Insights from international expert Dr. Mohamed Es Fih
The year 2020 dealt a hard blow to global economy. In Armenia, the roadmap to tackling the repercussions of COVID-19 and the Nagorno Karabakh war would have been impossible without e-commerce.
The project is being implemented by the International Trade Centre with the support of the European Union.
As part of the “Eastern Partnership: Ready to Trade – an EU4Business initiative” leading international expert Dr. Mohamed Es Fih has helped a number of local businesses build and streamline their e-commerce presence to boost exports to new markets.
Aravot.am spoke with Dr. Es Fih about the prospects of e-commerce in Armenia and its use in overcoming current economic challenges.
-What’s your take on the role and importance of e-commerce in the light of the current economic situation in Armenia due to the COVID pandemic and the war in Nagorno Karabakh?
E-commerce is a resilient sales channel, even in times of pandemic or conflict. Cross-border e-commerce can work well for local companies who may have stock abroad that can be replenished. This kind of e-commerce with international stock and logistics solutions is very resilient and allows for better margins. They enable local companies to reach the final consumer with their own logistics system and secure their brand exposure. The second advantage of e-commerce is that it creates an opportunity for local companies to consolidate efforts, set up an aggregation point in Yerevan, target one specific market, build a common marketing strategy for that market and aim for it. It will help them save on individual logistic costs. The price will go down once the volume is big.
To succeed in e-commerce, you need to be good at commerce itself and then incorporate the technical and digital parts. You need to have a quality product, certification, and good customer support in place.
-How can e-commerce help local companies develop trade and export potential amid COVID-19?
E-commerce is a must-have tool in times of pandemic. It does not have to be a full-scale set-up of e-commerce; it can be a contact-page, an online payment page on a Social Media platform, such as Facebook, Instagram, or LinkedIn. Businesses could work with the Armenian National Post and other stakeholders and negotiate a logistic package during a pandemic to create a win-win situation for SMEs, consumers, the post, or other partners.
-What are the main e-commerce challenges for local companies?
Doing e-commerce for food products is more challenging because you need food safety compliance standards and many other regulations. Companies engaged in producing other tangible goods such as fashion and textile products face relatively fewer challenges. Armenia has extensive talent in IT, design, and other virtual services. E-commerce works great for those services, as there are no logistics problems. I would recommend that Armenia start with IT services and then push for non-food products, particularly non-animal products. These two categories are the easiest to push forward. Food exporters must have necessary safety certificates before starting e-exports, at least for the European Union. It is interesting for marketing purposes to have other certificates such as bio or organic, which are not legally compulsory but will give a marketing edge.
-What are the key e-commerce platforms that can work well for local SMEs?
If you have a limited selection of products, then a Facebook page could work well. But once you have a more significant inventory, it is better to invest in an e-commerce website or an ERP system. There exist several free tools or low-cost solutions for setting up a website, such as; WordPress, Shopify.com. WooCommerce, etc. You can also open a marketplace account where you can pay a commission, but there is no need to pay upfront. There are also WhatsApp buyers՛ groups for sourcing tea or other products. Other platforms can be used, such as Telegram, Snapchat. Instagram has a one-click purchase option which enables you to post a photo and collect payment. There is always a way to find a channel. First of all, you need to conduct in-depth research to identify where your customers are.
-What are the viable e-commerce models for local companies?
As part of the EU-funded EU4Business – Ready to Trade project we have made very important breakthroughs in terms of payment, logistics, and fiscal agreements. The business model that we came up with for one of the beneficiaries of the project specialised in chocolate production can be applicable for any other company in Armenia. We registered a company in the US which is controlled from Armenia and can have a US bank account and a US payment system that can take payments from anywhere in the world. Stripe.com is the payment that we have chosen. I think this approach of setting up a company abroad is what can enable e-exports for SMEs.
To tackle the logistics problems, we had a discussion with an e-fulfillment company called shipbob.com, which provides refrigerated and temperature-controlled storage and shipping. These are essential requirements for chocolate. Once the chocolate is in the US, the local company can sell it online to different companies or clients in America and have it shipped within the country quickly.
-What are the key markets that Armenian SMEs should be aiming for?
Normally if you are concerned about costs, you should start with the nearest markets. SMEs that capitalise on the story and quality should be aiming for the highest paying market, such as Norway, Sweden, or Japan. In this respect, the most logical markets for Armenian companies to aim for are the US and Western Europe.
Tea can even work well in India. Although India is a major tea producing country, people there like to experience new flavors and are ready to pay for a unique experience. So, do not limit yourself, go for new markets.
-How can Diaspora help in facilitating e-commerce?
Diaspora can leverage in two ways – first, make your brand recognisable in a new market, and second, local businesses can set up a partnership with companies abroad owned by Diaspora Armenians for exporting products from Armenia. Now that Armenia is facing challenging situations, it is even more critical to use connections in the Diaspora to access foreign markets. Armenian government agencies, the Export agency or the Ministry of Economy, should think of creating an official partnership framework between local companies and those in the Diaspora to facilitate fiscal logistic arrangements and reduce paperwork. It will be useful to develop a protocol which will specify expectations and provide information on how to declare in Armenia and how to declare abroad, for instance in the US.
-What are your recommendations to the local SMEs aiming for international markets and the EU specifically? Any tips for boosting their export capacity with e-commerce, especially in times of COVID pandemic and amid the country’s current reality?
If you are running a business in Armenia and you don’t have capacity to increase the volume or cash flow, you should then invest in quality and tell your story. The story is even more important than the commodity. It should be anchored around the unique experience that the product creates by highlighting the marketing edge, such as quality and branding.
The current situation in Armenia – economic challenges due to the pandemic and war – is a signal for local businesses and the country to invest in digitalisation. Before trying to access international markets, first test your product in the local market. If it sells well locally, it is a good sign to go regional and international.