ensure maximum efficiency and competitiveness of an innovative business model based on the integration of all possible latest digital tools, tools and technologies of digital marketing.
Figure 5. Triggers of successful transformation of business model of retail enterprises in the conditions of digitalization (Proskurnina, 2020)
According to one of the leading analytical agencies in the field of e-commerce in North America "Absolunet" e-commerce in the US in 2018 grew by 16%, with annual turnover exceeding $ 500 billion per year (RAU, 2019). Nearly 60 percent of all U.S. retail sales last year were through digital technology, including offline payments with payment cards, mobile apps, and other offline technologies. In 2018, the main factor in the growth of e- commerce in the United States was a 55% increase in sales through mobile applications (Absulnet, n.d.).
The main trends in e-commerce in 2020 globally were the following 10 trends:
1. Active expansion of ethical e-commerce according to the system of two values:
transparency of pricing and environmental friendliness of materials. For example, the modern Everlane brand, whose sales are growing in double digits a year, has abandoned advertising and become a "transparent" online retailer, providing its customers with a detailed breakdown of the cost of materials for each product sold. For example, the well- known manufacturer of women's clothing and accessories Reformation, in its trade policy reveals in detail to customers its "environmental friendliness", covering all stages of production: from growing raw materials, dyeing fabrics, production, packaging, delivery - up to care for their clothes (Evo Business, n.d.).
2. The growth of numerous initiatives of e-commerce sellers aimed at curbing the return of goods by buyers. So, in 2018, the Internet site Amazon announced that it will introduce a life ban for shoppers who have a bad habit of constantly returning most of their purchases.
Also, Best Buy, Home Depot and several other major retailers in America use a special service that evaluates customer behavior and imposes restrictions on the number of products they can return back to the store. At the same time, 61% of retailers are concerned
Proactive search for new ideas
Quick reaction to
changes
High readiness
for digitizatio
n
New opportunities for sustainable development of retail enterprises
about tracking buyers willing to return products multiple times. As an experiment, since 2018, the well-known brand H&M has banned personal returns to any offline store of the network, purchases made online in this retail network. H&M online shoppers now need to use the mail and pay for the return service (Evo Business, n.d.).
3. Introduction to the responsibilities of the seller of calculation, collection and transfer of regional sales taxes by e-commerce. More than half of US states have already introduced a tax on online sales at the place of purchase. Vendors and suppliers of software solutions implement software for regional taxation and related electronic reporting. At the same time, Amazon has already set up sales tax collection in each US state on goods it sells directly. For sellers who use Amazon as a marketplace, the company offers not to delve into the difficulties associated with the new legislation on online sales taxes and to act as a tax agent for them. In the simplest case, a reduced unified tax rate is applied to the gross income of Internet platform sellers. Indeed, in 2016, the Italian government offered platforms to levy a 10% tax on all transactions made through online platforms (Evo Business, n.d.) .
4. Dissemination of Progressive Web App (PWA) applications that blur the boundaries between sites and mobile applications. PWA is a hybrid of a website and a mobile application that combines the advantages and removes the limitations of each of them.
Mobile applications are dying out, so the average US user in 2018 downloaded less than one mobile application per month. PWA sites are displacing mobile applications. When opened, PWAs work the same and very fast everywhere - they are independent of connection quality, device type and browser. For example, the big brand Lancfme changed its site to a PWA site in 2018 and increased the number of conversions by 17%. Thus, the brand of furniture and home decor West Elm by building a PWA-site in 2018 increased the time spent by buyers on the site by 15%, which ultimately contributed to a 9% increase in revenue from sales of goods (Tochylina, 2019).
5. Joining social networks where clients can make purchases in the category of e-commerce sellers. According to the forecasts of the social networking platform in 2020, transactions will finally become them and users will be able to make purchases without leaving the social networking platform. Yes, social media shopping has already become a standard phenomenon in China. In 2019, almost 55% of users of social network applications at least once made a purchase of goods or services directly in the social media application (Absulnet, n.d.).
6. The use of artificial intelligence by retailers to automate, create, optimize and classify the product pages of sites. Retailers for each item must provide a description of the product on the site, names, metadata for a particular category, stock availability, product matrix, manufacturer logos, etc. Obtaining this information from suppliers is a time-consuming task that requires a significant amount of manual labor. Artificial intelligence (AI) will help retailers in this. According to Alibaba Group, the company's artificial intelligence for copywriting, with a productivity of almost 20 thousand lines per second, in 2018 was used by sellers more than a million times a day. So, the company Amazon from 2018 offers sellers who use the AWS console, an artificial intelligence mechanism to make recommendations to buyers for their products (Absulnet, n.d.).
7. Marking of goods by retailers with a QR-code to redirect the buyer to the right place on the site of the same seller or manufacturer. Research links 28% of online sales to reading a QR code - when the initial acquaintance with the product took place in a regular store, but the purchase was completed online. The QR code stimulates and accelerates purchases, as well as unobtrusively leaves out competitors who sell the same product and who may be easier to find on the Internet than the site of the store. A study by Deloitte predicts that the share of consumers who check products in a physical store before making purchases online will grow in 2019 to 48%. (Absulnet, n.d.)
8. Transformation of online stores of large retailers into e-commerce marketplaces. Large retailers are expanding their reach and choice by integrating the marketplace model into their digital commerce tools. Thus, the 18 largest online marketplaces in the world sell goods worth more than $ 1 trillion a year. At the same time, 12% of large retailers currently have stores on marketplaces, and 32% of large retailers are considering launching a marketplace based on their online business. Analysts predict that by 2020 they will account for 40% of the global online retail market. Yes, Best Buy has benefited from its Internet traffic: more than 20 million visits per month, becoming an online marketplace and quickly doubling the number of its online names. Similarly, WalMart, having launched the marketplace function, doubled the number of product items of its online products in a year. The Australian Catch Group, which launched an online marketplace in early 2017, has grown more than 40 times in less than two years from 25,000 items to more than a million items. According to a study by Rise of the Global Marketplaces conducted by the E-Commerce Foundation and Nienrode University of Business, global markets such as Amazon, eBay and Alibaba are projected to account for almost 40% of the global online retail market over the next five years. years (Ecommerce News, 2015).
9. Separation of buyers-motorists who make purchases almost at the wheel to a separate segment of e-commerce. According to research, the adaptation of the voice search system to the consumer behind the wheel, appropriate contextual advertising and driver-friendly interfaces provide automatic conversion of local searches for sale. Nearly 50 percent of the 135 million American drivers use their smartphones to find the nearest gas station, order and pay for parking, and eat on the go or buy takeaway coffee. In addition, 80% of US mobile users use voice search systems to search for a local outlet; 50% of them will visit this outlet within one day, and 18% of these mobile users will make a purchase (Evo Business, n.d.).
10. Syndicated distribution of the same content on several sites / channels from one centralized point. Brands and manufacturers distribute their content to increase brand awareness, product information consistency, SEO and conversions. When syndicating content, it is important to ensure that the type of content is consistent with the format of the platform to which the feed is made. Digital leaders in 2019 will take another step forward to improve the syndication of content about their products. WalMart, the largest US retailer, has introduced product syndication tools for its suppliers to have the best and latest product content on their platforms. For example, inRiver, which serves manufacturers, distributors and retailers, has released a beta version of the product syndication tool. In this way, manufacturers and wholesalers have the opportunity to transfer product information from the centralized system to 'syndication programs for retailers and marketers, which ensures consistency, completeness and coverage of a wide range of customers (Absulnet, n.d.).
1.2.1 The transition of retail to an online platform
According to Emarketer, in 2020, the markets surveyed by the company saw an increase in e-commerce by at least double digits. Abnormal growth is observed in Latin American markets - 36.7%, so in Argentina, online retail trade increased by an impressive 79.0%. Also, a significant growth rate was recorded in North America - 31.8%. In Central and Eastern Europe, e-commerce growth in 2020 was below 30% and recorded at 29.1%. The Asia- Pacific market grew by 26.4%, slightly lower 26.3% in Eastern Europe, the Middle East and Africa grew by 19.8%. The global growth rate of e-commerce in 2020 was around 27.6%
(Cramer-Flood, 2021). Thus, we see that the pandemic has had a significant impact on the transition of retailers to online platforms.
According to Emarketer experts, in 2021 the trend of growth of the online retail market will continue, but with much lower rates. Global e-commerce growth will decline to 14.3% in 2021, partly due to a rebound and partly due to the fact that such growth has been postponed to 2020. At the same time, China will continue to lead the world in the number of buyers of digital services in 2021 with 792.5 million (33.3% of the total number in the world); this will give $ 2.779 trillion in e-commerce sales (56.8% of total); and it will be the first country in history to make more than half of its retail sales digitally (52.1% of retail is e-commerce).
Figure 6. Retail Ecommerce Sales Growth Worldwide, by Region, 2020, % change (Cramer-Flood, 2021)
In all industries, companies are actively adapting to the new reality. In a survey of CFOs on the prospects for the development of retail trade in 2021, 71% of CFOs said an increase in investment in information technology during 2021. 64% said they plan to increase investment in e-commerce in the next six months (BDO, n.d.).
36.70%
31.80%
29.10%
26.40%
26.30%
19.80%
27.60%
0.00% 5.00% 10.00% 15.00% 20.00% 25.00% 30.00% 35.00% 40.00%
Latin America North America Central and Eastern Europe Asia - Pacific region Western Europe Middle East and Africa Worldwide
The DataReportal report, which was based on research by companies such as Statista, GlobalWebIndex, SimilarWeb and others, shows that in 2020 there have been radical changes in sales of some products on online platforms. The largest growth in 2020 was in the food and personal care products, the growth rate was 245,1.
Prior to the pandemic, consumers were quite cautious about buying products in this category using online tools, making it much easier for them to visit a physical store and make the necessary purchases. However, the lockdown made its adjustments and the population began to actively order online. Accordingly, most large supermarkets have started to deliver their goods by courier. There is also a pick-up function, with the customer forming his own order on the website or in the store's application and indicating the time at which it will be convenient for him to pick up purchases. By this time, store employees were forming orders, and as soon as the customer came to the store, he could immediately pick up purchases, avoiding long queues and time allotted for the selection of goods.
Figure 7. E-commerce revenue by category, 2018-2020 (BDO, n.d.)
Another category that has undergone radical changes has been travel, and e-commerce revenue in this area has halved. Prior to the pandemic, tourism was a leader in online retail.
Quite high growth in revenues from e-commerce was observed in the category of toys and hobbies (137.1%). With the advent of leisure, consumers began to pay more attention to their own desires and skills, some regained their old knitting skills, some began to make decor for their own home, and some started their own business with the knowledge gained during quarantine.
Obviously, significant growth is observed in the field of music (159.9%) and video games (163.3%).
Fashion
&Beauty
Electroni cs&Physi
cal Media
Food&Pe rsonal
Care
Furnitur e&Applia
nces
Toys, Diy&Ho
bbies
Travel (includin
g accomm odation)
Digital Music
Video Games
2018 524.9 392.6 209.5 272.5 386.2 750.7 12.05 70.56
2019 620.1 456.9 168.8 316.7 383.2 1190 13.59 83.15
2020 665.6 501.8 413.8 330.9 525.6 593.6 21.73 135.8 2019/2018 118.14 116.38 80.57 116.22 99.22 158.52 112.78 117.84 2020/2019 107.34 109.83 245.14 104.48 137.16 49.88 159.9 163.32
40 90 140 190 240
0 200 400 600 800 1000 1200
1.2.2 Transition from outbound to inbound marketing
Outbound marketing is what used to be called "marketing". He distracts and pushes the audience, whether they want it or not. Television and radio advertising, telemarketing, banner and media advertising, billboards, advertising in newspapers and magazines, cold calls and pop-ups, as well as contextual advertising are all examples of outbound marketing.
Over the last 10 years, marketing has lost its popularity. Due to oversaturation - especially on the Internet - people began to ignore media advertising.
Today, these concepts are closely intertwined and the content marketing itself can be described as one of the components of inbound marketing. That is, the generation of content is one of the first stages from which the interaction with the client begins. But all that follows: getting readers' contacts, dragging them into the sales funnel, heating, sales and maintenance - this is inbound marketing.
Inbound marketing is a strategy by which a company creates content or tactics on social media that disseminates brand awareness so that people can learn about the company, go to a website for information, show interest in the product, and potentially make a purchase.
The basis of both directions is content. But there are key differences in its presentation. It is believed that it is enough to hire a highly paid content manager or marketer, and he will make good content. But for B2B it is very difficult to do.
The second problem is that CEOs of large companies no longer search for information on Google. Therefore, decisions are needed on how to convey this content to them. That is why inbound-marketing works when the client already knows about the company, he has an interest, he interacts. However, this way it is difficult to get a large client (Outbound and Inboud Marketing. How Businesses Survive Today, 2020).
Outbound marketing is about taking your quality content and making sure that the customer you need sees it. This method is great for corporate sales. But the sales funnel does not work here. Because from a list of 500 companies, the manager sells one, and then you have to go back to the remaining 499 and start all over again. The manager has no reason not to sell to them, because the list of these companies in corporate sales is very limited.
Table 1. Differences between inbound and outbound marketing
Inbound marketing Outbound marketing
Engages interested readers Pressures on everyone, regardless of interests
Written for the needs of the consumer Written for the needs of the product Interactive and smooth Inert, one-sided
Attracts customers Looking for clients
Is part of content consumption Disrupts content consumption Natural Habitat: Blogging, social media,
subscription emails, search, influencer marketing.
Natural Habitat: Display Ads, Billboards, Telemarketing Scenarios, Magazines, TV Ads
According to a study commissioned by Google, Boston Consulting Group, leading companies that are able to constantly expand their customer base, increase return on investment and maintain a competitive advantage, are actively using data-based marketing and sophisticated attribution models. Such companies receive an increase in revenue of up to 20% and cost efficiency - up to 30% (BCG, 2018).
Inbound marketing is now undoubtedly a more fashionable marketing choice. According to the Hubspot State of Inbound 2017 report, 71% of companies worldwide reported that they were primarily focused on inbound traffic. Of course, inbound marketing provides a better return on investment: inbound marketing is 62% cheaper than outbound.
On the other hand, the efficiency of inbound traffic is difficult to measure. Because the strategy involved is based on brand awareness, value delivery, rather than hard selling, it's hard to pinpoint how well your strategy works. The biggest criticism of outbound marketing has traditionally been that it is expensive, unresponsive, and not targeted. Companies spend hundreds of thousands of dollars on television advertising, send it to the world and hope for the best. And while most companies aren't going to increase the cost of these types of original advertising, telemarketing will never make sense for most brands - recent updates to target audiences have breathed new life into media advertising.
Things like pixel retargeting, contextual advertising, and similar audiences allow companies to display ads on Facebook, Instagram, Twitter, and Google specifically for users, depending on what they're interested in. This is a kind of outbound marketing that shows untapped potential and bypasses ad blockers. Unlike outbound marketing of the past, it involves an inbound strategy that never users what they interfere with useful or interesting.
In today's marketing environment, many companies use a combination of brilliant inbound strategy and retargeting of original media advertising. Remarketing can also only work with inbound traffic. Here's an example of how Brooklinen used Lookalike Audiences and Retrageting Outbrain to reduce the cost per conversion by 50%, all in the Outbrain ecosystem. (What’s the Difference between Inbound and Outbound Marketing?, 2021)Of course, like everyone in marketing, you will need to find a combination that will suit your potential customers.
Social networks play an important role in inbound marketing, thanks to which most of the communication processes between seller and buyer take place. Social media marketing is an integral part of the promotion of goods and services, and is considered an effective modern method of sales promotion.
SMM (Social Media Marketing) - a special tool, the process of promoting a brand, company or specific product (service) on social networks. This type of internet marketing is based on the use of various channels and resources to increase brand awareness, attract customers, introduce the audience to new products and other business goals. It is a fairly new field.
The importance of the method of promoting goods and services on social networks is to create content that people will distribute on social networks independently, without the participation of the organizer. It is believed that messages on social networks cause more
confidence in potential consumers of goods or services. This means that consumers trust advertisements much more than acquaintances or even strangers, being sure that they are not affiliated with the company they are advertising. Promotion on social networks allows you to influence the target audience, choose where this audience is most represented, and choose the appropriate ways to communicate with it, while minimally affecting people who are not interested in this advertising (Katereva et al., 2021).
The process is very dynamic, so you need to constantly monitor the emergence of new trends and changing interests of the audience. There are many different social networks, the audience of which is quite large, represented by different social groups by age, gender, financial and social status, nationality, etc. Thus, it is possible to reach a large audience of potential buyers.
1.3 The role of social networks in making a purchase decision
Companies influence consumer behavior through a variety of marketing techniques designed to find ways to meet the demands and interests of the buyer, which competitors do not have. It is based on consumer behavior that companies build a marketing policy, set prices, determine the range of goods and how to promote it.
Knowledge of consumer behavior makes it possible to predict the actions not only of an individual but also of whole groups with similar behaviors. The more accurate the knowledge of consumer behavior, the more accurately manager can predict the buyer in different situations of purchasing goods F. Kotler and K. L. Keller (2008) emphasize that understanding consumer behavior and the way they choose products and services is important for both manufacturers and suppliers, as it provides them with a lasting competitive advantage in the market. For example, they can use the knowledge gained by studying customer behavior to establish their strategy on how to offer certain products and services to the appropriate audience of customers, which will best reflect their needs and desires.
Social networks are becoming a universal platform both for entertainment (communication, watching video content, listening to music content, embedded online games) and for shopping, which is a significant potential for online business development.
Since social networks are one of the fastest growing channels of communication, consider the features of their work in terms of analysis of purchasing behavior.
The advantages of SMM (Social Media Marketing) include the fact that with minimal financial investment in the development of this area of communication with customers, social media marketing promotes business development, increases site traffic or pages on social networks, increases the number of conversions to them from search engines or links from other sites.
Another great advantage is that by tracking the actions of consumers online, marketers can analyze and understand the needs of the market, as well as identify potential consumers.
media marketing, in particular social networks, provide good opportunities for targeting the audience of Internet users and social media in particular.
By disseminating key messages about the company or its products, services through regular users, as well as journalists, bloggers, professionals in certain fields, you can increasethe effect, optimize the delivery of information about the new product, promotions and more to the target audience. Thus, social media can be used to support PR and marketing activities of the enterprise, as well as to promote products (new and existing) among the target audience.
According to data provided by DataReportal (Kemp, 2021), more than a quarter of social network users use these platforms in order to find the necessary goods and make purchases.
Namely, 27.5% of users said that they are looking for products to buy on social media. In addition, a third go to social networks to fill their free time (34.4%) and find interesting and entertaining content (35%), ie these users do not have a specific purpose of using social networks, but simply flip through the news feed in Facebook, Instagram or Tick Talk. So, they may be more interested in creative videos or photos about certain products sold online.
Figure 8. Reasons for using social media (Kemp, 2021)
Another important indicator in this study was the desire of users to share their views. About 23.4% of social network users consider it necessary to leave comments under the posts of other consumers or in company profiles. Today, it is typical for the target audience, before making a purchase, to study in detail not only the properties of goods or services, but also to read the reviews of other users. In this way, they will be able to form their own impression of the product of interest.
This process is one of the components of outbound marketing, consumers trust other consumers more than the manufacturer or seller. This also includes the success of so-called influence marketing.
16.30%
17.60%
18.90%
20.30%
21.30%
23.40%
26.80%
27.50%
27.90%
33.00%
34.40%
35.00%
36.50%
Share details of what I`m doing my daily life Follow celebrities and celebrity news Make sure I don`t miss out anything
Network for work Meet new people Share my opinion General networking with other people Research products to buy Share photos or video with others Stay in touch with what my friends are doing Fill up spare time Find funny or entertaining content Stay up-to-date with news and current events
Influence marketing is the most popular trend on social media. According to the Influencer Marketing Hub, companies earn $ 6.50 for every dollar spent on marketing influence (Kemp, 2021).
From the point of view of marketing, agents of influence are people who with their authoritative thoughts, judgments and actions can influence the opinion of other people, change their views, encourage the purchase and consumption of certain goods, promote commercial information by pursuing their own interests. The specificity of promoting a product / brand through opinion leaders is that the person who is involved in advertising, appeals to a circle of loyal target consumers who are interested in advertising information and are sympathetic to it.
Note that some researchers insist on the existence of differences between an influential person (influencer) and a brand lawyer (brand advocate). An influential person is not a consumer of the brand to which he advertises, while a supporter of the brand is a satisfied user and voluntarily, at his own request, informs the target audience about him, shares his shopping experience. The main feature of an opinion leader is the ability not only to communicate with a large audience of subscribers, but also to really influence the thoughts, actions, behavior of its representatives, to form / change their views, lifestyle, attitude to products and brands. The thought leader influences the target audience through emotions and rational arguments, he has real authority and trust, his competence in a certain area is not in doubt, his behavior is an example to follow.
At the same time, according to influencers Brown D. and Fiorelli S.(2013), influencers should be classified according to the nature of the relationship between the person of influence and his target audience. Experts distinguish two groups of influential people:
- Macro-influencers are people who come into contact with a significant number of active users with whom they have a weakly defined or unknown relationship.
- micro-influencers are persons who belong to the social group of the consumer and who have a direct influence on the behavior of the consumer, based on the personal nature of their relationships and communication.
The experience of working with bloggers shows that the most effective is working with micro-influencers, who have from 5 to 25 thousand subscribers. Research shows that it is easier for a blogger to communicate interactively and keep the attention of a small audience, respectively, advertising a product / brand is more effective in collaboration with micro influencers (Smirnov, 2020).
So, we summarize the key advantages of using an opinion leader as a communication tool in the marketing activities of companies (Smirnov, 2020):
- attracts attention and influences the perception of the target audience;
- forms the consumer value of the product / brand;
- is a source of information, which is characterized by a high level of consumer confidence -
