The Armenian ‘Zeal Socks’ brand has launched itself on the German eBay online marketplace in a simple and fast way – an opportunity provided to the company by an eCommerce pilot launched by the EU4Digital initiative, funded by the European Union. What has the pilot achieved, and what does its expansion mean for Armenian business?
As part of the EU4Digital initiative, the European Union is seeking to increase the flow of eCommerce between Armenia and the EU. As part of this effort, an innovative solution was tested in May-June 2021 that brought together small and medium enterprises, delivery operators and customs authorities in the Eastern partner countries, for an eCommerce pilot solution for the automatic exchange of eCommerce data between Armenia, Georgia, Azerbaijan and Germany.
Armenia is represented in the pilot by its national postal operator – HayPost – which acts as a link between Armenian entrepreneurs and the EU.
“A platform has been created within the framework of the initiative,” explains Kristine Ghulyan, Programme Development Expert at HayPost’s Commercial Directorate. “The solution enables Armenian producers and entrepreneurs to enter data about their products in the virtual warehouse. The virtual warehouse then automatically shares this data with online marketplaces operating in the EU, postal operators and customs, eliminating the need for sellers to enter data multiple times and prepare customs documents.”
Zeal socks looking to the EU market
‘Zeal’ is an online sock store, offering multiple styles and a range that conveys mood, breaking away from the stereotype of ‘boring’ one-colour socks.
Hayk Abazyan, the co-founder of the company, says the design and production is organised with Chinese partners, selecting original patterns for each individual design. The packaging retains the name in Armenian letters for a more striking visual branding.
“‘Zeal’ (which means ‘cool’) was a word that slightly pushed out of our everyday speech. We tried to reinsert it into a modern colloquial language, trying to associate this word with our socks,” says Abazyan.
The company had already worked with online payment systems, and was keen to test the virtual warehouse as soon as they learned about the opportunity.
“We were thinking about exporting for a long time, but it needed a lot of effort. In a sense, it was a headache for us, while the EU4Digital initiative and HayPost facilitated our work due to the automation of a series of actions,” said Abazyan.
How did the pilot project go?
At the beginning of the pilot project, HayPost employees logged the product data onto a virtual platform in the presence of a representative from Zeal Socks. The data entered in the virtual warehouse follows EU and international requirements, and so only needs to be submitted once, instead of providing the same data to the post or customs for each sale. The postal and customs documents necessary for a cross-border transaction are generated by the virtual warehouse.
“To test the process, it was enough to physically deliver one product to a German warehouse, which is what HayPost did. From there the product reached the buyer thanks to another carrier,” says Kristine Ghulyan, adding the test had been successful: the socks were effectively delivered to the buyer in Germany, and the data entered for the product remains in the virtual warehouse to be used for future sales.
“We are now in the stage of technical adaptation. We try to fully integrate this virtual warehouse platform with our internal systems so that we can work more smoothly with the information exchanges,” says Kristine Ghulyan.
The virtual warehouse is a game changer for local sellers: once logged into the warehouse, their products can then be marketed on any number of international online marketplaces such as eBay or Etsy, while the standardised data allows postal services to launch delivery and ensures seamless cross-border customs procedures.
How Armenia benefits from the project
In Armenia, the pilot was coordinated by the State Revenue Committee (SRC). Karen Martirosyan, Project Manager at the SRC, highlighted the added value of developing eCommerce between the EU and the Eastern partner countries.
“One of the main obstacles to cross-border trade is the circulation of paper-based commercial transactions and cargo documents. E-systems, on the other hand, create mutual trust between countries. The other main issue for local businesses is the lack of awareness regarding necessary documents and requirements. The European market is full of standards and quite strict, and this can be a challenge even for major players,” said Martirosyan.
“With the introduction of eCommerce and electronic data exchange systems, these obstacles are eliminated, as the system is designed in line with the legal requirements, prompting the entrepreneur about the necessary information, required fields and formats,” Martirosyan explained, welcoming the EU4Digital pilot as an important step towards supporting Armenian SMEs.
“This project allows Armenian SMEs to enter the European market without extensive analysis of the markets and legislation, it helps them in finding partners, and attracting additional resources to introduce products on different platforms. Besides, the Armenian diaspora also benefits. We received a positive response from the Armenian community in Germany during the pilot. The community had always wanted to buy Armenian products, but the opportunities were limited,” said Martirosyan.
How entrepreneurs will benefit
Kristine Gulian of HayPost explains how the solution helps to streamline cross-border processes.
“Through the digital warehouse, the data is sent to the postal operator automatically, on the basis of which the seller receives a unique code.” Sellers need this code to show at the post office so that the post can match the physical product with the automatically exchanged data already in their system.
“In addition, there is no need to re-enter information on different marketplaces, since the system takes care of this, and in the case of a purchase from these platforms, the money is automatically transferred to the accounts of our sellers,” explains Kristine Gulyan.
“The solution will be handed over to HayPost in October, and further enablement is planned, including actual access provision to multiple SMEs in Armenia,” Ghulyan added.
For Zeal Socks, the experience is proof of the effective optimisation of eCommerce flows between Armenia and EU.
“In our case, the conquest of new markets and the growth in demand will allow us to order socks with individual designs in the future. I would definitely recommend other producers to use the virtual warehouse when it becomes publicly available, as it allows you to save time and expand the sales market, which is the most important thing for any business,” said Hayk Abazyan.
Obstacles to eCommerce
EU4Digital eTrade expert Ruta Salvyte-Tamosiuniene says the project seeks to support citizens and businesses in the EU and the Eastern Partnership.
“We are trying to develop solutions and create conditions that will help bring the Eastern partner countries closer to the EU. Our work includes testing specific solutions that already operate in the EU and should be transposed to the Eastern partner countries. The pilot was about how to boost eCommerce and remove barriers to access the EU market, especially for SMEs,” she says.
The topic of eCommerce has become even more important as a result of the Covid-19 pandemic. While many buyers were familiar with online shopping, it was a challenge for businesses.
“Our EU4Digital partners used to sell their products in the traditional way, but the pandemic forced them to switch to eCommerce, an ecosystem that was not easy for many businesses to get acquainted with,” Salvyte-Tamosiuniene added.
“Cash payments and delivery are typical issues holding back eCommerce in the Eastern partner countries. Buyers are used to paying for the product after delivery, while in eCommerce you pay in advance, receive your product, after which a return and refund is possible,” the EU4Digital expert added.
She says businesses in partner countries are failing to use the main EU online marketplaces due to lack of awareness and the high cost of entering the EU market. Small companies in particular cannot afford to spend resources on studying the EU’s eCommerce ecosystem.
“Another obstacle is that local eCommerce platforms are not adapted for cross-border trade, for example, due to the fact that prices are not listed in euros or the product does not have an English name. In addition, the average delivery time in the Eastern partner countries is longer than in Europe. To overcome all these obstacles, we created a virtual warehouse, which was successfully tested during the eCommerce pilot,” says Ruta Salvyte-Tamosiuniene.
Development and expansion
The development of this eCommerce promotion model will continue in all the countries involved in the pilot, based on national decisions to take the solution further.
In Armenia, HayPost is responsible for developing the eCommerce solution.
“HayPost is the largest company providing logistics services in Armenia: it has the largest network in Armenia – 850 post offices – which allows to quickly organise the reception and delivery of goods. Being the coordinator of the whole process, from the digital import of the product to its actual delivery, HayPost exercises control and contributes to the smooth and high-quality implementation of the process,” says Kristine Ghulyan.
She added they would start with identifying the needs of SMEs in the virtual warehouse and the development of eCommerce with the EU.
“In this case, our primary goal is to support Armenian producers. As a national postal operator, HayPost is responsible for both the country and its export development,” says Kristine Ghulyan.
Author: Gayane Yenokyan